Ladies and gentlemen, can we open the meeting? It's wonderful to see so many people in the room, And I hope we'll have a very pleasant and interesting meeting. I hereby open the meeting and welcome all of you, both the shareholders, as all those So interested in all guests. Given the fact that we have a live feed on the webpage of DSM, I also want to welcome all those who attend the meeting through these means. And for those present for the first time, my name is Rob Rautz, and I'm Chairman of the Supervisory Board of Royal DSM.
On the podium behind me, you find members of the Supervisory Board, Pauline van der Meermoore, Eileen Kennedy, Victoria Haines, Fridzen Baassen, John Ramsey and Priti Pant. Also present among are Sirica Ma, and her appointment is on the agenda today. In the first row, you'll find the members of the Managing Board, Faika Sibesmaa Geraldine Matchett and Dimitri de Breza. Next to me, Luisa Vandenbroek, Corporate Secretary. She will drop the minutes of today's meeting.
Present in the room also, members of the Executive Committee in charge of strategy and DSM Food Specialties, Philipp Eichermann. On behalf of P and O, we have Joseph Wiese. And for innovation, we have Rob Van Lien and his successor, Trish Malachy. I'll come back to this in a moment. Chris Gapelsrudar, in charge of these non nutritional products, unfortunately, had to be excused.
Also, employees from several departments and business units are here, such as corporate control and Legal, Investor Relations and Sustainability. I would like to particularly mention Adson Nikolaigh, who is is leaving us after 8 years as President of DSM Netherlands. Edsel, thank you for your contribution throughout all those Yes. And I would like to very warmly welcome his successor, Ita Schippers. I would also like to welcome Erik Wiesen and his colleagues from KPMJ, Ericsson auditors in line with the corporate governance code.
The auditor is present. To answer your questions under Item 4, adoption of the financial statements, your questions about The fairness of the financial statements. We will have a brief commentary by the auditor later on. I also would like to welcome Joyce Limreiser, Notre Public working with Ellen Overy. And There was a possibility to give proxies and voting instructions to her as an independent party.
Also, she will supervise the conduct of this meeting with observance of all regulatory regime and statutory requirements, And this will be happening as usual. You had the opportunity to consult the agenda and the explanatory notes that have been published on the 26 of March. The registration date was Wednesday, 10th April, in line with the statutory term of 28 days exactly Prior to this meeting, I therefore conclude that the notice convening this AGM has been published with due observance all legal and statutory requirements and that, therefore, this AGM is qualified to take legally binding decisions. For The sake of the efficiency of the meeting, we will deal with some items as one group before proposing them for the vote. Also a few household announcements.
Please notice the location of the emergency It's marked with green signs. And in the case of an evacuation, please follow the comments of the shell no, not shell, DSM officers. That's a long time ago. DSM will do, says the Chairman, really blushing. Please follow the instructions of the DSM officials.
The language of this meeting is the Dutch language. If you wish to do so, you can also make any comments or ask We have simultaneous interpretation from Dutch into Dutch and Quebec. We have shareholders not have a headset yet to get simultaneous translation into English and vice versa. Headsets are available at the entrance of this room. It's possible to raise We'll deal with the items on the agenda in groups.
And after the discussion, there will always be the opportunity for asking questions. And my proposal is that as usual for each agenda item, every speaker in the first round will have the opportunity to ask a maximum of 3 questions. I know this is Secretary will comment and explain on the procedures. She will also lead the voting procedure. Please switch your mobile phones to silent mode.
And let me point out that during the meeting, it is not allowed to make any audio or video recordings. For the sake of the minister by the North Republic, we'll have an audio recording. Also, we have a recording The live coverage on the webpage of DSM. This live feed will be available on the webpage of DSM later on. Throughout the meeting, you have coffee, tea and drinks and some snacks in the hall with a large screen, so you can follow the meeting during Over there as well.
Please do not bring any caps or glass into the room. After the presentation by Mr. Sibesme, I will inform you of And before we turn to the agenda of today's meeting, Let me point your attention to the person of Jose Hernandigo, Mr. Frittas. In a company where safety is a core value, he died during his work as a contractor working for DSM in Pet Sem in Brazil.
His death Clearly demonstrates that DSM can only be successful as a company when any person working for DSM will safely return I will now turn to the discussion of item 2 of the agenda, which is the annual report of the Managing Board. And before I give the floor to Mr. Sibismar, the Chairman of the Managing Board. In order to comment on developments of the past year, I would like to complement him, his team and the company with the wonderful results of 2018, the results we see flowing over into the first quarter of 2019, we've seen an outstanding year once again with a record performance. And actually, since 2015, Every year has been a record breaking year.
And according to yesterday's outlook, 2019 promises to do the same. And we've also concluded the success full strategy period 2016, 2018. With the vast portfolio transformation of the DSM, a splendid foundation has been placed for the further growth The company based on the strategy update presented in June of last year, DSM is known as one of the most sustainable company, a company Linking corporate social environmental responsibility with operational excellence, innovation is a crucial factor in this. And projects such as Clean Cow, Veramaris, Stevia and Niaga are only testimony to this. And from my I would like to thank Mr.
