Thank you, operator. Good morning, ladies and gentlemen, and welcome to this conference call on DSM's full first quarter results, which we published earlier this morning after we already published our preliminary key numbers a couple of weeks ago on April 12.

I'm sitting here with Mrs. Geraldine Matchett, Chief Financial Officer and member of the DSM Managing Board.

Geraldine will give a short introduction, where after she will answer your questions. Given the facts that we already released preliminary key figures that the full first quarter results are in line with these previously announced figures, and that we are aware that many of you have a full agenda this morning, we will aim to keep this call short.

As always, I need to caution you that today's conference call 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.

And with that, I will hand over to Geraldine. Geraldine, please go ahead.

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

Although our full Q1 results are in line with the preliminary figures that we released on April 12, we decided to schedule this quick call in order to give you a chance to ask any remaining questions you may have, looking at the full set of figures for the quarter. I will start with providing a few comments on the key slides of our investor presentation that we published this morning, together with the press release, and then we'll open the line for the Q&A session.

Let me start with the highlights on page 2. As indicated on April 12, in order to provide as much clarity as possible in terms of the performance of our underlying business, we have shown separately the estimated effects on our business of the current higher vitamin prices, resulting from the exceptional supply disruptions in the industry.

These effects are expected to be temporary, and heavily weighted towards the first half of the year. What we refer to as the underlying business are the normal business activities, excluding these estimated extraordinary volumes and mainly prices that we refer to as the temporary vitamin effects.

This split is, of course, not our usual way of reporting, and thus, require some estimates. With reference to the underlying business, as you can see from these highlights, we have had a very strong start to the year with an organic growth of 11% and adjusted EBITDA growth of 8% despite the significant foreign exchange headwind of about 13 million [ph], and a ROCE improvement of 200 basis points.

Animal Nutrition, Human Nutrition, as well as Materials, all contributed to the strong performance, resulting in a continued good momentum in their businesses growing well above market. This very strong performance at constant currencies is in line with the increase we realized in both 2016 and 2017, which were of course well ahead of our targets set in our Strategy 2018.

When adding together the strong underlying performance and the temporary vitamin effect, the combined figures indicated a higher outlook for the full year 2018, which we announced with our preliminary Q1 results on April 12. This outlook can be found on page 4 of this presentation.

Now before moving to the underlying business performance of each business, let me just say a couple more words on the temporary vitamin effect, and for that, let's move to page 7. As shown here on page 7, in the middle table, the first quarter benefited from an estimated 220 million additional sales, and an estimated 165 million additional adjusted EBITDA contribution related to an exceptional vitamin price environment, which is expected to be temporary and heavily weighted towards the first half of the year.

This temporary vitamin price effect is mainly related to our Animal Nutrition. While it is clear that these market conditions are temporary, we are currently continuing -- they are currently continuing into the second quarter, but we have limited visibility as to the full year potential impact.

Our best estimate, as indicated in our outlook, is that the benefit in terms of additional adjusted EBITDA will be in the order of EUR250 million to EUR300 million. Now moving to the performance of the underlying business in Nutrition, let's go to page 8.

Organic growth in the Nutrition underlying business is estimated at 12% for the quarter, with 8% volume growth and a 4% price/mix effect, with both Animal Nutrition and Human Nutrition delivering strong above-market organic growth. Adjusted EBITDA for the underlying business in Nutrition is estimated to be EUR277 million, slightly higher than earlier indicated, representing an 8% increase compared to Q1 2017, despite the significant negative foreign exchange effect.

The estimated EBITDA margin for the quarter is 19.4%, representing a further step-up versus the 18.4% in Q1 2017. Now looking more specifically at Animal and Human Nutrition.

Let's move to page 9. Animal Nutrition had an exceptionally strong volume growth of 13% in its underlying business, mainly driven by very strong premix sales in all regions, but particularly in North America and Asia.

