Ladies and gentlemen, good morning, and welcome to this conference call on the third quarter 2015 results that we published earlier this morning. I'm sitting here with Mrs.

Geraldine Matchett; Chief Financial Officer and Member of the DSM Managing Board, and Mr. Jos Op Heij; Senior Vice President, Corporate Control and Accounting.

They will elaborate on the results and after that answer your questions. This call will last for about 45 minutes.

As a reminder, today's presentation 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.

With that being said, I will hand over to Mrs. Matchett.

Geraldine, please go ahead.

Thank you, Dave. Good morning, ladies and gentlemen and welcome to this call on DSM's Q3 2015 results.

This will probably be quite a short call as we have our Capital Markets Day tomorrow and are hoping that many of you will be joining us there. But I will, nonetheless, run through some of the key slides of our investor presentation and then we will open the call for some questions and answers.

Now, the investor presentation was published this morning with a press release, and you can find it on our website, dsm.com, and on our DSM investor relations app. I will start with slide 2 with the financial highlights for the majority of my comments this morning.

So moving to slide 2, well, as you can see, Q3 has been overall a good quarter and our outlook for the year remains unchanged. We continue to make good progress, both in terms of top-line growth and EBITDA growth, as well as generating a strong operating cash flow of EUR300 million for the quarter.

In terms of sales, which were up 8%, this was driven by nutrition that delivered a 7% organic growth. Volume growth in animal nutrition in particular reached 10%, which was higher than expected and human nutrition achieved 3% volume growth, despite continued market weakness in some areas.

As for the EBITDA, nutrition has been gradually improving with EUR213 million for the quarter, and this is reflected in a 17% margin compared to 16.3% in Q1 and 16.7% in Q2. This improvement in earnings came from organic growth, mainly driven by volume growth, and favorable US dollar rates, largely offsetting the significant negative impact of Vitamin E and the Swiss franc, which we've mentioned in the past already.

For performance materials, in the quarter we saw weak sales due to soft end market demand, while the negative pricing effect is linked to the lower input cost. However, from an EBITDA point of view, this was another good quarter with a year-on-year increase of 17%, supported by good margin management and the efficiency programs that we have put in place.

The EBITDA margin for PM remained high at 16.2% versus 16% in Q2 and 13.6% in Q1. Please note, however, that if we exclude the temporary benefits coming from the drop in input costs, the margin would be in the range of 14% to 15%, which remains very good.

These were the main highlights, and I will now only pick a few more slides to clarify specific points relevant to this quarter, starting with nutrition on slide 11. I'll give you a second to get to slide 11.

Okay, as already mentioned, animal nutrition had a very strong organic growth of 12%, supported by a volume growth of 10% and positive pricing effect of 2%. The volume growth came primarily from premix and our specialty products.

While the feed markets are expected to remain healthy going forward, I should however highlight here that these strong growth rates also reflect easy year-on-year comparative figures and this will end in Q4. As for the pricing effect, as in previous quarters we have seen a significant impact of Vitamin E be compensated by the higher prices of other products and animal nutrition.

Now, in Q3, this was even more pronounced, as substantially higher prices for folic acid and amino acids drove the overall price effect to this positive 2% that I just mentioned. However, as you know by now these higher prices of insourced materials only have a limited effect on our bottom line.

Now focusing for a second on Vitamin E, prices as reported by Feedinfo have come down somewhat over the quarter to about a mid-range of EUR5. So although the price moves are rather small, we still see some price pressure and our 10% increase announced in August is yet to have an effect.

We continue to believe that the current price levels are not easily sustainable for the Chinese Vitamin E producers, and the utilization rates in the industry are gradually increasing with rising demand. As a result, while we indicated at Q2 a negative EBITDA impact for the full year of up to EUR90 million, we now see that this will be approximately EUR100 million.

Now moving to human nutrition, let's go to slide 12. As previously highlighted you can see here that the overall nutrition growth was solid, with a 3% volume growth and a small price decline of 1%.

