Profit in 2010

Financial results

Net sales

At €8.2 billion, net sales from continuing operations in 2010 were 22% higher than in the previous year. Volume growth accounted for a 13% increase in net sales. Selling prices were on average 6% higher than in 2009. Exchange rates, acquisitions and divestments on balance had a positive effect of 3%. Net sales (total DSM) increased by 15%. In the graphs on the following page the development of sales by origin, by destination and by end-use market can be seen.

Operating costs

Total operating costs in 2010 of continuing operations before exceptional items amounted to €7.4 billion, €1.1 billion higher than in 2009, when these costs stood at €6.3 billion. Total operating costs in 2010 included cost of sales to an amount of €6.0 billion (2009: €5.0 billion); gross margin in % of net sales stood at 27% (2009: 25%).

Operating profit

The operating profit from continuing operations before exceptional items increased by €319 million (74%), from €433 million in 2009 to €752 million in 2010. The EBITDA margin (operating profit before depreciation and amortization as a percentage of net sales) increased from 12.4% in 2009 to 14.2% in 2010.

Net profit

The net profit from continuing operations before exceptional items increased by €240 million to €484 million. Per ordinary share, net earnings from continuing operations before exceptional items increased from €1.44 in 2009 to €2.89 in 2010.

Net finance costs (continuing operations), before exceptional items, stood at €93 million in 2010, compared to €111 million in 2009.

At 24%, the effective tax rate in 2010 was 1 percentage point higher than in 2009 due to changes in the geographical distribution of taxable results.

The net profit (total DSM) increased from €337 million in 2009 to €507 million in 2010. Net profit per ordinary share increased from €2.01 in 2009 to €3.03 in 2010.

Exceptional items

Total exceptional items after tax amounted to a loss of 40 million in 2010 (2009: €93 million profit). Due to an improved business outlook for DSM Anti-Infectives as a result of the new strategy and the announced formation of a joint venture with Sinochem Group, the remainder of the 2007 impairment of the cash generating unit amounting to €55 million before tax could be reversed. The disposals of DSM Agro, DSM Melamine and S.A. Citrique Belge N.V. resulted in a combined pre-tax book loss of €61 million. Other disposals resulted in book gains of some €22 million. The settlement of the US Federal Class Antitrust Litigation and related cases concerning EPDM resulted in a charge of €17 million. On balance various changes in pension arrangements resulted in an exceptional gain of €6 million before tax. Impairments of assets and businesses resulted in exceptional losses of €40 million before tax.

Cash flow

At €1,103 million, cash provided by operating activities (total DSM) was 12.2% of net sales.

The balance sheet total (total assets) increased by €0.9 billion in 2010 and amounted to €10.5 billion at year-end (2009: €9.6 billion). Equity increased by €566 million compared to the position at the end of 2009; this was due mainly to the profit for the year and changes in Other comprehensive income. Equity as a percentage of total assets increased from 52% at the end of 2009 to 53% at the end of 2010. The current ratio before reclassification to held for sale (current assets divided by current liabilities) increased from 2.14 in 2009 to 2.42 in 2010.

Compared to year-end 2009 Net debt decreased by €938 million and resulted in a net debt of minus €108 million. At the end of 2010 € 837 million was invested in higher yielding term deposits (duration 3 to 6 months), which are shown in the cash flow statement as ‘current investments’.

Capital expenditure on intangible assets and property, plant and equipment amounted to €476 million in 2010 and was above the level of amortization and depreciation.

The operating working capital continuing operations was €181 million higher than in 2009 and as a percentage of net sales amounted to 17.9% (2009: 18.6%). Cash and cash equivalents including current investments increased and amounted to €2,290 million.

Dividend

DSM’s dividend policy is to provide a stable and preferably rising dividend. In September 2010 DSM indicated that it would propose a dividend increase of €0.10 per ordinary share from €1.20 to €1.30 for 2010. In view of the strong financial results achieved in 2010 and the company’s confidence that the foundations are in place to achieve its new strategic growth and profitability objectives, DSM now proposes to increase the dividend by €0.15 (12.5%) to €1.35 per ordinary share. This will be proposed to the Annual General Meeting of Shareholders to be held on 28 April 2011. An interim dividend of €0.40 per ordinary share having been paid in August 2010, the final dividend would then amount to €0.95 per ordinary share. The dividend will be payable in cash or in the form of ordinary shares at the option of the shareholder. Dividend in cash will be paid after deduction of 15% Dutch dividend withholding tax. The ex-dividend date is 2 May 2011.

DSM reiterates that for the coming years the company intends to further increase the dividend to at least € 1.50 per ordinary share, barring unforeseen circumstances and assuming that DSM will be able to fulfill its growth aspirations.