In the quarter, we also saw an increased focus from customers on security of supply, amongst others, driven by the blue sky policies in China, which resulted in additional deliveries. Finally, in the quarter, the volume growth benefited from the introduction of reformulated forms due to new European regulations, with sales in the order of 15 million to 20 million.

And in Human Nutrition, as shown on page 10, the quarter saw a 5% volume growth, supported by increases in all regions and across all the market segments, with especially strong growth in premix sales, as well as the i-Health business. Higher pricing in both Animal and Human Nutrition were a result of pricing initiatives to mitigate higher input costs, and the impact of clearly less favorable exchange rates.

Prices were increased in premix and advanced formulations. Our pricing actions are supported by the effects of the blue sky policies in China, which have created a more inflationary pricing environment in the industry in general.

Now this brings me to our Materials business. So moving to page 11.

Our Materials businesses reported an organic growth in Q1 of 11%, with volumes up 7% and a positive price/mix effect of 4%. The strong organic growth was partially offset by a 6% negative foreign exchange effect.

Engineering Plastics, Resins and Dyneema all delivered strong above-market volume growth, with good demand in key markets. In line with previous quarters, this growth momentum continues to be supported by strong demands for innovative environmentally friendly specialty solutions, while the 4% price increases offset the higher input costs.

Moving to page 12. This strong top line momentum enabled our Materials businesses to deliver an adjusted EBITDA of 126 million, up 12% compared to Q1 2017 and resulting in an adjusted EBITDA margin of 17.1% versus 16.1% in Q1 2017, positively influenced by the strong sales in Specialties.

And with this, for the sake of time, I will open the floor for questions. Operator?

Two questions, please. Firstly, on the impact of the blue sky policies, I'm trying to sort of get an idea of the longevity of the volume uplift you've seen from this.

Can you share with us any visibility that you have over the investment levels at competitors from which your customers are switching their volumes? Are you seeing your competitors sort of reinvest to comply or come out of the market completely?

If you've got any comments you can make around that, that would be helpful. And then secondly, turning back to your own figures, the CapEx figure for the first three months, it feels like it's ahead of the run rate that I would have anticipated if you were expecting CapEx to be evenly spread.

Are you accelerating any investment plans? Or is there anything in there that should lead us to sort of above par CapEx forecast for this year or next?

Sure. Neil, let me maybe start with the CapEx one.

So indeed, we saw Q1 at 172 million, which is a bit on the high side. But here, it's also to do with the timing of creditors.

So what we're seeing in -- as a cash out, we're picking up actually nearly half, is to do with timing of spend versus new investments. So this is not really a sign of an accelerated spend.

And in terms of the guidance for the full year, we're probably looking at a bit above 600 million at this stage for the CapEx in 2018. So that's on CapEx.

Now the blue sky policies, and here, what we're seeing is a couple of things. Firstly, clearly, you have the interruption elements of what's going on, and that has a temporary effect a little bit in volume, but also in pricing.

Now in terms of the more mid- to long-term impact, what we expect is that it will, if anything, increase the cost base of the other players in the industry, and maybe therefore, have a supporting effect on overall prices. But beyond that, we don't have anything particular to flag in terms of capacity shifts within the industry due to blue sky at this stage.

First, on Food Specialties, can you explain the backhaul of the production interruption at savory? Is that linked to the BASF citral production facility also related to your production facility?

And secondly, on working capital, which shrank by 4% to 1.4 billion, despite probably higher receivables, and I refer now to the nutrition segment. Is that because you are basically sold out for some of the vitamins, and thus you have not anymore any inventories?

And if so, should we expect inventories to be replenished in Q2?

Martin, sure. No problem.

So on savory, actually, this has actually nothing to do with the outside world. It's entirely our production.

Basically, we use living organisms for this business, and sometimes, they just don't do what we expect them to do. So it happens from time to time.

So nothing linked to a broader industry link or another company. So that's the savory production interruption.

