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Edited Transcript of DSM.AS earnings conference call or presentation 7-May-19 7:00am GMT

Q1 2019 Koninklijke DSM NV Earnings Call

Heerlen May 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Koninklijke DSM NV earnings conference call or presentation Tuesday, May 7, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Dave Huizing

Koninklijke DSM N.V. - VP of IR

* Geraldine Matchett

Koninklijke DSM N.V. - CFO & Member of the Managing Board

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Conference Call Participants

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* Andrew Gregory Stott

UBS Investment Bank, Research Division - MD and Research Analyst

* Chetan Udeshi

JP Morgan Chase & Co, Research Division - Research Analyst

* Gunther Zechmann

Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst

* Laura Lopez Pineda

Baader-Helvea Equity Research - Analyst

* Laurence Alexander

Jefferies LLC, Research Division - VP & Equity Research Analyst

* Martin Roediger

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Mutlu Gundogan

ABN AMRO Bank N.V., Research Division - Analyst

* Neil Christopher Tyler

Redburn (Europe) Limited, Research Division - Research Analyst

* Thomas P Wrigglesworth

Citigroup Inc, Research Division - Director and Chemicals and Basic Materials Analyst

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Presentation

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Operator [1]

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Ladies and Gentlemen, thank you for standing by and, welcome to the DSM Conference Call on the First Quarter Results of 2019. (Operator Instructions). Now I would like to hand over the call to Mr. Huizing. Please go ahead, sir.

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Dave Huizing, Koninklijke DSM N.V. - VP of IR [2]

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Thank you, operator. Ladies and gentlemen, good morning and welcome to this conference call on DSM's First Quarter 2019 results, which we published earlier this morning. I'm sitting here with Mrs. Geraldine Matchett, Chief Financial Officer and Member of the DSM Managing Board. Geraldine will give a short introduction after which she will answer any questions you may have.

We appreciate that this is a very busy morning for you with so many people reporting, so we will try to keep this call to 45 minutes.

As always, I need to caution you that today's conference call may contain forward-looking statements. In that regard I would like to direct you to the disclaimers about forward-looking statements as published in the press release.

And with that out of the way, I will hand over to Geraldine.

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [3]

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Thank you, Dave. Good morning, ladies and gentlemen.

It's a pleasure to welcome you on this call on DSM's First Quarter 2019 results.

As you are used to from us by now, I will provide a few comments on the key slides of our investor presentation that we published this morning, together with the press release. And then we will open the lines for the Q&A section.

However, before starting, I have to point out that our Q1 2019 results are reported against a set of prior figures that include a significant additional benefit from exceptional supply disruption in some of the key vitamins that we clearly communicated all along last year as the temporary vitamin effect.

In order to continue to provide as much transparency as possible, we continue to show this separately, calculating growth against 2018 total results including this special event as well as the comparison excluding this event.

Of course, from this perspective of monitoring the progress of our business, the comparison to last year's underlying business is the only meaningful one. For this reason, in the remainder of my introduction, I will compare Q1 2019 versus the underlying business as estimated and reported in 2018.

Now one more comment on comparisons. Please note that we adopted the new IFRS 16 standard on lease accounting as from January 2019, whilst the 2018 figures are unchanged. You can find the full information about this on Page 18 of our press release. And to make it easier for you, we also provide here our Q1 2019 numbers, both excluding and including IFRS 16.

Having clarified all of this, let's start with the financial highlights for the quarter on Page 2.

We're pleased to report a good start to the year with good momentum in Nutrition as well as a resilient performance from Materials. Group sales were up 3% in total and 1% organically. Overall adjusted EBITDA, excluding a EUR 12 million positive effect from the adoption of IFRS 16, increased 10%. Whilst including the IFRS 16, the increase is 14%.

We are pleased with this performance, especially given the challenging comparable period where underlying sales had risen organically double-digit in both Nutrition and Materials. In this first quarter for the first time, we report our new matrix on cash generation, the adjusted net operating free cash flow, which amounted to EUR 60 million in Q1.

