Thank you very much, Robert. Good morning everyone.

Welcome to this Conference Call on DMS's results for the third quarter 2016, which I think you've seen we published earlier this morning. Geraldine Matchett, our CFO, the Member of the Management Board is with us this morning to talk you through the results.

And after that, of course, she's available to answer your questions. Now, we have until 8:30 this morning as usual.

And as a reminder, I need to point out that today's presentation can contain forward-looking statements. And in that regard, I would like to point you to our disclaimer regarding forward-looking statements as published on our website and in our press releases.

I'd now like to hand the call over to Geraldine. Geraldine, please?

Thank you, Steve. Good morning, ladies and gentlemen.

And welcome to this call on DSM's Q3 2016 results. Before we get started with the Q&A session, I would like to briefly walk you through some of the key points regarding our results.

Now, in summary, we are pleased to announce another strong quarter. Positive momentum continued in both our nutrition and our materials businesses; and good progress has been achieved in delivering our strategy 2018 ambition, both in terms of the growth initiatives, as well as our efficiency improvement and cost reduction program.

Looking at the overall headline figures, group net sales in the quarter were up to close to €2 billion supported by a 3% organic growth. Our EBITDA increased 13% to €323 million.

Our return on capital employed or L. School ROCE improved from 7.9% a year ago to 10.6% so far this year.

And our net profit was up 38% to €146 million. And if I include the exceptional items, which mainly comprise again relating to the IPO of Patheon, the net profit this quarter was even higher at €322 million.

Now, moving to the businesses and starting with Nutrition. Nutrition delivered a strong quarter supported by higher vitamin prices, albeit somewhat offsets by one-time cost, resulting in a good EBITDA growth of 8%.

This EBITDA progression was achieved on the back of an overall organic sales growth of 5% and that was supported both by the animal and the human nutrition business. The EBITDA margin continued to progress versus last year at 17.7%, despite cost relating to marketing and sales campaign in human nutrition and to maintenance shutdown cost relating to our vitamin E and vitamin C plants as scheduled.

Our Animal Nutrition saw a good growth in premix, carotenoids, and feed enzymes. And while the volume growth was lower this quarter due to the high prior comparative figures, the price mix effect was a positive 5% coming from the higher vitamin and premix prices.

In Human Nutrition, we delivered good organic sales growth of 4% with a solid performance in food and beverage, especially in Asia and Europe and continued strong volume growth in i-Health. Now, moving to our Materials businesses, they also continue to perform very well within EBITDA growth of 16% and a particularly high EBITDA margin of 18.6%.

Now, during the quarter, these businesses achieved strong volume growth of 5%, fully driven by the specialty segments. Prices were, however, down year-on-year due to the low input cost environment, as in previous quarters, resulting in an overall stable sale.

The high EBITDA margin I just mentioned can be attributed to a combination of factors, including discipline margin management, a favorable product mix with stronger growth in our specialty segments, and continued low input costs, as well as the benefit of our efficiency and cost saving programs that we carried out over the recent years. Finally, as the CFO, I can't end these comments without a couple of points on our cash flow and our balance sheet.

Overall, our efforts to increase our cash generation resulted in an operating cash flow of €325 million, which is €25 million higher than the same quarter last year. And for the net debt, it decreased by €400 million during the quarter to €2 billion, reflecting both the good operating cash flow performance and inflows relating to the IPO of Patheon that amounted to €219 million in the quarter.

To summarize, therefore, all in all, we are pleased with another strong quarter of operational and financial progress in the execution of our strategy 2018. And on the back of these result, which are clearly ahead of our original targets for 2016, our outlook for the full-year is maintained and is stated as follows.

DSM continues to expect to deliver full-year 2016 results ahead of the mid-term targets set in its strategy 2018 with a mid-teens EBITDA growth and an increase in ROCE of over 200 basis points. And with that, I would like to open the floor for questions.

Operator?

Yes. Good morning, Geraldine.

I've some -- I have a question about vitamin A, of course. Can you tell me more about what has been the reason for the price increase?

And at which price we are sitting now because Feike Sijbesma mentioned a price of €5 in August or in first quarter, I don't know exactly, but it has been bettered but to which level?

Okay. Good morning.

Thank you for joining the call.

Good morning.

Just to be clear, I think you meant probably vitamin E.

Yes, vitamin E. Sorry.

Yes. Yes.

Okay. That's fine.

So indeed the vitamin E picture, may be its worth just going back a little bit in time. If you remember last year, it was on a declining curve.

And at some stage, in the autumn, we had a view that we had pretty much reach a trough and that was below the €5 mark. Now, since then, we were approving rights in our interpretation of the market as the vitamin E price then raise -- rose quite sharply in the first half of the year.

And at the half year, in July, on our June numbers, what we were commenting there is, be a little bit careful; the vitamin E prices are really much higher now for two reasons. One is more structural and it has to do with of course demand and supply balance and the various players in the market, but there was also the effect of the G20 that was pending in September.