Now a couple of comments on my side from OWC. So what we're seeing is actually that we have OWC of 2.1 billion, and what you -- there is an FX effect on the consolidation.

As you know, with the US dollar being weaker and the Swiss franc being weaker right now, when you consolidate up into euros, you see an overall effect on the balance sheet in a consolidated basis. So that's part of the movement.

Now when you actually look at our inventory levels, they absolutely are a little bit higher versus year end. Now there is an element of seasonality there, so end of Q1, we tend to be a bit higher.

But I think the most useful information I can provide is that our Investor Days is remaining -- remained at 120 days, so pretty much stable. So you are not seeing there any big swings, neither one way nor the other.

Geraldine, two questions please. The first one is very simple on the pectin issue, can you comment a bit on what's going to happen after the deconsolidation?

Are you going to exit the whole thing? If you can put some colors on what's happening on pectins.

And the second on the temporary issue, well, pricing on vitamins, could you also comment on the boldness of it? I think, at the beginning you were saying it's not just vitamin E and A.

Can you talk about the other vitamins there?

Patrick, yes, so on the pectin, indeed, in the quarter, in fact, on the 1st of January, we deconsolidated these operations. Now to give you a size -- an idea of size, we're talking here for the quarter of a bit more than 10 million sales, and a bit less than 5 million EBITDA.

So it's not a very sizable business. Now we currently -- because the options were not honored, we are left with our existing 29% shares.

Now ideally, we would very much like to get more, but we are in discussion with our partners on that. And in the meantime, we cannot show this as a consolidated business, so it kind of slipped into associates' reporting, and that is...

You're still in discussion to acquire the 71%?

Yes, 90%. I mean, hydrocolloids remains a very interesting area for us from the development of the business, and broadening now our Nutrition portfolio.

So we still have good hopes that at some point, it will head in the right direction, but...

It's a valuation issue?

Well, I don't think it's necessary to go into the details. But yes, let's say that we're not realigned yet.

When it comes to the vitamin effect, actually there, I think we were quite specific that this is only to do with vitamin E and vitamin A. So we really have -- what we did is we took vitamin E and a pre-disturbance, and then we estimated the impact of the disturbance on the top line and the earnings.

So to be clear, this is E and A, and it's primarily animal nutrition and its impact.

I'd like to start also with these price increases. You had also quite nice price increase in the underlying business.

Maybe refer where that is coming from. And then also, on these disruptions you have seen, basically, the Citral value chain of BASF includes aroma chemicals and carotenoids as well.

Was there no shortage in these two? So was really everything what you're referring to when you had a positive impact only in these two vitamins?

And then maybe you can outline a little bit what's going on with the vitamin C plant in China, where you have a longer maintenance. I think it's four months.

What you are going to do there, and whether that has any impact on the earnings in the second half? And lastly, I'd still -- I'd like to get my head around on these very nice volume trends you have seen in nutrition.

My understanding is whatever you might have seen as additional volume from these vitamin interruption is taken out. So that's not in your underlying volume line, but I would like to understand what these EU regulations means, the 15 million to 20 million.

Was that a one-off? Or is that continuing?

And is there any way you can say something how big the impact of the Chinese blue sky impact and the additional security and supply your customers want to see, had on this quite nice volume growth in the first quarter?

Okay. That was quite a lot of questions in one big sentence.

So you have to excuse me, if I don't get exactly, but let me already make some comments. I think your first question was about the price increases within the underlying business.

Now as I've clarified, we very much defined the vitamin effect of E and A. Now as you can imagine, we have all the other ingredients out there, and what we have seen is that, during the period, we've got a foreign exchange effect that we need to mitigate.

We also, in our premixes, sell ingredients that we also buy, so source materials, and we've seen a bit of an upward trend on the price of both. So when you put that together, you see a positive pricing momentum, which is partly compensating for these costs.