Given the significant impact of the temporary vitamin effect last year, it's difficult to provide a meaningful comparison in this quarter. But towards the end of the year, we will be able to substantiate our progress on a like-for-like basis.

Finally, the difference in total net profit versus prior year is, of course, also reflecting the EUR 165 million benefit and EBITDA in Q1 2018 that we got from the temporary vitamin effect. Last on this page with regards to our outlook for the year 2019, we have increased our expected growth in adjusted EBITDA from mid- to high single-digit growth to high single-digit growth. But I will come back on that after my comments on the business development.

So let's go to Page 6 for Nutrition. Overall Nutrition delivered 3% organic growth, driven by strong topline development in Human Nutrition & Health as well as in Personal Care and Food Specialties. This is a very good performance when considering the tough comparable periods which saw a 12% organic growth in the underlying business in Q1 2018.

In addition to the organic growth in the sales, foreign exchange and the consolidation of Andre Pectin contributed a further 3% leading to a total 6% sales growth. Adjusted EBITDA in Nutrition increased 14%, including a EUR 4 million contribution from Andre Pectin and a EUR 7 million from the adoption of IFRS 16.

Excluding these 2 effects, the adjusted EBITDA growth was 10%, reflecting the continued good momentum.

The adjusted EBITDA margin increased 140 basis points to 20.8% or 100 basis points to 20.4% when excluding IFRS 16.

This increase in margin was supported by the solid organic growth from cost savings in the quarter, positive foreign exchange as well as a positive business mix.

Now looking more specifically at animal nutrition, let's move to Page 7.

As you will remember, the Q1 performance last year for animal nutrition, even when excluding the temporary vitamin effect, set extremely challenging comparable figures for the period with an underlying organic growth of 18%.

As a result, we are pleased to report that we have been able to maintain stable volumes with the price mix only slightly down.

Overall, business conditions remain good across all regions except for China, which was affected by the African swine fever. Although this was, in part, mitigated by higher poultry production in the region as well as increased [pork] production in other regions. These offsetting effects demonstrate the strength of DSM's integrated and diversified business model across regions and species, combined with our portfolio of market-leading nutritional solutions.

Now moving to Page 8, on human nutrition. Human Nutrition & Health also faced a strong comparable period with 8% organic growth in the underlying business in Q1 2018. Yet, even against this high comp, the business delivered an excellent performance with a further 5% organic growth, driven mainly by volumes whilst currencies added another 6%, mainly related to the U.S. dollar, bringing total sales growth in Q1 to a double-digit 11%. Good growth was seen across all regions and market segments with i-Health, Pharma and Early

Life Nutrition, performing as at -- especially well, while food & beverage showed strong pre-mix sales to regional and smaller customers.

DSM's other nutritional activities performed well with the consolidation of Andre Pectin, contributing EUR 12 million in sales and EUR 4 million in EBITDA for the quarter. Please note that although the transaction was closed in March, we could consolidate the business from the start of the quarter.

Now for our Materials business, let's move to Page 10. As with Nutrition, Materials is also reporting against the challenging comparable period, one in which it delivered an organic sales growth of 11% in Q1 2018, driven by both volume and price. In addition, whilst market conditions in some of our segments were robust, conditions in some of the other end markets remain challenging, especially in Asia. Automotive, Building & Construction and Electrical & Electronics experienced continued softness in Q1.

Given this context, volumes were down 6%, partly offset by a positive price mix effect and a positive foreign exchange, leading to overall sales being down 3%. Despite the topline development reflecting market conditions, our Materials businesses were able to maintain the adjusted EBITDA stable through active margin management from cost savings, currencies and positive mix. This resulted in a 60 basis points margin expansion compared to Q1 2018 or a 50 basis point expansion excluding a small EUR 1 million IFRS 16 impact in the quarter.