However, the markets remain somewhat of a mixed bag with continued soft conditions in the US in fish oil-based Omega-3, as well as the vitamin-based dietary supplements, as well as the food and beverage markets in both North America and South America not really picking up. On the other hand, we do see good growth in Europe and in Asia and I-Health continues on a strong growth path.

The 1% lower prices reflect the lower Vitamin E prices and some mix effect. Now for performance materials, let's move to slide 13 or 14, I'm not sure.

Anyway, the performance material slide. As stated, volume developments were weak this quarter, but this was largely due to polyamide 6 polymers, where we suffered from a temporary production restrictions at one of our engineering plastics sites, but these issues have, in the meantime, been resolved.

Also, in engineering plastics, specialty businesses showed, however, good volume growth. Resins saw weak sales mainly driven by soft demand.

In general, we see more uncertainty as to market volume developments in the coming months. However, we do not expect material changes.

Q4 will see the usual seasonal weakness in performance material, but this is due to the destocking effects. Now in terms of EBITDA, I would like to highlight here, again, the very strong Q3 performance with a 17% growth year-on-year, and an EBITDA margin of 16.2%.

But this includes some temporary margin expansion relating to that drop in input costs and as mentioned before, the normalized EBITDA margins are probably more in the range of 14% to 15%. I will finish now with a few comments on the cash flows by moving to slide 18.

As you can see in this table, Q3 has been a strong quarter from a cash generation point of view. The operating cash flow from continuing operations reached EUR300 million, whilst the capital expenditure for these same businesses amounted to EUR113 million, resulting in a positive free cash flow for the period of EUR187 million, which is a nice step up.

In nutrition, operating working capital as a percentage of annualized sales improved further from 32% last quarter to 31% this quarter. This is also reflected in the overall OWC development that moved from 26.7% to the 24.9% reported.

As a result the net debt decreased by EUR468 million compared to June, helped by this good operating performance, as well as cash proceeds of EUR282 million received from the sale of our polymer intermediate and composite resin activities to Chemical Invest. And on this note, as I have already reconfirmed the outlook for 2015, I will end my comments here and open the call for questions.

Operator?

[Technical Difficulty] you've made some progress as you mentioned in nutrition --

Sorry, we could not hear you. Maybe you have to start again, something was wrong with --

Okay, can you hear me now?

Perfect.

Okay, sorry again. Regarding the working capital progress in nutrition, I was under the impression that you would be trying to build some inventory in advance of the turnaround in the Vitamin E facility during the -- or the current turnaround.

Was there any impact in the inventory level in the working capital figure? So on an underlying basis, was there perhaps slightly more progress?

And secondly, on your guidance, full-year guidance, I've asked this on previous calls, but is the implication that you should expect to see some underlying progress in EBITDA, excluding the EUR35 million currency benefit? Thank you.

Okay, good morning, Neil. Thank you for the questions.

Indeed, you are right. From an operational point of view because we will be having the shutdowns in Q4, and that's actually something not to be forgotten, because the impact of the shutdowns will be in the range of EUR15 million to EUR20 million, there is an element of buildup of inventory.

These are products such as Vitamin E, Vitamin A, the carotenoids. The good news here is that despite that, we still have on a like for like -- well, trending in the right direction versus Q2 and also very much an improvement versus Q3 last year.

So indeed, there is some underlying improvement here beyond maybe the obvious. As we have been mentioning, this is very much an area of focus that the business has been pushing very hard.

So when we say we want to get our operating working capital down in nutrition, we really mean it. So it's doubly pleasing to see already the positive effects partly in Q3.

And Q4 we should then see some of the move on inventory linked to the shutdown. So that's to your first question.

Now indeed our guidance remains unchanged, which we aim to deliver an EBITDA ahead of last year, mainly driven by foreign exchange. Now, mainly can be interpreted in different ways, and I will leave some flexibility there.

One would hope it's not only foreign exchange.

Thank you very much.

Three quick questions, please. Firstly, in terms of the PA6 impact in the third quarter, could you give that at the EBITDA level, the impact at the EBITDA level?

Secondly, the comments on infant nutrition, how much, if any, is that related to some of the volatility in the China market, or is that just scheduling of orders for Western markets? And then the third question, looking at the cash flow, this other operating line that's been a big negative year-to-date, but much less so in Q3, are we going to see that substantially lower or tending to zero in terms of an outflow going forward?

