“For some who are not familiar with our brand, it must be perplexing to reconcile our corporate initials DSM – which expand to Dutch State Mines or Nederlandse Staatsmijnen – and find us attributing our positive financials to an 8% growth in our nutrition division and elevated vitamin prices, and having no mines on our books,” remarks the Dutch industry captain, in an exclusive interview.
What DSM was at its founding in 1902, with its origins coal mining, is nothing like what it is in the 21st Century. “By the time the last coal mine was on the verge of being shuttered in the Netherlands in 1973, DSM was already on its way toward becoming a bulk chemicals company.”
All about ‘future proofing’
While sticking to its petrochemical business model, privatization of the 1980s and 1990s gave the company the creative license to explore biotechnology and specialty chemicals. “Expansion led DSM to acquire biotech leader Gist-brocades in 1998, where I worked on new business ventures in India and other emerging markets. After the acquisition, I joined DSM and subsequently its board.”
What followed made Dutch corporate history. On becoming part of the DSM family, Sijbesma and his colleagues, new and old, set about what he describes as “future proofing” of the company, and its latest “most crucial” transition yet.
“Even before I took the CEO’s chair [in 2007], the board knew we had to change. However, it is not something everyone agreed with. My logic – formerly as a board member and subsequently as CEO – was simple; one that DSM could not thrive as a standalone bulk chemicals company in a changing sector.
“In the West, the market was led by the likes of BASF (Germany) and Dow Chemical (U.S.) who had scalability, and in the East players such as SABIC (Saudi Arabia) and Chinese petrochemical manufacturers were rapidly gaining traction. The core of our business – polyethylene, polypropylene, crackers and bulk chemicals – also required considerable investment to keep up with the competition.”
Sijbesma felt the time was right for a change. “The idea was to have a phased divestment of petro- and bulk chemical assets in step with steady investment in specialty chemicals/materials, food ingredients and biotech.”
A science-based approach
Much of the portfolio re-jigging took place between 2002 and 2011 and it wasn’t easy. “While many colleagues agreed with me, others accused me of killing the company’s legacy. My riposte was that we want to build on the company’s legacy.
“Divestment and investment also had to proceed at a pace many were not comfortable with. But if our future was not in petro- and bulk chemicals, then why sit on an asset and wait for it to become a liability before selling? We’d rather be proactive and get value for money in the “here and now”, which we did. With all that now done, and the last bit of portfolio optimization having taken place as recently as this year, I leave it to others to give their verdict.”
If the market’s verdict is anything to go by, Sijbesma has been vindicated. The company’s share price was less than a quarter at the start of the latest transition journey of what it is today.
“Our long term shareholders have benefited. Over the last decade we have delivered on promised returns and performed twice as good as the Dutch stock exchange. Even the short term shareholders should be satisfied, albeit we, as any other company, steer our corporate journey for the longer term.”
Sijbesma says DSM now has a “science-based” approach which is quite different from the mentality of an industrials outfit.
“Back in the petrochemical days we spent 0.5% to 1% of our turnover on research and development (R&D). This has risen to a 5% R&D spend as we speak from a position of expertise these days when it comes to food ingredients, nutrients, health products and specialty materials. This was hardly the case 15 years ago in a predictable petrochemicals tussle.”
Capital spending on new projects is also on a different scale. “To build a petrochemicals plant or cracker cost anywhere between EUR1 billion to EUR2 billion. The factories we build now cost in EUR20 million to EUR100 million bracket, producing a plethora of products for a wider diverse market.”
Where there was polyethylene and polypropylene production 20 years, these days DSM churns out anything ranging from synthetic vitamin to carotenoids, nutritional lipids to industrial resins and functional materials. Its innovation lab brings products such as biomedical devices and coatings for solar panels.
“The possibilities we have created are endless from a corporate perspective, and our diverse portfolio is run by a diverse workforce.”
No room for an insular workforce
Another silent transition DSM has made is the evolution of its workforce over the last 20 years. “When I stepped into DSM’s corridors 20 years ago, it was a typical European company with everyone in executive authority, not just the board, being white, 50-years plus, Dutch and male. The board was all male, and among the top 400 executives, only one was female.”
Sijbesma says the kind of transition he had in mind needed a diverse workforce to dispel the “corporate myopia.”
“But a diverse group does not organize itself; we had to put some effort in that. Now we have almost 50 females in the top 300 executives in the company, three female board members and two females on our executive committee. Our workforce comprises of some 100 different nationalities, and that’s reflected from plant floor to the executive floor.”
Market rumors suggest cash rich DSM has $3.5 billion in dry power ready to splurge on acquisitions, mention of which draws a beaming smile from Sijbesma. “Acquisitions are not about numbers, they are about strategy. Ours is all about emerging markets, while not losing sight of established markets such as Europe and North America. Majority of our acquisition targets would be in the food and nutrition area premised on what value they can add to our innovative streak.”