So that's really the price effect on the underlying business. Now to your question of why is this disturbance E and A, and maybe not also carotenoids.

It is a little bit, but it's a lot smaller. So we really tried to stay clear as to what it is that we're ring fencing in order to provide as much clarity as we possibly can in these rather unusual circumstances.

So there is an effect, but it's not at all at the same scale that -- what we've carved out. Now vitamin C, the shutdown, indeed, we've announced a shutdown in our Jiangshan plant, which is a 4-month shutdown starting in July.

Now this is something that has been planned for more than a year, and it combines various objectives. There's obviously the regular shutdown maintenance work, but there's also some upgrading of the sites.

There's also addressing some of the greenhouse gas emission, so that we need longer and bigger upgrades. Now the good news is that because this was very much a scheduled shutdown, we have built up enough inventory to meet all of our committed deliveries to contracted clients.

So no issues in terms of supplies or sales in the second half of the year. And summer is a good time because we always do the summer shutdown for these operation sites.

It's a bit of an annual event. And then the -- I think your last part of your question was where is the growth coming from, the volume growth, and we make reference in our comments for Animal Nutrition, where we saw a 13% volume growth in the quarter.

We make reference to an EU regulation on antioxidants. So basically, the European Union suspended something called ethoxyquin.

I think I pronounced it correct. It's easier to call it EMQ, and it's an antioxidant that is used in feed additives -- as a feed additive.

So it's an Animal Nutrition. So we have been -- I think it actually came up a couple of times in conversations before.

In order to respond to this new regulation, we have developed a EMQ3 portfolio solutions and what you see is that this changeover in the quarter, and maybe also a bit in Q2 is making the volume growth somewhat higher. So we didn't want you to take 13% of the new proxy in any way for Animal Nutrition volume growth, and we felt it was good to point it out that it's in there.

So therefore, basically a temporary impact specifically in this quarter, and will not influence the growth, in one or the other direction, in the coming quarter?

Indeed. I mean, maybe a little longer than just this quarter, but it's very much a 2018 effect, as we are basically swapping over old products with these new products with the new formulation.

And I think I covered your questions unless I'm missing...

Indeed.

Okay. Wow.

Oh. I was scribbling fast.

Okay.

Geraldine, just a quick question, and maybe impossible to disentangle it. But you've provided a lot of data on the underlying performance of the business.

But looking at the total working capital as a percentage of sales, we've got the headline figure there, but not the x bitumen effect. Is it possible to provide that x bitumen?

Yes. We indeed thought maybe we'd have a try, and then we realized that, honestly, we're making far too many estimates and a little bit arbitrary assumptions, so we gave up, I'm afraid.

Okay. No.

No. That's fair enough.

I kind of suspected that might be the case. And then my final question, just on the dividend proposal, looking at the payout ratio, a significant decline.

What was your thinking in terms of how you arrived at the dividend per share?

Okay. So tomorrow is our AGM, and we will be proposing a dividend of 1.85, which actually is a 47% payout ratio on the results, so adjusted, of course.

Now we wouldn't normally adjust a dividend because we have the stable preferably rising. We wouldn't normally have a kink in the dividend because of the earnings of the monetized -- coming from monetizing [indiscernible’.

So I don't know whether you did a payout ratio on the full earnings or the adjusted. We tend to work it on the adjusted and...

Right. Okay.

Yes, I know. Definitely, it's a huge decline on the full, but it's a slight decline on the adjusted, right?

Exactly, yes. So it's very much stable preferably rising, being our policy that even in the financial crisis, we didn't go down.

So we are maybe a bit cautious from the way up, but that goes with the long-term commitment.

Right. Okay.

No. It's just more, as the balance sheet delevers, I mean, obviously, ahead of the Strategy Day, there are other considerations to take into account, but I was wondering if that influenced your decision on the dividend as well.

No. Not particularly.

This is very much a standard dividend approach at this stage.

