Since 2010, DSM has undertaken a major portfolio change, creating a group that is largely serving the animal nutrition and human nutrition markets. We estimate nutrition will comprise c80% of group EBITDA in 2022. The rest of the group (Materials) is cyclical, producing engineering plastics and a high margin polymer (Dyneema). The group has several interesting projects in the pipeline, centered on sustainability.
DSM’s nutrition segment is growing by mid-single digits, and underlying margins have improved as the business moves downstream. DSM’s other business, performance materials, is more cyclical with exposure to plastics, including polyamides and nylon. This business has been formally placed under strategic review by management and, in our view, is likely to be divested, leaving DSM as a pure-play nutrition company. This could re-rate the shares further upwards, based on a comparison to consumer chemicals stocks. Risks relate to product launches, interest rates, and the execution on portfolio transformation.