Now moving to Page 12 on the Innovation Center. The Innovation Center also had a good start to the year with a solid top and bottom line growth. Bio-based products and services contributing strongly to the result, partly thanks to new and recurring license income for [new] technologies used in the production of bio-based fuels. The adjusted EBITDA increased from an around breakeven in Q1 2018 to EUR 6 million in Q1 2019. All in all, we made very good progress in our Innovation Center as well as with our large innovation projects. Also allow me to point you to the news on our sustainability performance that you will find on Page 11 and 12 -- I'm sorry, 12 and 13 in our press release and on Page 15 of this investor presentation.

Now let's turn to Page 13 for a couple of quick comments on cash flow and working capital. Cash flow from operating activities amounted to EUR 201 million in Q1 2019, unsurprisingly down from the 2018 Q1 cash flow of EUR 310 million, which included a EUR 165 million EBITDA benefit from the temporary vitamin effect.

As for the working capital, the increase is linked to higher receivables due to comparatively higher business activity at the end of the quarter, combined with lower payables. In addition, currency movements and the consolidation of Andre Pectin had a negative effect.

Importantly, this higher working capital was, when currency effects are excluded, not caused by higher inventory levels despite the underlying business growth. Therefore, the increase in OWC can be seen as more of a timing effect than a structural development. Having said that, let's make it clear, I am not satisfied with the working capital developments in the quarter.

And finally net debt closed at EUR 414 million, up from EUR 113 million at the end of 2018, reflecting the IFRS 16 lease capitalization of about EUR 200 million as well as the acquisition of Andre Pectin.

And now to finish, let's return to Slide 16 for some final comments on our outlook

As mentioned at the start of the call and as you have seen in our press release, we have raised our outlook for the year 2019 to -- DSM now expects to deliver a full year 2019 high single-digit increase in adjusted EBITDA, compared to prior (sic) [year] underlying adjusted EBITDA; meaning excluding the temporary vitamin effect of EUR 219 million recorded in 2018. This compares with an initial outlook at the start of the year to the mid- to high single digit adjusted EBITDA growth. This outlook reflects our confidence in the way the business is performing. We continue to see good business conditions in both animal and human nutrition across species, segments and regions. In Materials, while we are mindful of the soft business condition in some of the end-user markets, we expect to be able to deliver some growth in adjusted EBITDA over the course of 2019. And finally, for the sake of clarity, our guidance excludes the positive impact of IFRS 16, which we estimate at around EUR 45 million for the full year.

And with this, I will open the floor for questions. Operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Mr. Mutlu Gundogan, ABN.

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Mutlu Gundogan, ABN AMRO Bank N.V., Research Division - Analyst [2]

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Yes. Two questions. On Materials, the 6% volume decline. Can you tell us how the progress was throughout the quarter and how it has developed into Q2?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [3]

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Sorry, did you say one question or 2 questions

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Mutlu Gundogan, ABN AMRO Bank N.V., Research Division - Analyst [4]

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No, 2 questions. No, sorry. My second question is on the outlook that you guide for high single-digit EBITDA growth this year while you did 10% in Q1 despite a difficult comps. I mean, if I want to play devil's advocate, that would imply that you expect business trends to worsen in the rest of the year. Is that the correct way to look at it? Or are you just being conservative?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [5]

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Okay, Mutlu. So maybe let me start with Materials and the developments within the quarter. So I've mentioned in my introductory comments we have seen quarter 1 actually remaining pretty soft throughout the quarter. There's not much uptick, actually. And if we look at the developments, we may have seen -- actually saw a bit of destocking going on, particularly in automotive. And -- yes, so basically a soft Q1. Now so far in Q2 we're seeing about the same sort of developments as we did in Q1. So are not yet much of an uptick. But I think it's important to mention here that our outlook does not require a major step-up in the second half of the year in Materials, but rather a continued resilience of our businesses in these conditions. It's also probably good, that I highlight that we do have some end-markets which are robust. So we do have a positive mix going on. Amongst others, Dyneema is performing very well, as you know our fiber optic cable products, the connectors, et cetera. So it is a mixed picture, but that probably leads into your second question about the outlook, which is that we are confident, based on a good start of the year, that we can move from mid- to high to high single-digit EBITDA growth. And that is reflecting amongst others the mixed picture between Materials and Nutrition.