Van Lijn for his work as First Chief Innovation Officer. He's leaving DSM this summer, and he can look back Had a very successful career in which you managed to secure innovation, technology and science in the heart of the company. Rob, you have earned our sincere thanks and admiration. Ms. Maraki will be his successor.
She maybe can get up as well. She already started her introductory period. Trish, a very warm welcome. We count on you to preserve and
continue Rob's legacy. In conclusion, allow me to briefly
address the In conclusion, allow me to briefly address the share price. I remember the fact that last year, we mentioned the fact So that we had crossed the line of €85 I'm very happy to conclude that for several weeks, the share price has been above €100 And since Mr. Sebesma took office, the share price has more than tripled at an almost equal ax. So I think this is something that's highly interesting for those present in the room. Thanks to the Managing Board and Executive Committee T4 leading the company towards this result.
The company is doing well, Feike. Now the floor is yours to comment on the annual report of the managing board, And you can find this report on Pages 12 to 65 of the Integrated Annual Report 2018. The implementation of the remuneration policy The Managing Board and the reservation and dividend policies will be dealt with under Items 35, respectively. Feike, the floor is yours.
Thank you, Rob. And I would almost dare to say, let's leave it with your wonderful words. But first, we're going to watch a video,
And that's our ability to adapt to our environment, to transform in order to survive. Look at this company. What started from harvesting coal in the mines became petrochemicals.
At the time, it was a necessary solution to the demands of a growing population.
Their life changes needs change.
So it was time for them to change as well. Exactly. What was once a local coal mining company, they've grown to become a global science player in health, Nutrition and the Tivity.
Through this transformation, the company flourished.
The challenges of nutrition and climate change and managing the earth's resources can't be solved
We need these companies with the technological expertise and innovative power to provide answers.
That's why DSM has decided to take the ultimate step In their transformation.
It's what they've been building towards over the past century.
Arrived at the true purpose of the company.
And with 1 in 4 people across the world already benefiting from their products, I believe they can do exactly that. From the dark panels of the Dutch slate mines, something beautiful arose, A love for our world and humanity expressed through science, balancing profitable growth with playing a positive role in the world.
I believe it's possible.
And I'm not the only one.
Okay. So on my behalf and on behalf of the members of the Managing Board and Executive Committee, welcome at this general meeting of shareholders. And it's a pleasure to see that so many of you have taken the trouble to travel to Herna. We very much appreciate that. I'm going to give you a brief presentation on the state of play, what we accomplished in 2018 and also Look a bit towards the future.
I'm going to show you this one, done and dusted. The agenda goes without saying. I'm just going to refresh your memory. Of course, shareholders of DSM, you know this Very well. But what is DSM?
2 thirds, it's a company in nutrition. And then human nutrition, animal nutrition, you see that on the Right hand side of the pie chart and onethree Performance Materials, particularly focused on sustainability, green energy, Making cars lighter, greener, etcetera. And Innovation Center is the nursery, if you will, of a number innovations, I'm going to talk to you about that later on. But many of these innovations are developed in the businesses themselves. Sales of almost €10,000,000,000 2 kinds of EBITDA.
This is what you see here, about €1,500,000,000 and the other one is €1,800,000,000 the exact you'll find in the annual report. Why? Because last year, we had extraordinary income, additional income from the outages of one of our competitors in vitamins, and we said this is a one off occurrence. And so we reported on it Separately, which is why we have 2 different figures. And then our sales obviously take place globally.
45% of our sales I realized in what we call the emerging economies, 35% in Europe and 35% in The Americas. Oh, this is very difficult. No, I can't it doesn't add up, these numbers. Someone has to help me here because this if you add it up, it exceeds 100%. So that just doesn't work So well, anyway, I would say 45% is emerging economies, 55% would be the West Of the world and Europe would take the lion's part of the 55%.
And of course, we don't want to have more of a focus in emerging economies. 45%, 55% is a good Percentage. We don't want to be overexposed in that part of the world nor do we want to be underexposed. Innovation, about 20% Our sales innovation has been defined as the products that we've been introducing over the past 5 years. These are Products that we introduced over the past 5 years, which means 20% of our sales.
In order to have this percentage, and this is the percentage We aim for. You have to run really fast in order to hold on to this percentage because obviously you always lose 1 year.
R and
D, 5% approximately of sales that we invest in R and D, 23,000 employees With a high engagement score, every year higher, every year more engagement, more commitment with Our strategy, and I'm going to talk about that in further detail in a couple of moments, aligned with the Sustainable Development Goals of the UN And the megatrends worldwide and sustainability, you see lots and lots of abbreviations. Greenhouse Gas, that's the first one, GHG. Linked RCF, which is Our revolving credit facility, and that means that if we need bank loans, The interest that we pay on those loans is linked to our performance. With respect to greenhouse gases, this is quite unique. Geraldine agreed that with the banks last year.
