Performance Materials

Business and trends

The Performance Materials cluster comprises the business groups DSM Engineering Plastics, DSM Dyneema and DSM Resins. These business groups specialize in the manufacture of technologically sophisticated, high-quality products that are tailored to meet customers’ performance criteria. DSM Engineering Plastics is a global supplier of high-performance engineering thermoplastic solutions. DSM Dyneema is the global supplier of Dyneema^®, the world’s strongest fiber™. DSM Resins is a global supplier of innovative high-quality resins solutions for paints and coatings, composite materials and fiber optic coatings.

Climate change and the adverse effects of over-dependence on fossil fuels continue to be the most important trends driving the materials industry. DSM’s customers in virtually every sector are seeking products that reduce energy use or emissions in their own operations or, even more importantly, throughout their value chains. In many cases DSM is active in the business of replacing metals with lighter alternatives, for example, and supports customers who are increasingly seeking polymer solutions that are based on renewable (rather than fossil-based) raw materials and solvent-free products and processes that can help create more sustainable value chains. Resource scarcity, which also impacts costs, is increasingly contributing to these developments.

Energy reduction is key. This means not only finding new, less energy-intensive ways to manufacture DSM’s own products, but also, for example, developing resins systems that require less energy for curing, thereby saving energy in the application of DSM’s products. By providing lighter weight solutions than, for instance, conventional metal structures, DSM products help reduce energy consumption during use as well, thus making a significant contribution to the reduction of energy and carbon footprints across the planet.

Workplace health and safety standards are becoming more common across the world as prosperity grows. Health and wellness also translates into meeting the needs of an increasing elderly population. These needs require new thinking, and new applications. Urbanization is an important driver for building and construction – one of the areas in which DSM plays an important role with innovative resins solutions.

An aging population is just one of the radical global shifts DSM is now seeing. The world has become multi-polar and more difficult to predict, with rapidly growing prosperous middle classes in many formerly ‘emerging’ countries. Demand for plastics and resins is therefore high and increasing in these markets, not only because manufacturers are seeking to meet growing local needs, but also because global manufacturing has shifted to these countries.

At the same time, concerns about personal safety and global threats have not diminished. Innovation in this area is needed. The elimination of hazardous substances such as halogens in flame retardants in consumer electronics and the replacement of solvent-based resins by water-based resins continues.

DSM’s Performance Materials cluster has expanded significantly in the last two decades from just over €0.5 billion in sales in 1990 to €2.5 billion in 2010.

With major investments in high growth economies such as China and India, the Performance Materials cluster is making a major contribution to DSM’s growth in Asia. For instance, both DSM Engineering Plastics and DSM Resins have opened new plants in China in the last few years. DSM Engineering Plastics has opened a new facility and DSM Resins announced a joint venture for the manufacturing of unsaturated polyester and vinyl ester specialty resins in India.

The Performance Materials cluster outperformed its innovation target to 2010. Despite the downturn, innovations in performance materials continued to accelerate. With the great majority of these innovations driven by sustainability, DSM’s Performance Materials cluster is recognized as a front-runner in creating and introducing sustainable innovative solutions.

During the last two decades, the portfolio in Performance Materials has clearly evolved towards more specialized, higher-value-added businesses. Innovations, branding and continued operational excellence programs in the more mature part of the portfolio have contributed to a continuous increase in gross margin.

The cluster reacted quickly and very flexibly to the downturn, focusing strongly on reducing operating working capital, implementing cost-saving plans and reducing fixed costs. As a result, the Performance Materials cluster is recovering as economic growth returns. Indeed, in some key segments, DSM has been clearly gaining market share by staying focused on innovation and sustainability and by remaining close to its customers.

The businesses in the Performance Materials cluster have achieved strong leadership positions in chosen segments of the global markets for advanced materials.

DSM Engineering Plastics has a focused portfolio of products; with each of them it has realized global leadership. DSM Engineering Plastics is the global number 3 in the overall market for semi-crystalline engineering plastics. DSM is the global market leader in high-temperature polyamides. In polyamide 6, DSM holds a number 2 position, as it does in thermoplastic copolyester elastomers.