Thank you.

Yes. Hi, James, the PA6 we do not provide EBITDA by product.

I'm afraid there I will not provide more detail. However, this has been resolved so it was a one-timer.

Now, in terms of infants what we're seeing is that, indeed there is – the market in China is quite complex and is being watched very carefully. What we are not seeing is a switch from global producers to local, so it's a little bit of timing and a little bit of uncertainty here and there, but nothing structural.

Then from the operating cash flow point of view, you're absolutely right, the amounts in other is pretty substantial year to date. Now, the bigger portion of that actually came in in the first half.

If you remember we had some outflows linked to derivatives in that amount. So, for those of you who don't have the figure in mind, we're talking here about EUR340 million year-to-date and the majority of that is linked to derivatives.

So a lot in excess of, I would say, two-thirds are one-timer event. So, I'm glad to say that that is behind us.

Thank you.

Good morning. Thanks for taking my question.

I actually just had one question on the currencies. If you can provide a little bit more clarity, because how big is the real for you, because it's not easy to calculate the exact effect, if possible?

Yes, sure. Thank you for asking the question on the foreign exchange.

This has been an ongoing theme, as you know, these last few quarters. Now, the big move in Q3 has been the real.

Just to give you a bit of an order of size, so Brazil represents about EUR500 million as a business, the majority of that is the nutrition, more than 90%. And of course, within that we've got the Tortuga business that is about two-thirds of Brazil.

Now, from a currency exposure point of view, what we have is broadly a pretty good natural hedge in terms of cost and sales. So the majority of the impact for us is translation and that's what we highlighted in our notes, is that due to the big devaluation of the Brazilian real this quarter, we saw a EUR5 million translation effect on our consolidated euro numbers.

Now, of course, there's a little bit of transactional as well. We do actually export a bit from Brazil and we also have to import some raw materials, such as phosphoric acid into Tortuga.

But in the size of our picture, we take it into account that it is not the most material move, so hopefully that gives you a bit more of a picture.

Thank you so much. Just one more little question.

On I-Health, the magnitude of the sales, now I assume it's around EUR250 million. Would it be the right assumption?

About right, yes.

Thank you.

Yes, good morning everyone. Three questions.

The first is on the personal care and food specialties businesses combined. If I look at the sales of those businesses that was up significantly in the last two quarters.

The explanation in the press release is rather brief, so could you elaborate on that, what is driving that high growth? The second question is on biomedical.

You talk about a challenging US market; could you add some color to that? And then thirdly is on Dyneema.

There was an order delayed or postponed, has that or will that be realized in Q4? Those are the questions, thanks.

Okay, let me take it maybe in reverse order. Dyneema, as you know, is quite a lumpy business in terms of the commercial.

It's quite sizeable contract, so there is an element of timing in and out, so Q2 was a good quarter, Q3 is a bit weaker. So I wouldn't read too much into that and you will hear some more tomorrow at the Capital Markets Day in terms of the different pieces behind the Dyneema portfolio, but they are not much.

Now, biomedical, indeed I commented a bit short this quarter, principally because it's repeating what we have said earlier this year, which is that what we're seeing in the market is a consolidation of the players in the biomedical space. And as a result, we are seeing a bit of a step-back in growth compared to prior trends.

But there again, it's not a particularly concern in terms of us losing market share, it's more the market is a bit difficult right now in the US. Now, food specialties had a reasonable quarter.

We don't particularly stress the performance of food specialties versus prior quarters other than it's on track. And then personal care has been in the background.

I mean, it's obviously a small piece within our big nutrition portfolio, so we don't make a big song and dance, but they have been very successful at pushing their products. Again, tomorrow Stefan will give you a bit more color as to what's in there, but we are strong in skin, in sunscreens, and in, yeah, mainly skin and sunscreen actually, and those are the ones that are doing well.

Okay, thank you.

You're welcome.