And in the financial world, this is quite unique to link Your interest to sustainability performance. So complements to the finance team and sustainability team. SBT is science based targets. We all know At the time, we entered into the Paris agreement. Mr.
Stephens, welcome here. I was thinking, oh, my God, what's what are we going to do without you at this AGM? And I'm so pleased to see you here. So the SBTs are our targets that we have defined Derived from the Paris goals. And if every company achieves its own SBT target, Collectively, we will be able to achieve the Paris goals.
Not everybody can do that. The climate panel a couple of months ago highlighted that the world is far from on track to achieve these goals. So apparently, not everybody is doing the exact same thing that we are doing. Renewable Energy. 41% of our energy is renewable All comes from renewable sources.
Now we're preparing for a world in which we have carbon dioxide pricing, More than €25 per ton in Europe, and internally, we calculate a price of €50 per ton. And we also take part In the process of disclosure, transparency, if you will, concerning climate related financial matters, so how climate impacts on Our business, our employees. This is not sales, but this is where our employees located our global spread. Europe is the largest, but also Asia, China, particularly a very strong position here. Well, you'll be familiar with this history of DSM over the past 117 years, to be precise, the transformation from being a coal Mining company to a petrochemical company being a science based nutrition, health and sustainable living company That we are today.
And this also means that if we're in Nutrition and Materials that As you saw in the earlier slide that we have activities in several markets. You see that on this pie chart food and Beverages, dietary supplements, early life nutrition, building industry, automotive industry, Electronics Industry, Materials. In Nutrition, we have a very robust position globally, 2 thirds of our entire portfolio. And what we have here is global products. That's what we call them, products that we make on several locations in the world.
And we upgrade them, blend them and turn them into tailor made, custom made solutions locally. And we do this in all sorts of regions in the world and different market segments in the animal segment and also the human segment. Actually, we're the only company worldwide that has Basic products as well as the custom made formulated products targeted to our customers. We've got lots and lots of competitors that are in the segment that are related to the customers. We buy their products, and we have other competitors that make basic products, But they don't upgrade that to the custom made solutions for the customers.
And we're the only company that really covers the entire combination across the supply chain. And as DSM, that gives us a very robust position, globally speaking. On the Materials side, here you see the different Material businesses that we have. Certainly but surely, we're moving towards the top right hand side. There's more market growth there.
And in this area, we have more possibilities To create value. And you will see in which segments we're focusing on Health, Improved living, but also green products and mobility and connectivity, very important trends. And slowly but surely, we're trying to move the portfolio towards the top right hand side. And you see this in our performance. You see that we are Succeeding quite nicely in doing so.
So what was 2018 like for us? A brief overview. Our employees, everybody worked very, very hard. That is to be expected. But our employees, and this will interest you, Are extremely motivated, are very passionate about the company, are very proud of the company.
And sometimes I with shareholders and they say, Oh, that's a matter for you. That doesn't really affect me. But I do think it should interest you as shareholders view Whether you invest in a company that has highly engaged employees, very motivated employees, that's very important. It's almost inconceivable that it would be the other way around that you would be able to show good performance if your employees are not engaged. Financially, we're talking about 2018 but also the period from 2015 to 2018.
We continue to improve our performance, and we outperformed our own targets. Our own targets were rather ambitious every year, A growth in excess of the market growth and EBITDA, a profit increase every year That is high single digit. So that's just not 10%, but somewhere between 5% 10%. And we've exceeded the 10% of the years. So that is quite an achievement.
Sustainability, Actually, we outperformed all our targets and aspirations. We did better than we intended. I already mentioned our people, our employees. So we have An excellent position in the market. We have excellent technological positions in order to embark On the past towards the future towards 2021.
Now in numbers, what does this mean exactly About numbers approximately €9,000,000,000 sales, Which is the average between the two numbers on the left hand side. This has got to do with this vitamin effect that we talked about Earlier on. So for the full year, we had a benefit that we deducted from this. So You have the underlying effect here. Without the one off effect, you'll see the same thing with the EBITDA.
That's why we have these two numbers, 1.5 EBITDA, the official number was obviously 1.8, but we had this one off effect there. Our return on capital employed Once again increased almost 1 percentage point, 100 basis points from 12 point 3% to 13.3%. If you look at the underlying business and if you adjust for the vitamin effect. This is what the numbers are. We set aside the additional effects.
The vitamin effect, we report that, But we decided that we need to be held accountable for the performance without this extraordinary this one off Our net debt has decreased even further for the full year. We ended the year with hardly without a debt. If we then focus on sales. Sales in Nutrition and in Materials, Both well in excess of market growth, 7% in Nutrition, 5% organically immaterial. So that is organically without Acquisitions and without the effect of currency.