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Operator [6]

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The next question is from Mr. Thomas Wrigglesworth, Citi.

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Thomas P Wrigglesworth, Citigroup Inc, Research Division - Director and Chemicals and Basic Materials Analyst [7]

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I have 2 questions. First is just following on from your comments on the outlook. So what is it that's changed, that's made you feel that this high single-digit rate of performance is now more sustainable through the course of the year? Is there anything you can identify that -- certainly versus what you were guiding at February? And then secondly, on the African swine flu development, maybe 2 parts: firstly, is the topline impact reflective of the profit impact that you show? And secondly, as we see lower swine production in China, should you -- should we actually see a positive effect? Because actually you'll see a better mix into poultry, which I think is higher value for you; and secondly, non-Chinese pork production should increase again, which might have a positive mix effect. So if you could help on those 2 components on African swine flu, that would be very good.

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [8]

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Sure, Thomas. No problem. So first key what has changed, well, as always when you start the year, you have 12 months to go. After Q1 you have 9 months to go. And if we look back to our quarter 1, we're very happy with the start of the year. Materials top line is indeed a bit down, but the resilience of the earnings is just a testament to the changed portfolio that we have. So while the visibility actually remains a bit limited, we will all know more by the end of Q2, we do feel that part of the hesitation that we had at the start of the year is being addressed, bit by bit as we go through the year. So it's very much reflecting the strong Q1. Now if I come back to the African swine flu, you've actually answered the question for me, which is very nice, which is that it is of course a development that is important in the animal protein space. But at DSM, we have a very strong business model. So we are seeing a switch to poultry. Just to give you a few numbers: Animal Nutrition sales 45% is poultry, whereas swine is 20%. And if you actually look at the sales of swine in China, we are talking here about 2% to 3% of sales for DSM overall. So this sort of puts a bit of perspective. So what we will be -- we have started to see and we will continue to see is, no doubt, a switch towards poultry, which is indeed traditionally our strong area. And other geographies are clearly producing pork for China, so we are seeing an increase in imports both from Europe and North America. And actually, probably most geographies will be contributing to that because China is a big market for pork. And that enables us to leverage our business strengths.

So coming back to the outlook, we also, although we don't want to diminish the importance of the African swine fever, we do believe that we are able to mitigate, if not partly benefit from this. Now I will add in 2 more long-term elements. Just to give you an idea of scale. The culling in China is in the order from some estimates 120 million pigs.

And if you think about that from a bigger picture, it's likely to lead to a rationalization of the pork production in China, maybe having less of the full backyard animals and more professionalized meat production. Now that has a benefit for us because, of course, the more the production is professionalized the more they use feed ingredients to keep the animals healthy and growing well. And that will effectively increase the addressable market over time. So while it's a bit of short-term disruption, we see that probably as over time being a -- leading to a positive development in pork production in China.

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Operator [9]

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The next question is from Mr. Gunther Zechmann of Bernstein.

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Gunther Zechmann, Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst [10]

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First one, a technical one. The one-off that you mentioned on lower costs in Nutrition, could you just highlight what's that regarding? And quantify that as well. And the second on your ROCE outlook. ROCE in the quarter was flat if you exclude IFRS 16. Can you just confirm that you stick to the previous ROCE target of an increase around 1 percentage point annually? And then if there's time, I'd like to sneak in a third question as well.

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [11]

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Okay. So let me start with your first 2 questions. Now we are always vigilant on our cost base and that is what we just do as a matter of course. So here there's nothing that I can think out loud is a particular granular information to provide.

