DSM Firmenich (DSFIR) H2 2023 earnings summary

Executive summary

• Successful merger integration ahead of plan; first €15m of integration synergies contributed in Q4, with sales and cost synergies gaining traction.

• FY 2023 performance was significantly affected by unprecedentedly low vitamin prices and destocking; strong H2 cash generation supported a stable €2.50 dividend proposal.

• Animal Nutrition & Health separation is planned for 2025, while FY 2024 adjusted EBITDA guidance is at least €1.9bn.

Financial highlights

• Pro forma FY 2023 sales were €12,310m, down 7%; adjusted EBITDA was €1,777m, down 22%, with a 14.4% margin versus 17.2%.

• FY 2023 adjusted EBITDA included an estimated €500m negative vitamin effect and ~€90m negative FX impact; excluding the vitamin effect, EBITDA would have been in line with 2022.

• Q4 sales were €3,112m, down 6%; adjusted EBITDA was €439m, down 12%, including an estimated €120m negative vitamin effect and slightly more than €20m negative FX impact.

• Core adjusted net profit was €555m and core adjusted EPS was €2.03 for FY 2023.

• Adjusted gross operating free cash flow reached €999m, up 9% YoY, with H2 contribution of €714m versus €285m in H1.

Outlook and guidance

• FY 2024 adjusted EBITDA expected to be at least €1.9bn, incorporating a €200m step-up from merger synergies and the vitamin transformation program.

• The outlook is based on controllable measures amid uncertain global political and economic conditions; the Q2–Q4 2023 adjusted EBITDA run-rate annualized to ~€1.7bn.

• FY 2024 planning assumptions include capex ~€0.8bn, core tax rate ~24%, core Finex ~€35m per quarter, and ~265m shares outstanding.