India, where the company also has two greenfield projects, remains a key focus, followed by China, and other markets in South East Asia. “It’s logical, as that is where half the world’s population growth would be and nutrition needs to be taken seriously. Away from emerging Asia, we are also expanding in Africa via our presence in South Africa, Ethiopia and Rwanda.”
Journeying with people from all walks of life
Today DSM operates in nearly 50 countries with over 21,000 employees, and the CEO says it is a privilege to be on the road interacting with people from all walks of life. And we’re not just talking his company’s own workforce and its customer base.
Sijbesma is also a Climate Leader for the World Bank Group, has taken his company into a partnership with the United Nations World Food Program, earning him the UN’s Humanitarian of the Year award in2010 Among other signature engagements, he is also a supervisory member of the Dutch Central Bank.
“My wife and two boys are a huge source of energy and strength for me in all my endeavors. I am an extrovert and a journeyman. Meeting people from diverse backgrounds keeps me going and broadens my perspectives about our planet’s journey forward.”
To this effect, the DSM boss has committed to reducing his company greenhouse gas emissions by 45% in the run up to 2025, recycle 80%-90% of its waste by 2020, and source 50% of its electricity from renewable sources by 2025.
“And as a person running a company directly involved in nutrition, it pains me to confront the reality that almost a billion people in the world are going to bed hungry every day. As human beings we are better than this. I hope that both myself personally and DSM as a company play their part to change this dynamic.” That should be well within the scope of a company and its boss so at peace with transitions.
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If you perform a general sweep of steady dividend-yielding European stocks, possibilities are that the Netherlands’ Royal DSM (AMS: DSM) or Koninklijke DSM will appear on the list under the specialized chemicals classification, with its market leading positions in health, nutrition and products.
Lately, the business has actually made a practice of gratifying financiers with strong outcomes. Take its most current set of financials released simply a couple of weeks ago that saw DSM publish an 11% increase in 3rd quarter core earnings to EUR406 million ($462 million) beating market projections of EUR390 million.
It made it possible for DSM to verify its 2018 outlook for a near-25% development in adjusted EBITDA (profits prior to interest, tax, devaluation and amortization). The current success that is standing out of prospective financiers and existing investors alike is down to a long, tough and tough portfolio turn-around and service renovation covering over 15 years, states DSM’s Ceo Feike Sijbesma, and what’s more – it is not the business’s very first shift either.
(*** )(** )” For some who are not acquainted with our brand name, it needs to be bewildering to reconcile our business initials DSM– which broaden to Dutch State Mines or Nederlandse Staatsmijnen— and discover us associating our favorable financials to an 8% development in our nutrition department and raised vitamin costs, and having no mines on our books,” mentions the Dutch market captain, in a special interview.
What DSM was at its starting in 1902, with its origins coal mining, is absolutely nothing like what it remains in the 21 st Century. “By the time the last coal mine was on the brink of being shuttered in the Netherlands in 1973, DSM was currently on its method towards ending up being a bulk chemicals business.”
While adhering to its petrochemical service design, privatization of the(******************************************** )s and1990 s provided the business the imaginative license to check out biotechnology and specialized chemicals. “Growth led DSM to get biotech leader Gist-brocades in 1998, where I dealt with brand-new service endeavors in India and other emerging markets. After the acquisition, I signed up with DSM and consequently its board.”
What followed made Dutch business history. On entering into the DSM household, Sijbesma and his associates, brand-new and old, commenced what he refers to as “future proofing” of the business, and its most current “most important” shift yet.
” Even prior to I took the CEO’s chair [in 2007], the board understood we needed to alter. Nevertheless, it is not something everybody concurred with. My reasoning– previously as a board member and consequently as CEO– was easy; one that DSM might not grow as a standalone bulk chemicals business in an altering sector.
” In the West, the marketplace was led by the similarity BASF (Germany) and Dow Chemical (U.S.) who had scalability, and in the East gamers such as SABIC (Saudi Arabia) and Chinese petrochemical producers were quickly acquiring traction. The core of our service– polyethylene, polypropylene, crackers and bulk chemicals– likewise needed substantial financial investment to stay up to date with the competitors.”
Sijbesma felt the time was ideal for a modification. “The concept was to have a phased divestment of petro- and bulk chemical possessions in action with constant financial investment in specialized chemicals/materials, food active ingredients and biotech.”
A science-based method
Much of the portfolio re-jigging occurred in between 2002 and 2011 and it wasn’t simple. “While numerous associates concurred with me, others implicated me of eliminating the business’s tradition. My riposte was that we wish to construct on the business’s tradition.
” Divestment and financial investment likewise needed to continue at a rate numerous were not comfy with. However if our future was not in petro- and bulk chemicals, then why rest on a property and await it to end up being a liability prior to offering? We ‘d rather be proactive and get worth for cash in the “here and now”, which we did. With all that now done, and the last little bit of portfolio optimization having actually occurred as just recently as this year, I leave it to others to offer their decision.”