And EBITDA, 6% 5% up innovation sales almost 20% and 43% close to the 45% high growth economies. And also outperformed the market in sustainability. We've been able to achieve a reduction in absolute terms 41% of all the energy that we purchase is renewable, is sustainable. We've said that every year we want To realize a 1% energy improvement last year, we achieved 1.4%. And also our water consumption, we were able to reduce that even further.
And if we then look at our employees, our people, ourselves, How proud people are of our company. We see an improvement of our employee engagement from 75% to 76%. Safety, Rob Rouss already refused referred to a casualty that we suffered this year. And we're not proud of our general Safety performance, and we fine tuned that by the end of last year, early this year. This is something that requires our constant attention.
We are doing better than our peers, but there are also other well, there are companies that are doing better than we are. So we want to compare ourselves We're the very best in the world, and we can't claim that we are among the best in the world in this respect yet. We've made major progress in the field of diversity, not only gender but also nationality. 90% of our executives Female executives, when I just became CEO, I always said, welcome, lady and gentlemen, to executives. When I was referring to the top 300, well, that's a long, long time ago, and we've come a long way.
And the supervisory board sets the example 50% After this meeting, I would say 50% female supervisory directors in the Executive Committee, it's 43%. But also in the field of other nationalities, not only European nationalities, we see that we've been making headway. And also in brighter living solutions, solutions, products that have a better environmental footprint Than competing products or that have a better, lighter impact on society at large. We are proud of our own company, but you've always got to tread carefully here. But of course, we are proud.
But we're not the only ones because there are also many other people that are proud This is a list of recognitions of ranking. We're right At the top of the list, Fortune publishes a list every year of companies that really have an impact on the changing world. There are about 50. And we're on the list. And so we are a bit proud of that.
Strategy, not only in 2018, but if we look at the entire period from 2015 to 2018, EBITDA, the profit increased annually by about 13%, and our return on capital employed It needed to be higher because it was 7.6% in 2015. So there was room for improvement. We're not very happy with that number At the time, but we now see looking back that we've been making good progress here, almost double the number. And growth, here you see it not only for 2018, but for all these years, you see that we outperformed the market. Our markets in Nutrition and in Materials grow somewhere between 2% 3% a year over the past few years, and clearly, we've outperformed the market in this respect.
We see the same growth in Nutrition at this point. In Materials, we see because of the Economic situation, we see a slightly different situation. I'm talking about 2019 here. Dividend. Well, the box has been ticked here, €230,000,000 But this is looking forward a bit because I can't remember which agenda item it was, 3.
But if you approve the dividend, the increase of dividend, then this slide will prove to be correct. And so this is quite a good increase. We've never seen a Reduction of our dividend. Our peers 50% of our peers have been cutting their dividend And reducing it, and we never ever did that. And that is precisely our strategy with respect to dividend, an increasing dividend, a stable To increasing dividend, but in any case, never a declining dividend.
And every few years, you see we move forward with this. Share price Did well. Mr. Rautz referred to that over the years. I'm sure you followed that being shareholders.
And this is a slide that we used on several occasions. What does DSM do? And it tries To combine sustainability and impact on the environment with financial results. 10, 12 years ago, 15 years ago, there was a bit of a debate about this, whether You can actually tackle both things simultaneously, a better world sustainability. Sustainability always costs money.
Can you actually make money By being sustainable and how does this work. I think that we've been able to show that these two things can go hand in hand. In fact, that was the performance of DSM over the past few years: sustainability, Creating a better world and good financial returns. I think that's obvious because why wouldn't the world Be prepared to spend a lot of money to tackle the major problems or making their lives more pleasant to the people who live on this planet. I think visavis the future, those companies that don't embrace this will end up having issues.
I think in 10 years' time, If we meet here, I don't know whether I will be here. Well and I don't know whether you will be there in 10 years' time. But If in 10 years' time we were to meet here and look back on today, I think that it's safe to say And I see this more and more also with investors. I think it's safe to say that making the world a better place, Taking care of sustainability and financial returns have to go hand in hand. Otherwise, you'll end up having problems because Millennials will no longer want to work for you, buy your products if you fail to price Carbon dioxide.
At the end of the day, you'll have to foot the bill. Silverton, Mr. Silverton worked for Investor Relations, and he made this slide. And in 2007, he joined the company and he wanted to see this period of time For Investor Relations, 2007 to 2019, he says that this coincides with the time you have been CEO. So yes, in fact, the share price has tripled over this period of time.
Yesterday, It closed at 103 something. I think it dropped a bit. Or is it still in excess of 100? Still over 100, yes. Antoine, greenhouse gases also because of the changing portfolio in The course of the year has dropped dramatically, €15,000,000,000 share price dividend.
