Guarantee obligations
Guarantee obligations are principally related to VAT and duties on the one hand and to financing obligations of associated companies or related third parties on the other. Guarantee obligations will only lead to a cash outflow when called upon. At year-end, no obligations had been called upon. Most of the outstanding orders for projects under construction will be completed in 2025. Other relates mainly to contingent liabilities in contracts for catalysts.
Litigation
dsm-firmenich has a process in place to monitor legal claims periodically and systematically. dsm-firmenich is involved in several legal proceedings, most of which are related to the ordinary course of business. dsm-firmenich does not expect these proceedings to result in liabilities that have a material effect on the company’s financial position. In cases where it is probable that the outcome of the proceedings will be unfavorable, and the financial outcome can be measured reliably, a provision has been recognized in the financial statements and disclosed in Note 18 Provisions.
In 2015, an award was issued against DSM Sinochem Pharmaceuticals India Private Ltd. (DSP India) in a protracted arbitration case in India going back to 2004 involving a joint venture that DSP India had formed with Hindustan Antibiotics Ltd., which suspended its operations in 2003. DSP India (renamed to Centrient Pharmaceuticals after divestment by former DSM in 2018) is covered by an indemnity from DSM B.V. for this case. In 2015, DSP India made an application with the Civil Court in Pune (India) to set aside the arbitral award. The award amounts to INR 127.5 crore (€14 million as at year-end 2024) excluding interest of 12% per year as of 2004. dsm-firmenich provided the Pune Court a bank guarantee of INR 410 crore (€45 million as at year-end 2024). At the end of 2024, application proceedings were still pending. dsm-firmenich views this case as unfounded and is of the opinion that the likelihood of the award being ultimately set aside is high. Therefore, no liability is recognized in respect of this case.
In 2019, Brazilian tax authorities disagreed with certain tax treatment as applied by the company in 2014–2016, which would have an effect on such prior year income tax returns of around BRL 134 million (€21 million as at year-end 2024), including penalties and interest. dsm-firmenich views this case as unfounded and considers that the possibility of winning this case is high, as confirmed by external legal counsel. Therefore, no liability relating to this case is recognized. Currently certain elements are subject to appeal at the Superior Chamber. In the event that dsm-firmenich receives an unfavorable decision, the case can still be taken to the Judicial Court.
In 2023, certain competition authorities commenced an industry-wide investigation into the fragrances sector. As part thereof, unannounced inspections were carried out at several of our offices and a subpoena was received from the Antitrust Division of the United States Department of Justice. The company is fully cooperating with the authorities. As per the date of release of this report, no further update on the status or outcome of the investigation is available. In addition, multiple lawsuits have been filed against the company relating to the investigations.
The contingent liabilities and other financial obligations in the above table are not recognized in the balance sheet.