But clearly we're always managing our costs and that is what we're referring to here. So nothing more specific to be provided. As for the ROCE, indeed if you compare underlying to underlying and excluding IFRS 16, we're currently about flat with 13.2% versus 13.3% last year. So it is impacted by the fact that we have a somewhat higher balance sheet this quarter. I referred to that in my opening comments.

If you actually look at the developments of working capital, it's a combination of things. You have -- IFRS 16 actually adds nearly EUR 200 million to the balance sheet. We also have foreign exchange effect. We have Andre Pectin being consolidated and some priming on AP and AR on the quarter. So that's taken into account. It's why we haven't seen a progression, but we're still confident that we will get a ROCE improvements year-on-year by the time we reach [September].

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Gunther Zechmann, Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst [12]

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So if I can just back out to one follow-up or the third question, I should say. One of your big competitors in the Materials space actually reported last weekend had volumes up but quite a big knock on their margin. In your Materials business it's the exact opposite. Are you consciously walking away from less profitable business? Or are you just differently positioned? Could you just highlight what's driving the margin resilience, but volume reduction that's different from your competitors.

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [13]

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Okay. I mean, a, there are a lot of competitors out there, so I can't really comment as a comparison. But what I can say is that as you know over time, we have been moving our portfolio towards increasingly more specialty applications, which does provide an ability to do very good margin management along the way. Now we mustn't forget that the comps last year were very high as well from the top line point of view, where we had very good volume developments.

And therefore what we're seeing is on top line, a little more of a negative development on the quarter. But through good margin management, through some cost actions, through foreign exchange and positives mix, our earnings have remained stable which shows the quality of the portfolio as we go through.

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Operator [14]

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Your next question is from Mr. Neil Tyler, Redburn.

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Neil Christopher Tyler, Redburn (Europe) Limited, Research Division - Research Analyst [15]

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Two from me, please. The strong growth in the other activities within Nutrition, 10 -- sorry, 12% organic. There's a few different and varying activities within that. Can you call out anything that was exceptionally strong in there. And then, Geraldine, in your introductory comments you mentioned very good progress in the large innovation projects. I wonder if you wanted to elaborate at all on that progress, and when we might begin to see some contribution from those projects?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [16]

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Yes, Neil. So in the other Nutrition, there are indeed a number of activities in there. The ones that performed very well include Personal Care, that had a very good quarter.

Both on UV filters, skin care. So good developments in that space. And we also see Food Specialties having had a very good quarter in both savory and in dairy. So there a good development versus Q1 last year. And thirdly, depending if you're looking organic or not, remember that Andre Pectin comes in there. This is our hydrocolloids business and we consolidated that this quarter. So if you put all of that, that's where the other Nutrition uptick is coming from.

And yes, our innovation projects are going well. I remember on our year-end call we had a lot of discussions around the innovation projects, so I will keep it a little shorter on this call, but basically, the news is positive pretty much on all of them. So Veramaris, we will be opening the plant this summer. And market interest is very strong, so this is very well-positioned at -- start delivering on the potential revenues of EUR 150 million to EUR 200 million coming from that plant. So all green lights there. The joint venture on our -- on Stevia. Avansya is also progressing really on track. The joint venture is up and running. Now we're very much focusing on getting the plant ready to increase volumes. We've already had some pilot material in the market, but now we want to increase that and on market developments as well. So no flags -- red flags to mention there. And on Clean Cow, in line with what we said a couple of months ago,

we are busy with the registration filing, both in New Zealand and in Europe and so far, so good.

So progress, but there's not much that I can add to what we've disclosed prior in terms of when does this start gaining, contributing to the reported figures.

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Operator [17]

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Your next question is from Mr. Martin Roediger, Kepler.