Looking forward, this is a bit of an intricate slide, but on the other hand, it's quite straightforward On the left hand side, you see the input in our strategy, sustainable development goals, the goals of the UN, megatrends, Our own competencies, they're all inputs in our strategy. So what is it that we intend to do? We intend To make money around Nutrition and Health, Climate and Energy and Resources and Circularity. The latter 2 could be Summarized as sustainable living. Now we will be We focus our business on this triangle.
That is how we make our money. And at the end of the day, that will lead to more engagement Of our own employees, more sustainability and more growth. And we reflected that in targets. Our targets for the next few years are cash flow growth and our EBITDA growth. And on the left hand side, you see our clear targets.
And we can be held accountable for that. Over the next 3 years, on the right hand side, you will see the underlying ambitions that we also have, not really target, but Well, because we've got lots and lots of targets, but there's sort of underpinning ambitions that we need to have if we want to achieve the targets. And of course, you see your sales Growth here, your working capital, our investments and return on Capital employed and earnings per share. Innovations are crucial To the future of DSM, part of the growth will be driven by innovations. And over the past few years, We're really, really focused on that, particularly on a number of larger projects.
And I'd like to discuss a couple of them very quickly Because they will be a determining factor of our performance over the next few years. Veramaris, Green Ocean, It's a joint venture with Evonik. What do we do there? We make sustainable fishing truly sustainable. Lots of our fish come from fish farms so that we don't have to deplete our oceans.
But in contained conditions, we can farm these Fish and we can leave the oceans. In peace, that's not entirely true because these large fish need food And so they need smaller fish to eat, and we need to fish the smaller fish and make fish meal of it to feed the larger fish. We don't really need to do that because the smaller fish In the fermento, you make fish oil of it. You can feed it to the larger fish. And That's a good thing for the ocean because you can make things more sustainable, but it's also good for our customers Because of the warming of our oceans and warming of our planet, the fish stocks in the ocean Klincao, yet another innovation project also focusing on sustainability.
Many of us know that A lot of our emissions come from our cows, CO2 equivalents, So to speak, because we're talking about methane here that cows emit at the front and the back, to put it bluntly. And this is quite a substantial contribution to the greenhouse gas emissions on this planet. Of course, cows have been excluded from emission rights, CO2 payments, etcetera. I don't know whether that should always remain the case, but We've got ingredients that we are testing and registering right now to make sure that the methane emissions can be reduced by 30%, which is quite an important reduction. And that way, you can make the meat and dairy Industry more sustainable.
Fermentative Stevia. Stevia is a really natural Sweetener. Many sweeteners are chemical sweeteners. They have all sorts of drawbacks. And this is a natural product, and it comes from plants.
It's a plant extract. At the supply side, that makes things a bit tricky because there's a limited supply, A bit irregular higher costs. And of course, you should be able to do things differently through fermentation technology. And DSM is very good at that. We entered into a joint venture with Cargill, and we're well positioned to serve this Significant potential in the market.
Niaga, carpet but also other applications in the U. S. Carpet is the number 2 landfill activity. So what do we do with our old carpets? Well, we throw them into the landfills or we turn it into a mountain.
And we do the same thing with diapers, with nappies, Especially in the U. S, so we have enormous landfills with carpets and nappies. And In 100 of years, people will start digging and find won't find pyramids, But we'll find carpets or diapers. Anyway, the question is whether we really want to leave our planet that way for Future generation. So we said, okay, we have to come up with a solution.
Now that is tricky because the chemicals that you use in carpets, They have a top layer, bottom layer, and they're very difficult to dissect and to separate afterwards. It's a very costly process. And if you would make the carpet from the same chemicals at the end of the process, You could reintroduce it into your plant and reuse everything and start all over again. And that way, you can make it Completely circular products. Last but not least, the Q1, Geraldine presented this yesterday as well, the figures for the Q1 and how we started the year.
And actually, we started very robustly with a Sales growth of 3% 10%, EBITDA growth, actually even a bit more. But this is from Because of accounting changes, IFRS because of IFRS regulations, the increase is even 14%. I'm not really mentioning that, although it will be the official percentage according to the official accounting rules. But if you compare Year on year, it's 10% growth. Nutrition did very well in Materials.
In these very tough economic conditions As shown its resilience, operating cash flow increased as well. Net profit Slightly lower than last year, but that is because of the one off vitamin effect. So if you adjust for that, it's better than last year. And then the start of this Q1 2019 has prompted us To increase the outlook for the full year, and I believe that shareholders yesterday welcomed that In general, so this is how we started off the year. And as Mr.
Rautz just pointed out, We expect that we will realize a profit growth. 2019 is expected to be yet another record year for DSM. But we'll have to wait and see, wait for another 9 months. So once again, good to see so many of you here. And thank you for your support and loyalty over so many years to DSM.
We very much appreciate that. Thank you.
Thank you, Mr. Cybezmann, for your comments. Now the moment has To ask questions about Agenda Item 2, you can use the microphones that are present in the room. Please first indicate your name, the organization that you may represent. Who would like to take the floor?