Thank you. Sorry to ask, but on Vitamin E, I just want to understand, because we've been in this situation now for, I would say, probably four quarters if I'm not wrong, where volumes are good, prices keep coming down and you keep referring to Chinese competitors struggling.

So I just want to understand what is really the ground reality? And if basically now volumes actually do slow, what's going to happen to pricing in a sense?

That's sort of my first question. And the second linked question really is what is your feel with regards to your market share in this product?

Have you gained market share versus your Chinese competitors? And then my second question really in nutrition would be, could you give us some color on raw materials, whether you've had any tailwind in raw material prices this year, or is this something which we expect next year?

Thank you.

Okay, sure. Vitamin E; let me maybe just clarify, because there's something you said that I wasn't sure I heard right.

We're not flagging that there will be a slowdown in volume of Vitamin E. In fact, Vitamin E is the backbone of the animal business and it's actually seen good volume growth, so we're not seeing a dropdown there.

Now, if we step back for a second, yes, you're right, we've been talking about it now for several quarters. What we're seeing this quarter is effectively no big change in the picture and what we mean by that is that the players who are active in Vitamin E are the same.

We know that we are very well-positioned on the cost curve versus our Chinese competitor. And we know as well that too being publically quoted helps us know for sure that they are suffering at the current price level.

Now, I'd like to highlight here, because I think it's been misinterpreted at times, that while our level of profitability has significantly come down over the years with Vitamin E, it remains a profitable product for us. So we are not bleeding.

This is not a problem child per se. It's just the comparators are pretty drastic and we are perfectly okay at running our business with current Vitamin E prices.

Now, what we have done at the beginning of the year is, actually at the end of last year, we switched policy and went for volume over price in order to ensure that we do not lose market share. And in fact, in doing that we've gained market share.

So that worked very well. But there comes a point where you want to start reintroducing a bit of price firmness, and to do that we attempted to push price increase in the market in August.

Now, to be fair, this is yet to show any benefit, so it gives a bit of an indication of where the market still is on the supply side. Nonetheless, the capacity utilizations are increasing.

Demand is still firm, so we would see this as a gradual story. Now, I know we've said it bottomed out, it bottomed out.

Now it is a commercial market, so we are reading it in the same way as you are. Of course we've got good insight, because we are a big player there.

But if we look at the move in Q3, it's not a substantial move. It's sort bopping up and down a little bit and we just adjusted the estimate to reflect that.

So that was on Vitamin E. Now, I think your second question was on the purchase ingredients for nutrition.

Now, here we flag amino acids, folic acids, for example, as some of the categories that we buy. So we don't only sell ingredients that we make, we also source from other parties.

Amino acids are a big chunk, because that goes into the big flow of our animal nutrition business. And these are very much the sort of pass-through in that we make a markup, of course, but it's not the same level of profitability that we make on our own ingredients, which is logical, because we don't have the capital attached to it either.

So, all we want to flag here is that part of the swing on the nutrition margin that we have seen is also linked to this and the mix effect that goes with it.

Okay. Can I just clarify one point?

Regarding utilization, you would say that year-on-year in Vitamin E your utilization is markedly up.

Our utilization is certainly has come up markedly and we were already a very big player, but as we pushed our volume presence on the market it has come up over the year. I think that would be a fair statement.

But my reference was more to the market position that we believe the capacity that's out there, including ours, is being increasingly utilized, which the usual trend as that happens, it provides a little bit more firmness on the price.

Okay, thank you. Very clear.

Hi, good morning. I've just got a couple of questions.

First of all, just on the food and beverage, and particularly with the outlook that you've given, just around the improving situation in North America, but also now the weakening situation in Asia, kind of any extra color you have around that? And how significant both of these might be, whether you're seeing a sharp pickup in North America or a sharp slowdown in Asia?

And then just on the animal nutrition. Again, you're quite upbeat about volumes at least certainly being stable.

Does that mean from, I suppose, a market perspective that when we get to the high comparables particularly, say, Q1 next year, that you'd be looking maybe kind of flat situation, or even some growth potentially into next year? Thank you.

Yes, sure. So just to clarify our comment, indeed, what we're seeing is a little bit of downward or weaker markets in Asia for food and beverage.