It's actually Markus Mayer on behalf of my colleague, Laura. I have two questions remaining.

Firstly is on the tightness and also the strong pricing power at your Resins, and I think this was [indiscernible] resins. Do you see this current price level as sustainable?

That's my first question. And the second question is also more or less related in this kind of segment, and most of your competitors which have -- its proposal to the construction industry had quite a harsh winter effect, in particular, in the northern hemisphere.

And you pointed continued healthy demand in the building and construction industry. Is this mainly turned by the price effect?

Or is this also volume related?

Okay. So when it comes to our Resins business, we have actually seen good momentum despite the harsh winters.

So what we're seeing is not only pricing, volumes are doing well. Now of course, we have a very broad geographical footprint with this business.

And what we're seeing is one of the big drivers of the volume development, is very much that switch from solvent based and non-solvents. So that's where I have to say that our portfolio positioning is proving to be very strong, and enabling us to grow above markets, as we have stated.

Now in terms of the pricing, there's been a lot of force majeures, et cetera, in the sectors, as you know. I think the team has done an extraordinary work at managing to continue to supply, and that has supporting prices.

But at this point, we are not flagging a strong correction in that space at this stage at least based on our portfolio. I'm not sure which reference you're looking at.

Maybe one other comment on our Resins business. We had a site for our powder coatings, called Augusta, in the US which was closed.

Now this was reopened. That's the good news, end of April.

And we were, during the period of the close, able to meet all our customer needs through the network of production capacity that we have. So that was also well-handled by our business team.

A couple actually. So Materials volume growth is 7%.

It looks from your commentary quite well balanced across the three subdivisions, but I wanted to check in on that assumption. So are you seeing similar type of growth across Plastics, Resins and Dyneema?

That's the first question. The second question was just on the mass.

I'm sorry if I missed this, Geraldine, but on the mass of the exceptional profit. So why is there a discount on the revenue benefit to get to EBITDA?

So the 165 is clearly 75% of your 220. So what are you leaking on 25%?

Okay. Sure.

So Materials, we have 7% volume growth, as you said, and it is indeed well-balanced. So all three are on volume growth.

Now Engineering Plastics has the highest growth on the quarter, and there, I have to say, the automotive space is strong with E and As effect. Now all sectors are good, maybe Engineering Plastics a bit stronger than the two others, and within Engineering Plastics a good quarter on automotive.

So that's on that. Now when it comes to the 220 and the 165, what we see is, of course, within the quarter, we said it's primarily priced but there's some volume growth.

So that's playing into that delta. We also have some FX differences on top line and bottom line.

And thirdly, during this rather exceptional quarter, we also picked up some exceptional costs that went with this environment, and we've got it with the exceptional. So that's how you -- that's the gap between the 220 and the 165.

Just to come back on that, the FX effect, I mean, they're both in euros, right? The 220s in euros and the EBITDA is in euros.

So is that export transaction issues? I'm just trying to understand that.

Yes. The FX effect is not the biggest.

I mean, what you see is that you indeed have a bit of a different cost based on production and on sales. So there, you will have always some FX difference there, but it's not one of the major elements within the GAAP that is set.

Okay. That means we're done with Q&A.

Geraldine, make some closing remarks?

Yes. Thanks, Dave.

So in summary, of course, we are very pleased with the strong start to the year. I'm particularly pleased with the strong underlying performance that continues with all businesses.

We'll remain fully focused on improving our operation and financial performance through our growth initiatives, and completing the improvement programs within Nutrition. And finally, let me just remind you that on the 28 of June, we will have our Capital Markets Day in London, where we will be sharing the outcome of our strategy review, and the highlights of our strategy updates.

And I hope to welcome you all there. And with that, thanks very much.

Okay. Thank you, Geraldine.

This concludes our conference call for today. Thank you very much for your attention and your questions.

If you have any further questions, don't hesitate to reach out to our Investor Relations team. And then it's back to you, operator.