Thank you, Chairman. My name is Gerd Hosspron. I represent the Association of Shareholders, VHBP. The share price is at the record level. Yesterday, we've seen a Positive profit announcement.
So I guess that in preparation for the meeting, the members of the Board thought it's going to be a piece of cake. No critical questions today. Well, I can assure you that we will ask critical questions. Certainly, looking at the strategy that we have seen in June 2018 after the last AGM. When we look at the adjusted EBITDA that has been forecast for the Nutrition Development, we see that it has already been achieved.
And Mr. Sieben just told us that the strategy is you can hold us accountable for. You already achieved it nearly. So the question to you is whether the adjusted EBITDA for Nutrition was not too low. When taking a critical view on this target, what target you would formulate for 2021 for yourself now?
Now materials, We see that the organic growth is expected at 25%. And that's quite an achievement Because you don't depend on the automotive And that's a cyclical industry. So I wonder how you come to 5%, not 25%, 5% organic growth. Is that a realistic And then a last question. I'm listening to you, Mr.
Chairman. About 3 questions, and I'll come back in a later turn. In June 2018, at a strategy We essentially thought that you would look at a demerger between Nutrition and Materials that have very little synergy. During an analyst call, you have received questions about this, particularly about the CapEx, the possibility To invest in materials as a business unit, as far as we can see, there only is a possibility To invest into write downs. And there's no real M and A budget for materials as a business unit.
And that leads to the follow-up question. Why aren't you investing much more clearly in materials if you decide not to divest This business unit, if you're not investing, then certainly now looking at the economic cycle, this would be The perfect moment on the top of the markets to divest, to sell off. So please explain your approach on this. Thank you. Thank you for your questions.
There's always somebody who rings at a party, they say. Thank you for the questions. I'll cover them And maybe Geraldine and Dimitri then later can give some additional comments if needed. When looking at the EBITDA growth of Nutrition, this is a target we achieved For 2021, you say no. We achieved it for the period 2015, 2018.
We achieved EBITDA growth high single digit, which means 7% to 9%, And this is generously more than 10% buy now for that period. If we look at the coming upcoming periods 2018 And we are now into Q1 2019 up to 2021. Once again, we said that the adjusted EBITDA operating profits in Nutrition would once again be At a high single digit level. And indeed, in Q1, we have outperformed. So We have made about 10% of 19% I'm being corrected.
No, in 2018, in this address, You mentioned an adjusted EBITDA of 20%. Well, if you add Q1 2019, you already overachieved this. My apologies. Now I see your point, excellent point. Well, different question, different answer.
This was about EBITDA growth, but you agree with me that this is an ambitious target and that overachieving this is actually quite a performance, quite a feat. Now about the margin. We indeed stated that it would be over 20%. Currently, we're achieving this. So that is the profit margin ratio.
I'd be cautious about increasing it even further. Many people ask us about this. Maybe an odd answer. Don't we want to make a limited additional profit? No, we don't.
I'm not so happy for that. It could be a wonderful profit percentage. If sales can increase with this profit percentage, then obviously, the overall profit of the company will grow year on year, And therefore, we hope the share price. But if you get into crazy profit percentages On sales, you may destabilize markets. And in a way, you don't want to destabilize them.
So I am happy if we achieve 20% on a solid basis. The world is volatile enough To make us work very hard to achieve this, this is not something easily achieved. Anything you would like to add?
Just one clarification, and I think it's an important one, which actually is fully aligned with your answer, which is that our target is actually the EBITDA Growth. On the right hand side, what we show is our ambitions that underpin the targets. It's very important to remember that what truly, At the end, funds are innovation, our growth, the dividend is the earnings line itself. Being the CFO, I'm very conscious of fact that you can get a margin up relatively easily, but it doesn't drive the right economic generation, which is actually generating their earnings. So I just wanted to clarify what is an ambition that underpins the assumption versus a firm target.
Yes. Geraldine refers to
I switch language here. We've shown a slide. I don't remember which number. On the left hand side, you saw the real targets that we have formulated. And on the right hand side, You saw the underlying ambitions that you referred to.
We want to be held accountable to an absolute growth of our EBITDA because we assume that absolute EBITDA is somehow linked to the share price. So it would not be logical if there would be no such link. EBITDA obviously As an origin, you need revenue growth, you need a profit margin, some cost levels. Otherwise, you simply won't achieve profit. This is what we call our Aspirations, we share the aspirations with the world and ask also from some leeway because this is the Instruments, the tool we have in order to achieve what Geraldine calls the major target, the major purpose.
And our EBITDA margin shouldn't be too much flatter, but I think that applies to all categories. Now about Materials. You said 5% organic growth is our target in the strategy for the years to come, which is way above The market average, if the market average is 2% to 3% of growth, then this is our target. And it is our target. You say, well, can you achieve this?