Dyneema^® is respected as the global premium brand for ultra high molecular weight polyethylene fiber. DSM Dyneema manufactures and sells products in several forms including fiber, tape and uni-directional (UD) sheets. The powerful Dyneema^® brand is licensed for use in a wide and ever-increasing range of applications such as medical sutures, commercial fishing and aquaculture nets, ropes, slings, high-performance fabrics such as cut-resistant gloves and apparel and vehicle and personal ballistic protection. DSM Dyneema is an undisputed and highly successful leader in sustainable innovation.

DSM Resins ranks among the global leaders in the markets for resin systems for industrial coatings and decorative coatings. DSM is a niche player in functional materials with a global leadership position in fiber optic coatings, protecting more than one billion kilometers of fiber optic cables around the world. As a leader in sustainable solutions, DSM is recognized as a front-runner in the development and production of environmentally friendly resins such as waterborne coating resins and powder coating resins. DSM Resins is the European market leader in unsaturated polyester resins and is rapidly building a position in the fast growing markets of China.

DSM Engineering Plastics

Key drivers of profitability

• Market growth in key segments and regions
• Sustainable solutions driving innovation: green materials, weight reduction (replacing metal, fuel efficiency, reduced emissions), halogen free
• Drive for miniaturization, functionality and performance
• Growth in market share in high-end innovative applications

Key success factors

• Global market leadership in chosen markets
• Global presence (follow customers)
• Cost position
• The right portfolio of engineering plastics matching needs in chosen markets
• Ability to commercialize market-driven innovations
• Product, application and value chain know-how

DSM Dyneema

Key drivers of profitability

• Market growth and penetration into existing applications
• Success of innovations, new launches
• Dyneema^® and Dyneema Purity^® brands

Key success factors

• Capability to manage growth, both in hardware and in people
• Ability to commercialize market driven innovations
• Product, application and value chain know-how
• Strong, healthy IP position (patents & trademarks)
• Brand value (trust and innovation)

DSM Resins

Key drivers of profitability

• Market growth in key segments and regions
• Sustainability: lighter materials and environmentally friendly, safer, solvent free paints
• Growth in market share in high-end innovative applications

Key success factors

• Global market leadership and presence
• Brand value (differentiation, reliability)
• Ability to commercialize market driven innovations
• Leading low-footprint technology platforms geared towards markets

The cluster in 2010

DSM Engineering Plastics offers an industry-leading portfolio of green thermoplastic technologies. Its leadership in sustainable solutions is demonstrated by its complete portfolio of halogen-free engineering plastics, developed for a wide range of high-performance applications. This has been further strengthened by the successful launch of new innovations, of which Stanyl^® ForTii™, the new breakthrough high-temperature polyamide with halogen-free flame retardant grades, is a recent example.

DSM strives to further improve the environmental performance of its products. The most innovative developments in this field are new bio-based polymers and bio-based building blocks. DSM is already making good progress on this front: EcoPaXX™ is the best-performing green polymer available, and has a zero carbon footprint (cradle to gate). Also, with Palapreg^® ECO, DSM has created a resin with 55% bio-renewable content (the highest bio-based content in resins on the market) which has excellent properties while simultaneously supporting sustainability in the value chain.

Many of DSM’s customers are looking for materials with high recyclability to improve the Life Cycle Assessment scores of their own products. DSM Engineering Plastics is leading the response to this need. Recognizing the growing interest in recycling with the ultimate goal of achieving closed-loop systems, DSM has adopted the Cradle to Cradle^® concept as part of its sustainability strategy. DSM Engineering Plastics is also actively replacing hazardous materials, particularly by introducing halogen-free alternatives, such as Arnitel^® XG (used in consumer electronics cables), Stanyl^® ForTii™ (especially in electronic connectors), and Arnite^® XG (used in electrical insulation in white goods).

The Dyneema^® brand is well known in the industries served, and DSM Dyneema is at the final stages of implementing a comprehensive brand licensing strategy which will result in a number of new licensees and enhanced control of the brand. This strategy is particularly targeted at supporting key customers. DSM Dyneema conducted a comprehensive eco-footprint study throughout the commercial marine (wild catch) industry. The results demonstrate conclusively that trawlers equipped with nets and ropes made from Dyneema^® are inherently more fuel efficient and safer to operate than those employing conventional steel and nylon equipment.

