Financial Performance

At a glance

On a pro forma basis:

On an IFRS basis:

Navigating a tough environment

dsm-firmenich operated in a tough macro-economic environment in 2023, characterized by a solid performance across the company, significantly impacted by unprecedented low vitamin prices, persistent destocking by our customers and negative foreign exchange rate effects.

In light of these unprecedented economic conditions, we accelerated our plans for driving through profit improvement and cost reduction measures and advanced the review of all our business segments. This led us to the initiation of a process to separate out the Animal Nutrition & Health (ANH) business from the Group which we announced 15 February 2024. This should strongly reduce our exposure to vitamins earnings volatility and reduce our capital intensity in line with our long-term strategy. We believe that the full potential of the ANH business could be best realized through a different ownership structure. The process is subject to satisfying customary conditions, including consultation with works councils and employee  representatives (as required) in all relevant geographies.

Our largest profit improvement and cost reduction measure in 2023 was the restructuring program in its vitamin activities, which we embarked on mid-year. This program is expected to result in an estimated Adjusted EBITDA contribution of around €200 million per year with the full run rate to be reached by the end of 2024. By year-end of 2023 dsm-firmenich already made strong progress in executing the program through the closure of the Xinghuo vitamin B6 plant in China and shutting down the Jiangshan vitamin C production in China. The sales model now supports a ‘go-to-market’ approach which is simpler and more efficient in the current market environment.

Delivering synergies through integration

In 2023 we made good progress in integrating the two legacy organizations, ensuring business continuity and our ability to  deliver the announced synergies. We are on track to achieve our target synergies of approximately €350 million Adjusted EBITDA per year. Around half of this is expected to come from cost efficiencies, with the full run rate achieved by the end of year three. Initial benefits of about €15 million were delivered in the fourth quarter of 2023. The remaining synergies are expected from incremental revenues of €500 million, generated by an acceleration of innovation with customers. There has been good early progress and the full run rate is still expected by the end of year four. These revenue synergies are driven by complementary capabilities and realized in the three Business Units with the strongest strategic adjacency - Perfumery & Beauty (P&B), Taste, Texture & Health (TTH), and Health, Nutrition & Care (HNC) - with roughly the following balance:

• 60% in TTH Business Unit
• 25% in HNC Business Unit
• 15% in P&B Business Unit

Great future ahead

Supported by our exciting innovation pipeline, all these actions will help us to prioritize and accelerate the company’s nutrition, health and beauty high-growth and higher-margin businesses, all of which is reflected in our mid-term financial targets of 5-7% annual organic sales growth and 22-23% Adjusted EBITDA margins.

In light of the unprecedented conditions with very low vitamin prices and a continued destocking cycle, we took a number of immediate and effective actions. We accelerated our plans for driving through additional self-help measures and advanced the review of all our business segments.

Financial results

P&B recorded good performance while performance in TTH was solid. HNC, but especially ANH, were weak on exceptionally low vitamin prices and persistent destocking. 

In 2023 net sales was €12,310 million which was 7% lower than in 2022. Organic sales declined by 5% year on year. The results for the full year were impacted by a combination of unprecedented market dynamics that led to very low vitamin prices, together with a deep destocking cycle.

Adjusted EBITDA, significantly impacted by the vitamin effect and foreign exchange was 22% lower than in the prior year, resulting in a 280bps margin decline. This includes a negative vitamin effect which is estimated at about €500 million. Without this effect, the Adjusted EBITDA would have been in line with prior year, despite a negative foreign exchange effect of about €90 million.

The below tables provide a reconciliation of the Alternative Performance Measures (APMs) on a pro forma basis to the APMs on an IFRS basis. For a reconciliation of these APMs to the closest reconcilable IFRS metric, see also Note 2 Alternative Performance Measures to the Consolidated financial statements.

Net profit (IFRS-based)

Adjusted net profit from continuing operations of €190 million was down by €365 million versus 2022. Next to the addition of Firmenich and the vitamin impact, this was mainly caused by the increase of depreciation and amortization, following the Purchase Price Allocation of Firmenich. The net profit available to equity holders of DSM-Firmenich AG increased by €437 million to €2,131 million. This increase was mainly a result of the net book profit of €2,796 million on the sale of DSM Engineering Materials (in comparison with 2022, where we had the net book profit of €1,018 million on the sale of DSM Protective Materials), partly set off by the higher Alternative Performance Measures (APM) adjustments of €746 million, mainly due to acquisition, integration and restructuring costs (including impairments). As a consequence of the above, the net earnings per ordinary share from continuing operations decreased to -€2.82 in 2023 (2022: €2.64) and for total dsm-firmenich it decreased to €9.14 (2022: €9.80).

