Press Information. From coal-mining to Life Sciences and Materials Sciences A history of successful transformation

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1 Press Information DSM, Corporate Communications P.O. Box 6500, 6401 HJ Heerlen The Netherlands phone +31 (0) From coal-mining to Life Sciences and Materials Sciences DSM has a long history of successful transformation. From the beginning in 1902, when the Dutch government established the company as a state-owned coal-mining operation, via a publicly listed (bulk) chemical company to today s DSM: a Life Sciences and Materials Sciences company active in health, nutrition and materials. At a very early stage, DSM realized the need for change. In the 1930s it converted a by-product from coal mining into a profitable commodity, ammonia, a key raw material for nitrogenous fertilizers. This marked the first step on a diversification path that ultimately saved DSM from the fate of many other coal-mining companies in Western Europe. After WWII, DSM started to transform itself into a (bulk) chemical company. And by 1970, chemicals and fertilizers comprised the company s main activity. Petrochemicals then took center stage. In 1989 DSM was privatized and its shares were floated on the stock exchange. By that time it had also diversified into highquality plastics and fine chemicals. DSM became a hybrid company active in commodity, fine and specialty chemicals. Over the past twelve years major portfolio changes have taken place, such as the divestment of the petrochemicals business and the acquisition of companies such as Gist-brocades, Catalytica, Roche Vitamins & Fine Chemicals and NeoResins. With the divestment of the base chemicals activities in the last three years and the changes within the organization, this transformation has been completed and DSM is now a Life Sciences and Materials Sciences company ready for a new growth phase as the company enters a new era. In this next phase DSM will deliver on its promise of creating brighter lives for people today and generations to come, driving focused growth and becoming a truly global company. Embedded in the company s mission is the core value that DSM s activities should contribute to a more sustainable world. This guides how DSM pursues sustainable value creation for all stakeholders on three dimensions simultaneously: People, Planet and Profit.

2 Page 2 of 5 DSM s strategy is a response to key global trends (summarized below) that are affecting economies, people and markets in different ways. By focusing on these trends, DSM will be better able to support its customers in developing solutions that meet current and future needs. A major driver of these global trends is the continuous growth of the world population, from around 7 billion people today to an estimated 9 billion in Global shifts DSM s customers know that the world is changing faster than ever influencing where demand comes from, how and where people are living and how they connect with one another. Urbanization and economic prosperity are promoting dietary changes and increased spending on housing, transport, lifestyle and energy, all of these being areas where the chemical industry has sustainable solutions to offer. In 2009, per-capita demand for chemical products in developed economies was six times greater than in high growth economies, showing the latter s huge market potential. Increased demand around the world is also driving a higher use of natural resources, leading to a search for further efficiency, recycling and renewable solutions. Industrial biotechnology is an important technology to help provide solutions to global challenges regarding food and energy access and security. Several new technologies, especially in the communications industry, are having a high impact on society and behavior. Climate and energy Climate change is a reality and future production and efficient use of energy is a central challenge for society. In this context, DSM s customers are seeking sustainable value chains with higher yields, reduced waste, lower energy use and fewer greenhouse-gas emissions. There is also a growing focus on alternative, renewable raw materials, made possible with the help of industrial biotechnology to produce chemical building blocks, materials or energy. Health and wellness Prevention is better than cure. Today many health issues and the associated drug use are diet and lifestyle induced. Customers need to address core health needs, whether through nutrition, medicines or lifestyle improvements. The population in the West is aging and there is cost pressure in all healthcare systems. At the same time, healthcare demand in high growth economies is increasing. Nutrition security and access is increasingly recognized as critical for human mental and physical development in both the West and the East. There is also a growing demand for safer and healthier foods and pharmaceuticals. DSM in motion: driving focused growth DSM in motion: driving focused growth marks the shift from an era of intensive portfolio transformation to a strategy of maximizing sustainable and profitable growth of the new DSM. The current businesses compose the new core of DSM in Life Sciences and Materials Sciences. DSM s focus on Life Sciences (Nutrition and Pharma) and Materials Sciences (Performance Materials and Polymer Intermediates) is fueled by the above-mentioned societal trends and the company aims to address to the unmet needs resulting from these trends with innovative and sustainable solutions. It is DSM s ambition to fully leverage the unique opportunities in Life Sciences and Materials Sciences, using four growth drivers (High Growth Economies, Innovation, Sustainability and Acquisitions & Partnerships) and bringing all four drivers to the next level. At the same time DSM aims to make maximum use of the potential of all four growth drivers to mutually reinforce each other, and generate a greater number of compelling, high-potential business opportunities.