DSM Resins’ waterborne coatings range already delivers significant advantages to its paint customers, who are faced with regulatory pressures and social responsibility demands. An example is NeoCryl^®, a family of waterborne resins that meet food safety standards and can therefore be used in inks and overprint varnishes that come into direct contact with foods.

DSM's resins also deliver considerable advantages in creating lightweight composites used in containers, cars, trucks and trains, wind-turbine blades and a range of other applications related to improving energy efficiency. DSM will further increase the flow of radical innovations. DSM Resins’ ongoing focus on and commitment to both customers and innovation gives DSM a strong competitive advantage versus the competition.

Organic sales growth in 2010 was 31%, highlighting a very strong recovery from the depressed year 2009 in all three business groups. Prices at DSM Dyneema were flat, but clearly increased in the other two business groups. The sales increase was reflected in the operating result, which showed a significant improvement, especially in the first half of the year because of downstream restocking. The second half of the year was affected by increased feedstock prices.

Looking ahead

Many of the core end-markets for DSM’s Performance Materials cluster have suffered during the current downturn. But just as DSM’s sales volumes saw a serious decline in 2008, DSM expects to benefit from the strong return to growth in these sectors during the period from 2011 to 2013. Automotive, personal protection and electrical and electronics are all expected to see above-GDP growth during the coming period.

To realize the opportunities in high growth economies, DSM will continue to invest in these markets. DSM Engineering Plastics and DSM Resins will set up a Materials Research and Automotive Development Center in Shanghai. This will be DSM's biggest center for advanced materials research outside the Netherlands. Through the research center, DSM will deliver its global capabilities in advanced materials to the strategic Chinese market.

DSM’s Engineering Plastics business focuses on further strengthening its leading positions in high temperature polymers, polyamide 6 and copolyester elastomers and on using its applications leadership to meet the needs of its customers, who are increasingly focused on creating sustainable, and at the same time profitable, products and value chains.

An important prerequisite for DSM Engineering Plastics' ambitious growth is its strong upstream integration in a leading caprolactam player: DSM Fibre Intermediates.

DSM Dyneema is committed to supporting customers and to developing new products, forms, applications and markets. DSM Dyneema believes that it can continue to achieve rapid sales growth by further expanding into new markets and applications, while accelerating the replacement of traditional materials in existing ones.

Innovation remains key: DSM Dyneema’s product portfolio already includes over 100 inventions protected by 500 patents or patent applications. DSM Dyneema has innovated towards diverse applications ranging from developing new medical devices for surgeons to increasing the towing capacity of ocean salvage vessels.

DSM will accelerate innovations and get them to market even quicker by extending its co-creation partnerships with leading value chain players. This will help DSM Dyneema to extend the penetration of the product into new markets. The combination of light weight and high strength of Dyneema^® fiber has huge potential in areas yet untouched. Growth will be driven by even more creativity in application development.

Like other materials businesses of DSM, DSM Resins will focus on high growth economies. This means its investments will also largely be in these economies. For DSM Resins, the main high growth economies are China and India. In addition, there is extra focus on growth in the US markets.

Furthermore, DSM Resins’ focus is on accelerating growth, particularly via innovations, and on meeting the sustainability demands of the value chains it operates in. The business group will continue to do this by carefully selecting combinations of end-markets and regions that are characterized by high growth and attractive margins and that can benefit from DSM’s advanced technologies.

With its range of innovative specialty resins, DSM is able to differentiate itself from the competition. In many cases, the resin is the key differentiator for the end product. DSM Resins is creating customer value by understanding what its customers need and where it can add to their business and their customers’ businesses. Strengthening value-based pricing by focusing on specialty functionality will add value to DSM Resins’ customers as well as to the company’s own operations. DSM Resins will also look to grow through selective acquisitions.

DSM’s businesses in the Performance Materials cluster will aim for faster growth than the sector averages by focusing investment, marketing and business development on high growth economies; by utilizing their understanding and technology lead in sustainable solutions to meet rapidly developing customer needs (lighter, stronger, more recyclable, and bio-based) and by deepening their innovation leadership position in materials by getting great ideas to market even more quickly. Continued growth for sustainable and innovative solutions is foreseen. For the cluster, DSM expects sales to grow at twice the worldwide GDP growth rate.