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Martin Roediger, Kepler Cheuvreux, Research Division - Equity Research Analyst [18]

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Most of my questions have been answered. So only 2 minor ones. On animal nutrition, the price mix was down by 2% in Q1. Any explanation on that? I can't imagine this is eventually related to some potential weakness in Vitamin E. Also excluding the EUR 165 million EBITDA effect for onetime gains in vitamins. And the second question, to continue with innovations. You talk about the recurring license income for yeast technology. Am I right that this is the eBOOST yeast? And the licensing come from Gevo, is that correct?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [19]

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Yes. So on animal nutrition, we have a slightly negative price-mix effect that -- to be honest, as you know, we have a lot of moving parts behind that. So we can't really pinpoint a particular ingredient which is leading to that. Remember that it was quite a turbulent picture last year. So there's no particular ingredient to highlight here driving this, and overall the pricing environment is relatively stable. So we're okay there.

Now on innovation, the license that we are referring to, and we don't provide the granular detail, but it's actually linked to our yeast and enzyme platform that we use -- that's used in biofuels production. And we don't disclose exactly with whom, et cetera. But it's nice to see that we are in a position to monetize the development that we've been doing in this sector for quite a while.

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Operator [20]

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Your next question is from Mr. Laurence Alexander, Jefferies.

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Laurence Alexander, Jefferies LLC, Research Division - VP & Equity Research Analyst [21]

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I have 2 quick ones. Could you give a little bit more detail on what you're seeing in construction markets by region? And secondly, how you're thinking about the potential net impacts for your business from the -- in terms of, I guess an interest in alternative meats or alternative proteins, plant-based proteins and how that affects your business mix? Is there an opportunity to put [treated soil] into those products?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [22]

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So in terms of building and construction, just to remind everyone, the size is about 6% of group sales. What we're seeing in terms of business development is that it continued to be pretty soft. Here Europe remains an end -- a geography that's important for us. But please remember that also we wrap in there machines and ships, et cetera. So, it's not just buildings, per se, it's very much in line with the macro. So we just need to see whether there's a little bit of an uptick at some point, but for now we're seeing pretty soft, primarily in Europe.

On plant-based protein, I mean, this is one of our innovation areas that we've been working on. There's some innovation both in-house, relating to canola protein and such things. Now it clearly -- we see this as an area that over time will gain traction and that we are going to keep growing. And if you remember in our Capital Markets Day this was a space where we want to gain scale over time. But nothing specific to report, I have to say on this quarter, other than we continue with our innovation program there.

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Operator [23]

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Next question is from Ms. Laura Lopez, Baader Bank.

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Laura Lopez Pineda, Baader-Helvea Equity Research - Analyst [24]

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I have 2 more questions. So under pectin, you mentioned that it is already fully -- it was fully consolidated on the first quarter. And you reported EUR 12 million sales. When you reported that you were going to buy or increase your shareholding on this company, you reported that the company had around EUR 65 million of sales. So the EUR 12 million is a little low. Is this maybe like some cyclicality on this business, that the first quarter is always a little weaker? Or was there a weakness in the market? I know maybe they are highly exposed to the Asian markets, so maybe they're a little bit -- if it performed weaker than expected or what was the reason for that?

And then just the second one, more like housekeeping. How is the phasing of the share buyback going? Do you still foresee to finish this mid- next year?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [25]

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So indeed, Andre Pectin had a bit of a softer first quarter, not materially so but I think the easiest is for me to give you a bit of a guidance. And you can sort of assume about EUR 15 million top line per quarter, with an EBITDA of about EUR 5 million. So I think if we look at that as the starting assumption. Going forward, there is a bit of seasonality, but no big trend to highlight other than that. As for the share buyback, so it got initiated on the 1st of April for the EUR 1 billion. So at this stage, actually in April, we've been buying back more in relation to the stock dividends that -- for which we need to buy some shares. But we are still expecting that the timing will take us into next year, probably Q2. So broadly EUR 600 million this year and probably EUR 400 million next year.