3 Page 3 of 5 Regional organizations, functional excellence groups and shared services enhance the performance of the business groups which together create One DSM. DSM will capture regional business opportunities and synergies and implement excellence throughout the global organization. The culture change program that is currently in progress (focusing on external orientation, accountability for performance and inspirational leadership) will be further rolled out with an emphasis on collaboration and speed of execution to support this strategy. All this is based on sustainability as DSM s core value and its belief in diversity, including internationalization. With its transformation completed, DSM can now focus on, and accelerate, growth. The company has set itself ambitious targets for the next strategy period. For 2013 two profitability targets have been set: an increase in EBITDA to a level of billion and an increase in Return on Capital Employed (ROCE) to more than 15%. In addition, DSM aims to achieve organic sales growth of 5-7% annually up to High Growth Economies - from reaching out to being truly global All the evidence indicates that fast-growing economies such as China, India, Brazil and Russia and other emerging areas will be the major global growth engines for the world economy over the next decade. DSM has actively pursued growth opportunities in high growth economies across all businesses. In the past five years the share of sales from these economies has increased from 22% in 2005 to 37% in 2010, and DSM exceeded its ambitious Vision 2010 sales growth target of USD 1.5 billion in China (in 2007 this target was increased from USD 1.0 billion). DSM s ambition now is to broaden this approach and accelerate growth in multiple economies and regions. By 2015 DSM expects sales from high growth economies to grow towards 50% of its total net sales. Over 70% of DSM s growth in the period to 2015 is expected to come from high growth economies. DSM's strong focus on China will continue and the company expects its China sales to grow to over USD 3.0 billion by To support this growth DSM intends to invest USD 1 billion in China in this strategy period. DSM will also increase its presence in other markets, doubling or even trebling revenues in India, Latin America and Russia. To enable this ambitious growth, DSM will need to adjust its organization in a variety of ways to facilitate local decision making and innovation. DSM s goal now is to truly internationalize its business. This will bring the company closer to its key markets and customers. It will strengthen the regional businesses and stimulate diversity and innovation. Innovation: from building the machine to doubling innovation output Since the announcement of the innovation boost back in 2005, as part of DSM s Vision 2010 strategy, the increased commitment to innovation has significantly paid off. DSM aimed to achieve 1 billion in additional sales through innovation in 2010 compared to 2005, and clearly exceeded this target despite the strong headwinds encountered since Q Furthermore, DSM has made a big step in improving innovation practices and culture in the company and has succeeded in considerably increasing the number of product launches (from about 25 back in 2006 to a steady launch rate of approximately 60 per year now). The Emerging Business Areas provide strong, long-term growth platforms, which optimally combine the available competences in Life Sciences and Materials Sciences. DSM aspires to take value creation through

4 Page 4 of 5 innovation to the next level. The speed of innovation will be increased even further and the EBAs DSM Bio-based Products & Services, DSM Biomedical and DSM Advanced Surfaces should grow to a combined turnover of more than 1 billion in In addition, DSM aims to increase innovation sales from approximately 12% towards 20% of total sales by Sustainability: from responsibility to a business driver DSM is consciously expanding its sustainability approach. From an internal value and a tool for making a responsible contribution to society, DSM believes that sustainability will be the key differentiator and value driver over the coming decades and that the company is uniquely positioned to capture new valuecreating opportunities. DSM s strategy is strongly connected to the company s mission to create brighter lives for people today and for generations to come. It has set new and ambitious targets and aspirations for sustainability: by 2015 ECO+ products products and services that, when considered over their whole life cycle, offer clear ecological benefits compared to the mainstream solutions they compete with will account for 80% of innovation sales and towards 50% of the total running business sales (compared to an estimated 34% now). These developments will make DSM an industry leader and preferred partner in value creation through sustainability. DSM s integrated Triple P approach pursues sustainable value creation for all stakeholders on three dimensions simultaneously: People: DSM s People strategy will deliver measurably better solutions to meet human needs and improve lives. The company commits to developing internationally recognized measures of its impact on people and will engage with communities, governments and societies around the world to understand needs in areas such as health, nutrition and product performance. Planet: DSM will tap the creativity of its increasingly global and diverse organization to increase ECO+ innovation and will build on its strong platform of ECO+ innovation, such as coatings for solar cells, waterborne paints, bio-based materials, halogen-free plastics, etc. DSM s Profit objective is to translate innovative sustainable solutions into strong value-creating businesses addressing unmet needs. As a result of its increased focus on understanding (societal) needs, DSM will grow the profitability of its People solutions and ECO+ businesses in several ways. This includes meeting demand for cleaner, greener technologies; developing products specific to high growth economies; and developing sustainable business models such as Base of the Pyramid and Cradle to Cradle. To capture the profit potential of Triple P for DSM s business, the company is embedding it fully into its organization, activities and reporting. Acquisitions & Partnerships: from portfolio transformation to driving focused growth Like many other companies, DSM has been cautious about making acquisitions during the financial crisis and economic downturn. However, a number of smaller acquisitions and venturing investments were made in for example, in 2008 DSM acquired The Polymer Technology Group, a biomedical business and DSM Venturing has currently about 60 million invested in promising companies and leading venture capital funds. DSM has also established joint ventures and partnerships in many areas. A recent example is the partnership with Roquette for bio-based succinic acid, and the agreement with Sinochem Group to form a

5 Page 5 of 5 50/50 global joint venture for the business group DSM Anti-Infectives is one of the first major milestones of DSM s new strategy. In December 2010 DSM announced its intention to purchase Martek, a US based producer of high value products from microbial sources that promote health and wellness through nutrition. This transaction will be the first major acquisition by DSM after its successful transformation into a Life Sciences and Materials Sciences company. A new brand for a new era DSM s new Bright Science. Brighter Living. brand is an essential element of its strategy. As the transformation of DSM into a Life Sciences and Materials Sciences company active in health, nutrition and materials is complete, a new corporate brand is a logical step. It demonstrates very clearly to customers, suppliers, shareholders, the communities in which the company works as well as to DSM employees that DSM has turned a page. The new brand is a symbol of the company's transition to the new DSM. The new brand is a reflection of the overall positioning internal and external of the company. It stands for the newly created DSM, the DSM culture and the way DSM wants its employees to work together. It presents the company s values and the One DSM philosophy (based on the realization that DSM can only fulfill its strategic goals if it operates as one united team across the globe) and it fits with the mission to create brighter lives for people today and generations to come.