Financial income and expense increased by €62 million year on year to a net expense of €150 million. Next to the addition of Firmenich, this was mainly caused by the increase of the exchange differences by €71 million, largely caused by the development of the Argentinian Peso.

The total effective tax rate over taxable result 2023 for continuing operations was 2.8% (2022: 21.0%), excluding APM adjustments this was 37.3% (2022: 20.2%). This was mainly caused by the geographical spread, primarily due to the vitamin effect, and changes in tax rates.

Adjustments made in arriving at dsm-firmenich’s Alternative Performance Measures (IFRS-based)

Total APM adjustments from continuing operations for the full year amounted to a loss of €826 million (2022: a loss of €80 million), consisting of a loss in EBITDA of €633 million (including restructuring costs of €234 million and acquisition/divestment/integration costs of €363 million), impairments of €294 million, financial expenses of €34 million and a related tax impact of -€135 million.

Sales by destination

Sales by business segment

Sales bridge 2023

Adjusted EBITDA margin

Cash provided by operating activities of €1,265 million mainly consists of the EBITDA for the year (€3,610 million), excluding the net book profit from disposals of €2,843 million (mainly the sale of DSM Engineering Materials, recognized under investing activities) and the change in working capital of €160 million. Overall, the full-year operating cash flow increased by €300 million. Next to the various impacts of the merger, this was mainly due to the improvement in performance in relation to the working capital.

The cash used in investing activities consisted mainly of the acquisitions of subsidiaries (-€3,691 million, primarily the merger with Firmenich) and the capital expenditures (-€684 million), partly offset by the proceeds from the divestments (€3,533 million, mainly from the divestments of DSM Engineering Materials). The cash used in financing activities included the dividend paid (-€582 million), repayment of borrowings (-€549 million) and the repurchase of shares (-€256 million), partly offset by the proceeds from issuing new shares (€733 million). For the full cash flow statement, see the primary statement in the Consolidated financial statements.

Balance sheet (IFRS-based)

The balance sheet total (total assets) reached €34.3 billion at year-end (2022: €17.4 billion). Equity increased by €12.3 billion, which was attributable to the issuance of new shares (€11.5 billion) and the net profit of €2.2 billion, offset partly by the dividend payments of -€0.6 billion, the repurchase of shares of -€0.3 billion and the transfer to liabilities relating to the buy-out of non-tendered shares of -€0.6 billion. Equity as a percentage of total assets increased from 62% to 67%.

Compared to year-end 2022, net debt increased by €2,128 million to €2,215 million, mainly due to the acquisitions/merger, partly offset by the divestment of DSM Engineering Materials. The gearing at year-end 2023 was 8.8%, compared to 0.8% at year-end 2022.

Capital expenditure on intangible assets and property, plant and equipment amounted to €700 million for continuing operations in 2023 (€684 million on a cash basis). Including new leases the additions to intangible assets and property, plant and equipment was €844 million, which was roughly the same as the level of amortization, depreciation and impairments, excluding the impact of the purchase price allocation (PPA) of Firmenich.

Total working capital from continuing operations (excluding the liability relating to the statutory buy-out of non-tendered shares of DSM N.V.) amounted to €3,199 million compared to €1,992 million at year-end 2022. This represents 25.7% as a percentage of annualized fourth-quarter 2023 sales (2022: 23.8%). Cash-wise, the operating working capital (OWC) from continuing operations decreased €268 million compared to last year, which is mainly attributable to the reduction in inventories. The OWC percentage increased from 29.0% at year-end 2022 to 31.1% of annualized sales at year-end 2023.

Cash and cash equivalents came to €2,456 million at the end of the year; including current investments, this amounted to €2,563 million (2022: €2,880 million). Besides the regular cash flow elements, the large movements due to the acquisitions and divestment were almost in balance.

Outlook 2024

As the global political and economic environment remains uncertain, and given that it is early in the year, we feel it prudent to base our full year outlook for the entire company only on those elements which are under our control, namely a €200 million step-up in Adjusted EBITDA from a combination of synergy delivery and the vitamin transformation program. Considering that the full negative vitamin effect emerged only in the second quarter of 2023, the effective Adjusted EBITDA run-rate in the period Q2-Q4 2023 on an annualized basis was about €1.7 billion, the company estimates for the full year 2024 an Adjusted EBITDA of at least €1.9 billion.