The target has been presented in June of last year in a different marketplace than we see today. In Q1, you see us not making this target at all. We're not achieving 5% at all. We have a volume decrease of 5% to 6% in terms of volume. We still outperform the markets we operate in, which is important for us.
We're outperforming the market average. But at the same time, the markets have changed completely over the past year. Now we are not a company that will change its long term targets overnight in such a situation, so be it. The world looks less shiny than it was a year ago. But for the time being, we maintain our targets.
And let me come back to Geraldine's words. The major target is an absolute increase in profit. And even under those market circumstances, we think we can get pretty close. And in Q1, we have achieved that What we were aiming for. Anything you would like to add, Dimitry?
One thing maybe. Let's be very clear about that the current existing materials markets have growth levels that in some quarters have been affected by destocking, but we should look We are a company that wants to look beyond destocking, and then markets have a certain growth rate. We Can outgrow the markets, we stated. Why? Well, because we focus on new segments that grow faster, such as So we want to move to bio coatings.
We want to use water based So, coatings that are growing faster than solvent based coatings, the same thing for automotive. Lightweight replacement of metal is a very important segment for us. And currently, we see that the cars under construction currently Have a higher growth in DSM supplied materials than other materials. This is what we call substitution. So we think we play in the right markets with the right products, New mobility, connectivity, green products and applications are what we play in.
And this is why we think that in the long term, we can outgrow the market 2%, 3%, it is the market average, so 5% seems achievable. Then you had a last question. This is the link between Nutrition and Materials. We understand that the end markets of Nutrition and Materials Very correctly, as you state, are different. We have the electronics or we have green energy.
We have something completely different than Nutritional Products. The end markets are completely different, but we don't think there is no Synergy between the segments. If I look at the technology we use, we have a lot of technology in use. We have developed a wonderful mapping for Technology that featured in the presentation in June of last year and the way the various types of technology make up the basis Materials and Nutrition is clear in the presentation. There is a mutual link.
Also, size and Synergy, at least in our view, in terms of the people involved. We train people across the company, Not everywhere very consciously, so because expertise is also important. So some people remain active in one field, but some Also move across the company, and this cross fertilization is really helpful to come to other insights. But indeed, You're right. You're stating that the end markets are different.
But as long as we can add value to materials, as long as we How should I say this? Performed better than the market average around us. Apparently, we're good owners for this business Because we add more value than is happening in average around us. If that would not be the case, If we would, obviously, not doing this, we would have to reconsider. You say we don't invest in materials.
That's not true. We invest Materials Development, Nayara is a good we also invest in acquisitions. However, we stated that acquisitions will happen predominantly Nutrition. Why nutrition? Well, this is our largest business by far.
It's twothree of the entire company. And we see very extensive possibilities for acquisitions there. But we never said we completely Exclude acquisitions in Materials. And in one of the slides, I showed something Dimitri presented several times, which is the fact that the entire Matera's portfolio has shifted towards health, towards nutrition, towards green products. And the problems we encounter there Are very closely related to the issues we find in nutrition.
We have climate related issues that are closely related to issues concerning nutrition. So this shift of our portfolio actually closes the gap Between Nutrition and Materials. Thank you, Feike. The next speaker, you have a train to catch. So please.
Good afternoon, ladies and gentlemen. My name is Robert Freaker from We Connect U, Public Affairs and Investor Relations. In the Netherlands, we have 3 champions of sustainability: Weber Akols, Paul Polman And Feike Sigismar. And that's a wonderful lineup. However, currently, only one of them is Still working both with Unilever and TSM, which is Mr.
Saibas Ma. And despite his Vast drive, there's a risk that worldwide, 1,000,000 species of plants and animals will disappear. So we need to step up the effort. Something I appreciate is the integrated approach, the practice what you preach He does many things in the field of lighting, warmth, mobility, energy. And I want To state that he is the ambassador of the Waka Waka.
He hands them out everywhere, and this is something the I think that's a wonderful step. We'll solve this during the meeting. Well, isn't that important? I think we should Treat each other with respect and decency. Within Unilever, you know about heating of And this makes sure that we can heat people's offices very cheaply.
It saves a lot of money in the office, and it provides a lot of comfort When we heat chairs and the thermostat can be turned down worldwide for 3 degrees centigrade, If all your employees and their families have a circular showering, that saves 1 Olympic swimming pool including the heating. And then I think it's wonderful that Editskypa has been convinced to start traveling with the sustainable travel of DSM because she has this fantastic network in The Hague. She has a fantastic network in the field of sustainable care, and therefore, she can speed up the sustainability within DSM, Certainly, in the light of our constructive relationship with Marco Rutter and then a final remark. I'm really happy About the following. And this is my question.
What is the cross fertilization between Unilever and DSM? Can you expand on this? And then the reduction of 30% of methane, I think that deserves a Nobel Prize. I mean, cows are the most polluting factor worldwide. And if we save 30% or reduce Pollution by 30%.