This is seen more in the branded products from what we can see from our client base. It's not marked, it's more gradual, to answer your question and in the US it's also, I would say, a gradual.

So these are not big shifts, they're more trends, tendencies that we wanted to highlight. Now, you're right that animal nutrition, if we look at our presence in China, we have about EUR1 billion of turnover in China a bit more.

About 45% of that is linked to our nutrition business and the big part is animal. What we have seen currently is that there's a little bit of carefulness in the purchasing and the supply chain, but again it's more gradual.

But to your point, we are now entering into a period where the comps are less favorable. Now, we've had a very good run on animal health, so I wanted and I highlighted in my introduction comments, please bear in mind the actual organic growth year versus prior year, will be a tougher story across the board for animal next year.

Okay, thank you very much.

Hi, thanks for taking my question, I have two. The first one, can you give us an update on the reorganization of the business that you announced in August?

Obviously, it's early days, but maybe if you could give an update on sort of headcount reduction and the other measures? And then secondly, could you give a bit more detail on the performance of Omega-3 globally?

It sounds like it's still weak in the US. Do you plan to run any more of the campaigns as you did earlier in the year?

Yes, sure. So we indeed announced in August the reorganization of our functions.

This is underway. What we have is, we have APs this year about EUR25 million benefits.

We had announced EUR125 million to EUR150 million in all. That is versus the 2014 base line, and based on a run rate end of 2017.

I'll go into a lot more of that tomorrow, if you want to hear all the details. It's been keeping us extremely busy, so a lot is happening, but we're not disclosing FTE counts at this stage.

Now, to be clear, the bulk of the transformation will be effective in the years ‘16 and ’17, but as I said, I'm going to mention a lot of that tomorrow. Now, in terms of Omega-3, you're absolutely right.

Now if we – the market is unfortunately still in a declining mode in the US, so I'm talking here about the fish oil-based Omega-3, to be clear. So US markets are still difficult and we're not really seeing uptick in the data that you can get from Nielsen, et cetera.

So we are addressing it from the various different angles from a commercial basis and Stefan will elaborate on that as well tomorrow. I'm sorry to refer a lot about tomorrow, but I for efficiency sake, he can explain it a lot better than I can anyway.

Now, what's important, though, is that this is a category that's doing well in other geographies. So we keep flagging the US, because obviously ONC had a big US component to it and it's an important market.

But the good news is, in other geographies Europe and Asia in particular, it's a category that's doing very well. So there is light at the end of the tunnel, but what we can also expect is that the fish oil prices will not come down in the period.

So when I refer to a mixed bag, this is more the lesser pretty part of the mix.

Okay. Thank you.

Good morning. Just one question from me on the Patheon joint venture.

I note that the S-1 was filed in the summer, and that the use of proceeds will be to pay down a $550 million loan off, which was used to pay a dividend to the principal shareholders. I'm wondering if -- so your share of that dividend, I think, would have been about $264 million.

I'm wondering if that has come into the cash flow yet, or maybe you can give some more color on that?

Sure. Now, as you know, under US rules we have to be extremely careful what we say about Patheon at this point in time.

However, what I can confirm to you is that in H1 we got an inflow of 155 million, which came as a reduction of our outstanding balance. So indeed, that piece has come in in H1.

Beyond that, I'm afraid I cannot comment.

Okay, thank you.

Yeah, thanks very much. It's actually Andrew Benson.

Most of the questions have been asked, but a quick couple of points. On the Vitamin E price increase, it does strike me as you've changed your strategy there from volume over price back to look for price.

But given the price increases announced in August, is it fair to say that you're not imposing that and effectively, that it's failed? And lastly, you've been battered by various stories on omega oil and all the rest of it, over the past few years.

Well, we've got another one now that according to the World Health Organization, it looks like red meat and processed food isn't quite as good for you as some people would have thought. Is there any strategic planning to deal with that?

Do you think this latest World Health Organization announcement is going to have an impact on your business?

Okay. Let me maybe tackle question one first as I'm not entirely sure I've got your second one.