And I'm sure you've heard that in order to make the environment more pleasant for the G20 a number of industrial sites were asked to reduce activity and that had created quite a lot of speculation in the market and probably a bit of a speculative price element. So what we have seen since, and that's the news if you want for the third quarter, is that now the G20 is over.

What we have seen is the price come down a bit following the sort of G20 being gone and no more speculation around that and has being stabilized the prices around €7.50 to €8 currently. And I'm stating here the spot price on feed info, which by the way is the external reference and is not our prices.

But what we're seeing now is that it seems to be stabilizing, it's in-line with what we were indicating by the way three months ago. And it appears that the market is reasonably firm.

But it is the spot market out there and we'll have to see how it evolves from here.

And you have long contracts. Is the price already going in -- the new prize already going in the contracts?

Very fair question because that is one of the very important elements, which is that, firstly, we don't sell very much at spot at all, so it goes into our contract. Now, vitamin E goes primarily into the animal nutrition space, some goes into human and a little bit in personal care and cream, but the bulk goes into the animal feed.

And there we tend to see if we average out, but of course there's a whole bunch of things about at six month delay. So what we saw is this y because of this timing effect, it was actually a negative impact in Q1 and Q2 still versus prior, so we had comparatively a lesser good time in the first two quarters.

And in this quarter, for the first time, if you want, we are starting see this generally positive environment coming through the contracts and into our results with a positive -- and we have indicated at the half-year that overall we believe that the positive environment of vitamins will bring us €20 million to €30 million over the semester and that is --

How much? The €20 million to 20 --

So €20 million.

€20 million to €30 million?

Yes. €20 million to €30 million.

Okay.

And the split between Q3 and Q4 is kind of more about a third this quarter and two-third the next and a lot fourth quarter of the year.

Good morning, Geraldine and Steven. If I could, start with perhaps, the outlook for margins in the fourth quarter.

Obviously, there's a raw material tailwind that we're seeing a -- a new margin does seem quite sort of volatile. But if you could give me some color on what you -- how -- if you expect that level to continue into the fourth quarter, that'd be great?

Good morning, Andrew. I'm presuming you're referring here to raw materials businesses, right?

Yes.

Yes. So indeed here, it's, we're spending a bit of time on the margin.

As we indicate in the press release at 18.6%, this is particularly high margin for our materials businesses. But I wouldn't really call it volatile because it's been building, if you want, quarter-over-quarter, but there are elements in that to be mindful of.

One of them is the fact that clearly we are in a low input cost environment still and that is helping us in margin terms and the impact of that and related math that go with it hasn't really changed and its still around 150 basis points. So what we're saying is, that this 18.6% would probably -- about 150 basis points will probably unwind over time as the environment gets a bit tighter on these input cost.

So we'll have to see. Now, we've been flagging that to be honest for a few quarters.

And the good news is that it hasn't yet transpired, so it also shows that our transformation of the portfolio to a more specialty portfolio is really paying off because its only -- well, it's when you have a good portion of specialty elements, that you're able to hold these kind of benefits as long as we have, so that is a positive. Now, there is another element in the margin which has to do with mix.

So what we're seeing is that we've got a nice growth and we saw a 5% volume growth in our materials business, that is coming predominantly from our specialty segments and that's of course from a mix is where we make slightly better margin and, therefore, its favorable. We believe some of that is partly due to the current market conditions in PA6 polymers that are very soft.

However, there's also an element that is structural because we have decided to walk away from some really low profitability volumes. And therefore, again, to the transformation of the portfolio, some of that mix effect should be long-lived.

So these are, I would say, the two main components that I would highlight here behind the margin of materials.

Okay. And in terms of [indiscernible], would you say that you're running ahead of schedule in terms of the cost savings program?

And in terms of why you're getting those savings, I'm picking up some information that some work around the periphery of the CVC DSM partnership. You're decommissioning a polymerization plant in Augusta for instance and that wasn't part of the partnership.

So I'm just -- I guess, my question is, is there some structural measures that you're doing on the periphery of that partnership? And what should we read into that, if anything?

Okay. Two very relevant topics although, somewhat different.

So may be on your first question about how we're doing on our cost savings. We're really on track with where we would like to be.

And if you remember, these are really the efficiency improvements and cost saving programs that we announced in the Capital Markets Day. They are -- we gave a good update at the half-year, we'll give another update at the end of the year.

But in the meantime, we can really confirm that we are on track with delivering our ambition there and that if you look at the run rate level, we should by the end of 2016 have reached the €90 million to €100 million cost saving run rate by the end of this year and that is versus 2014. So it's a bit of a formula, but that's how we've been tracking it from the very beginning.

And we continue to spend a lot of effort and focus on delivering that because it's essential we get it all the way through the organization. So that's on the on the program, if you want.