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Operator [26]

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The next question is coming from Mr. David Simons, JPMorgan.

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Chetan Udeshi, JP Morgan Chase & Co, Research Division - Research Analyst [27]

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It's actually Chetan Udeshi. I just had a question on the leverage on the Nutrition business where you know 3% organic growth resulting in 10% underlying EBITDA growth. That's especially at a time when the price mix is also slightly lower year-on-year in animal nutritions. So can you maybe just shed some light on what are these underlying positives that is resulting in this somewhat better leverage in the Nutrition business on EBITDA from top line?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [28]

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As you know, we run a rather large and complex Nutrition business. So there are a lot of different moving parts in there. I think that the -- one of the important elements is actually mix. As you saw, we got a very good growth in human nutrition with all components of human nutrition contributing well and Personal Care as well, which always tends to have a positive mix effect. And we had in the quarter a bit of a positive on foreign exchange as well, which was helpful. But the main thing is we are, of course, very diligent and systematic about managing our costs. And yes, with that we're able to be confident that we can continue to deliver an EBITDA growth in high single-digits area which is what our mid-term ambition is for Nutrition.

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Operator [29]

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And your next question from Mr. Andrew Stott, UBS.

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Andrew Gregory Stott, UBS Investment Bank, Research Division - MD and Research Analyst [30]

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A couple of questions, please. Firstly on M&A, I'd take you back to the Q4 comments. You said that the share buyback was not an indication of reduced acquisition ambition. And you've just said in answer to a previous question that the buyback is going to be fairly measured. Is there anything you can say on -- generically on the availability of assets right now and multiples out there, sort of where you're at in your own heads on acquisition opportunities? That's the first question. And then the second question, a much smaller thing, is Dyneema. You are expanding capacity in Dyneema in the second half. Given the benefit to Materials from what looks like a strong Dyneema performance, is there some costs we should think about that are incurred in that ramp-up for the second half? Or should we just dial down the margin for the second half in Materials?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [31]

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Firstly, on M&A, I think we are extremely consistent here. We always said we were going to be very disciplined in the way that we look at opportunities, putting value creation as the foremost ambition and not speed. And so we are continuing to do our work. And we're very mindful of the fact that valuations are an important element of value creation of any M&A. So we continue and there's not really that much that I can add, and of course, we will inform the markets as soon as there is something to be added on the subject.

But we do indeed retain enough financial flexibility while doing the share buyback, which is how we wanted to position our capital structure, really on the back of a lot of confidence in the way that our businesses are developing. Now when it comes to Dyneema, we indeed are putting some expansion capacity in there, but there is no particular costs related to that for which you need to make any specific adjustment.

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Operator [32]

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There are no questions at this moment. Please continue.

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Dave Huizing, Koninklijke DSM N.V. - VP of IR [33]

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Okay. So if there are no questions anymore, then also living up to our promise of keeping it short and concise. Geraldine, do you want to make some closing remarks?

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Geraldine Matchett, Koninklijke DSM N.V. - CFO & Member of the Managing Board [34]

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Yes, thanks, Dave. So basically, in summary, Q1 was a good start to the year, demonstrating continued underlying momentum even, given the very tough comparables for the periods that we reported against. Business conditions remain broadly positive and support our plans, despite the softness in some of the end markets for our Materials businesses. And as a result, we feel confident in raising our outlook for the full year to the high single digit adjusted EBITDA growth.

And with that I would like to thank you all for joining our call, and I wish you a very good day.

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Dave Huizing, Koninklijke DSM N.V. - VP of IR [35]

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Thank you, Geraldine. This concludes our conference call for today. Thank you very much for your attention and your questions today. If you have any further questions, don't hesitate to reach out to our Investor Relations team. And with that, I hand back the call to the operator.

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Operator [36]

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Thank you. Ladies and gentlemen this concludes the DSM call. You may now disconnect your lines. Thank you for your participation and have a very nice day.