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DSM was founded in 1902 by the Dutch state to mine coal reserves - DSM stands for Dutch State Mines. Over its lifetime, DSM diversified into food ingredients, enzymes, pharmaceuticals, and chemicals. Since discovering and commercializing their Amylase enzyme in 1906 for food and industrial applications to Brewers Clarex, which has become the standard enzyme in the brewing industry and other products like BakeZyme and Maxilact, DSM has been a leader in the enzymes market for over a century.
DSM has built a portfolio of leading enzyme products in food:
Brewers Clarex has helped eliminate the costly cold stabilization process in brewing
Maxilact is used to break down the lactose component and enable the creation of lactose-free dairy products
BakeZyme is used to keep bread soft and fresh for long by delaying crumb staling during storage
The first slide of their latest corporate presentation addresses COVID-19 and what DSM had to do to keep the lights on.
The next slide goes into key transactions for the company: acquiring CSK in 2019 for its dairy products, acquiring Glycom in 2020 for its human milk oligosaccharide products, and acquiring Biomin in 2020 as well for its animal nutrition products. DSM spun off part of its materials business line to focus on nutrition and food.
This slide just shows their goals for the year: good margins, higher cash flow, and more acquisitions.
The last ten years for DSM has been a divestiture of its chemicals business and focusing on enzymes. This shift is part of a broader move to replace organic chemistry with enzymatic reactions.
DSM still has a materials business, focusing on thermoplastics, which is growing at a slow pace.
DSM has a dominant position in some parts of the materials market in the EU, mainly bio-based ones, but the division is still focused on margins versus growth. Interestingly, the company doesn’t use similar slides for their nutrition business; maybe it’s so good that it is better left unaddressed.
DSM highlights some of the trends driving the growth of its nutrition business.
The next slide addresses DMS’s Bbsiness model - enzymes with broad applications and sales forces that are region focused.
DSM’s recent acquisitions are meant to strengthen their business model by adding more products.
As a transition slide, DSM frames food production in a very profound way - through the process of industrialization, food and nutrition have diverged. This is a pretty exciting opportunity to change this.
The company argues that their business model might be able to solve this problem.
Biology and engineering might have a shot at merging food and nutrition.
A big part of this theme is melding data science with biology.
DSM wraps this section up by focusing on their mission to combine health with nutrition.
Their technologies ranging from enzymes and metabolic engineering are a core source of new products for DSM.
The idea is that this business model is unique enough to garner high (over 20%) EBITDA margins.
DSM lays out its financial goals for its nutrition and materials businesses.
Hopefully this can be aligned with their sustainability goals.
Important parts of DSM’s strategy are large-scale M&A as well as acquisitions of new technologies.
The presentation ends with its financial goals and capital structure.
DSM’s presentation does a good job at framing a large opportunity to merge food and nutrition. Their historical position in the enzyme industry put DSM right in the middle of this opportunity. However, the company will need to balance immediate cash flow goals with 5-10 investments in new technologies around software and synthetic biology.
Follow up questions for the team:
Will, or when, the materials division be spun off?
Are there any cost synergies from each acquisition? On the sales side or R&D?
Could DSM launch its own product lines, at least co-develop, on the theme of merging food with health? Any corporate VC activity for DSM?
Would DSM be open to acquiring smaller technology startups?