Now, what you probably picked up relating to ChemicaInvest, which is a joint venture with CVC, where we caught that in August last year our caprolactam, Acrylonitrile, and Composite Resins businesses, yes. So there, it is a joint venture.

And what they're doing has nothing to do, if you want, with our operational and our cost improvements et cetera. They're very much in the lead.

Having said that, they have indeed taken a decision to close down the sites in the US called Augusta, which was a higher cost site. And given the -- it has to be said tough market conditions out there.

We're actually very supportive of that decision. And it does not have any implications for us other than we're supportive of that decision.

Okay. I mean, it's probably bit inside the base.

But -- since this is small BEP (phonetic) plant on site and -- but that has still remained within the assignment, so I was just wondering, that seems to be closing as well?

Yes. And so the main point here is that, we have drawing rights with ChemicaInvest.

Yes.

So may have to supply the caprolactam throughout. And then, it's up to them how to do that.

Yes.

In this case, they've taken a decision of finding an alternative source for the caprol that we need and that is the big decision. Now, our debt activities and other activities in the US are not part of that decision and that is very much then up to us to decide what we do.

Okay.

But really at this stage it's the capro element.

Right. Okay.

And I mean, if I may, I have a couple. Just interested in the -- I was away when you announced the Stevia move into that market by 2018.

I'm just interested, if you can, if you got time and there's not too many questions, a timeline of what happens from here and how? Obviously, there's a big -- well, big smoke layer in that market evolver.

So how you sort of will compete with them? And just maybe bit of color on the new omega-3 high purity product that you're launching.

I'm wondering, how the campaign in the US is going? And if there's a turnaround there to any sign of hope or -- I mean, or you can sort of just continue with the promotion program till it brings results?

So it's a -- I just wonder what the strategy might be up to us we kind of -- as it sort of gets longer and longer in terms of trying to push the market there?

Yes. Well, maybe I'll start actually with the second one because that has a link with these Q3 figures.

As we indicate, we have been spending a bit more in Q3 on our marketing and sales campaigns. And part of that is to do with indeed this new high concentration omega-3 product 3C, which we launched, I think it was this week or last week, very recently.

Now, if you remember, we had flagged that we were getting this new technology on stream at our Mulgrave sites in Canada. And for us it's a very important step because it enables us to get into more segments of the omega-3 space.

So with the higher concentration, you can play in a different segment of higher value supplements, where you can blend on the omega-3 more easily with other ingredients and tends to be bit more premium. So now what's great is that we're on stream.

It also by the way has benefits in terms of sourcing. So we are able to source in kind of broader way and have cost efficiency.

So it really wins on, it ticks all the boxes and it was very nice to see the launch of that take place, and it would -- the initial response was very positive at one of the big trade fairs of the industry. So that was one of the elements behind the sales and marketing spend of this quarter.

And the other one is our i-Health business, the B2C business that we have, that is -- which by the way is still growing very, very nicely. And there was some more activity in terms of sales and marketing behind those products, which are products that go straight on the shelf of course being B2C.

So that's really the background behind the sales and marketing cost. I'll just take the opportunity of the question to mention that that was broadly an envelope of about €10 million over the semester of which about two-thirds was this quarter and one-third will be next.

But -- so that's the scale. Now, when it comes to you Stevia, this is really the space of the big challenge, the new cold whatever you want to call it, the new tobacco of Health which is reducing sugar.

And of course, what's important or interesting with sugar reduction is that it's not only about the sugar, it's also about the texture And that was one of the things that we explained at our Capital Markets Day in Charleston in September, which is that when you take out sugar out of our product you don't only have the sweetness problem to manage, but you also have a lot of texture challenges and that has actually been driving an area of good growth strategies on Hydrocolloids business and that is being doing very, very well because we are now on product innovation and product development with our clients helping address these picture challenges, which actually like to reducing sugar out of product. And so Hydrocolloids is an area, and we had the head of our -- of that division, who's based in China, come and explain how that is all panning out in the industry.

So Stevia is one piece of that space. And we are indeed doing some development on Red Day and Red bam (phonetic) on technology there, but it's really early days for us to be specific about it.

Thanks. Thanks a lot to take out little bit of time.

Okay. Operator, thank you very much indeed.

Then, I think it's time to wrap things up. Geraldine, would you care to make some closing remarks for us, please?

Yes. Thank you, Steve.

Well, in short, our performance here today in both our EBITDA growth and our ROCE growth is ahead of our mid-term target. And we're making good progress on the execution of our strategy 2018.

While the global macroeconomic uncertainties remain of course a concern, we maintain a full-year outlook and expect to deliver results ahead of these mid-term targets with a mid-teen EBITDA growth and increasing ROCE of over 200 basis points, which is of course the punch line of our press release today. And with that, I thank you for your time.

And I wish you a very pleasant day.

Thank you very much indeed, Geraldine. Thank you everyone on the phone.

Have a good day please. Bye-bye.