But so firstly in terms of vitamin E and the price increase, so as I have said, we started by defending very much our market share by going for a volume over price. That needed to be done to signal to the market that we intend to remain a very important player in that space and that was very successful.

Now, there comes a point where having established that, it's always wise to try and reintroduce a bit of price firmness in the market. Now, this takes time.

Currently, it's not gained much traction, but it is something that we will keep trying to do from time to time, and see how we can get it back in the market. So we are not -- I wouldn't say, outright it has failed.

What I would say is that it is yet to show an impact on the pricing, so that's on the vitamin E. Now, in terms of the various scares or conversations about benefits of various ingredients and foods and health, you're right that it's a very up and down story along the years.

What we tend to see is that one headline, then dissipates and things go back to usual. So I wouldn't comment particularly on this one.

What we know is that over the years it creates a little bit of bumpiness along the run, but it is very rare that something significant changes the picture. I mean, if you look at the megatrends that we always highlight, the world population will continue to grow.

One thing is for sure is that protein is one the big challenges of feeding the population going forward. Whether it be through meats, whether it be through other sources of protein, we are positioning ourselves very strongly to be part of that story.

But this could be a very long conversation. Hopefully, again maybe tomorrow when Stefan elaborates more on our positioning in the different food parts, this will help you get a feel for also the diversity of what it is that we're involved in.

Thanks very much.

We have now time for one last question.

Good morning, everybody. Very quick question, can you comment a bit more on Vitamin A prices, always commenting on E, but if you could give some flavors on vitamin A?

Second question, the Aland consolidation, could you give a bit more color on how much it contributed in the quarter and where do we find it? I suppose it's in human nutrition, but it'd be useful to get that.

And finally cash flow statement, the EUR239 million of disposal in Q3, is that a fair assessment of the polymer intermediates/resins cash inflow that you got? Thanks.

Yes, sure. So, Vitamin A, if you remember this is a completely dynamic from Vitamin E and there was a spike due to disruption in the supply side of the market in 2014.

Mainly what we're seeing is that Vitamin A prices are back to the normalized and perfectly okay, levels. So I would say here nothing much to report other than what we would term the current market prices as normal.

So it was more the past that was abnormal, so nothing much there. And, Aland, indeed, that is a vitamin C producer that joined the Group.

So you do find it within the nutrition. It's actually the biggest impact has been on the headcount.

Those of you who may have noticed, we had a 2,000 increase in headcounts which may be surprising, given the restructurings we're talking about. It's because more than 1,800 actually came in from Aland.

And you have the full disclosure of the Aland numbers at the back of the press release. So if you want to see it, it's all there, the balance sheet, the income statements, everything.

Then the cash inflows from divestments in the quarter, now what we have is we got EUR282 million in cash from the divestments of composite resins and polymer intermediates. This is broadly in line with what we had estimated, because this is not the final-final number.

There is still some elements to be sorted out in Q4 linked to working capital, cut offs and things like that. And there's also part of it is reflected in licensing agreements and such things.

So pretty much in line with what we had flagged at the time of the transaction.

Do you expect a further payment before the end of the year?

Yes, we'll have a little more cash coming in, in Q4.

Okay.

Okay, looking at time, we now need to round off this call. Geraldine, do you want to make some closing remarks?

Yes. Thank you, Dave.

Well, firstly, thank you all for your time and for listening to the call. I think really, in summary, we can say that Q3 has been an overall a good quarter for us.

And as I said, we reiterate our outlook for the year. I hope that most of you will be joining us at the Capital Markets Day tomorrow in Amsterdam, as we very much look forward to welcoming you there.

For those of you who can't make it physically, don't forget it's all fully webcast, so you can watch and hear us from remote, if necessary. With this, I wish you a good day.

Thank you, Geraldine. As usual, we will publish tomorrow at 7.15 a press release on the Capital Market Day.

So you don't have to phone us, you now know that’s coming. The presentations will be published tomorrow at the start of the conference, so that means at half past 1.

And with that being said, we will end this conference call. Thanks again for your attention and your questions.

If you've any further questions on the background information, please feel free to contact us. With that, I hand the call back to the operator.