Wonderful. Thank you, Mr. Sibismar. Thanks for your questions, your comments. Well, biodiversity, Indeed, yesterday, we saw the presentation of the UN report on biodiversity, and it shows that we face a major problem and that it's expected many amphibics, insects and even some mammals are to disappear over the coming 25 years.
I think this is our common concern, and it's completely valid you point out this challenge. And it mainly concerned animals and insects, but the report also concerns plants. And there's a risk of creating a monoculture. I'm a biologist by training, And biologists use pools of genes. And if a pool of genes is not sufficiently diverse, Then things go out of hand sooner or later.
That's basically what this report amounts to. So this is a source of concern We at DSM have developed policies that Mr. Van Deen has looked into this in detail over the past 2 years. In terms of our own operations, we try and advocate the importance of this issue and the need to address it worldwide. So I think it's more than valid As you highlight this point at our meeting today, then Waka Waka, a wonderful simple invention.
You have a Small solar device. And Alice, if you can find 1 in the office, then I'll give him to Mr. Rautz. It's a very simple tool that can bring light and even electricity for charging their mobile phones world Why? Because many people have no access to electricity in their homes.
And wherever possible, I hand them out as gifts. Well, Heating chair is an issue we've discussed several times. I could even enjoy the system myself. I found it works, and I know You are an important advocate of chair heating to see whether we have other ways Of heating ourselves then heating the air around this. Circular shower technology, I know the technology.
It always leads to giggling questions about the exact reusing the shower water And how clean you get, but actually there's a filter involved, so it really gets you clean. It's nice. It's not exactly DSM's core business, so I'm not What I can do, but I understand the concept. Edith Schippers, well, we are happy she's with us, so we share your happiness there. And obviously, Idris has her network.
But the most important thing she has is a Kiel. She brings a skill that will drive DSM Netherlands to even greater height, and this is the most important. Then we have Unilever And DSM. Indeed, by accident or not, I'm a member of the Supervisory Board of Unilever as well. We Run into each other there as well.
And Unilever is a customer of DSM, a very small Customer, by the way. So there is no conflict of interest, and we have full disclosure. And I learn a lot about our final markets That can be useful for our work. And then a final point, well, if you We'll argue for us as a company receiving the Nobel Prize for clean cow, we will not object. So I can only embrace that last proposal.
And in the meantime, we will carry on with our innovations. Maybe we can work on this together because I can't really get far on my own. And this is a dramatically beautiful innovation that will bring Purpose to the world. I essentially agree with you. Cals represent a very significant part of our To exhaust.
And we, as DSM, think it's odd that cows have been excluded. They amount To almost the same pollution as traffic, and traffic will be charged by 1,000,000,000 and 1,000,000,000 of taxation. Exactly. And it is highly cost efficient. Let's have cars in Amsterdam instead of electric cars.
Thank you. My name is Carola Van Lamoun. I work for Rubico. And today, I will also be speaking on behalf of Agmea Investment Management, Mensis, NN Investment Partners and MN. You refer to the excellent performance.
And so first, you deserve a compliment for your this past year. DSM once again showed excellent performance in terms of sales growth, profitability, return on invested capital, sustainability targets and also strategic targets. And it's a good development that the auditor of DSM is I have three questions for this agenda item. First of all, you talked about sustainability. It's a driving force for DSM.
And we saw it on Slide 23, if I'm not mistaken. DSM defines 5 sustainable development goals as being the most relevant for the organization. For the 3 environment related SDGs, You have numerical targets, but for the goals numbers 23, that doesn't seem to be the case. Could you perhaps point out how DSM measures the impact for SDG 2, 0 hunger and 3, good health and well-being. And which goals you apply to that effect.
And I hope that you'll be providing us with more details next 2nd question, because of the good financial performance, DSM is has enough money to buy back shares, 2,600,000 shares as per the 1st April of this year. What are the priorities for the balance sheet after the conclusion of your buyback program, what is the ratio in terms of organic growth, Etcetera. And finally, a question about further improvement of margin and working capital. From your presentation, I understood That for Web King Capital, you have the ambition to achieve minus 16%. Could you perhaps explain?
Yes, indeed. The U. N. In cooperation with almost 200 countries that approved that, drafted the SDGs, the Sustainable Development Goals, the global goals. The worldwide strategy is really or the global strategy is what we would call it.
These are 17 goals. We address a number of these 17 goals with our portfolio, not all of them, and actually quite deliberately so. We set aside what we used to call corporate social responsibility As being a separate activity, that no longer is the case. We want to incorporate it in our mainstream businesses, and that is the way we look at it. And in our mainstream our mainstream business has been organized in a certain way.
We have certain competencies. So That means that we can contribute to certain SDGs better than to others. There are 5 core SDGs in which indeed we can make a major contribution. And we tried to give them numerical goals, 0 hunger. That is a bit Tricky, I mean, to do this numerically.
Nonetheless, I'm going to give you a couple of numbers. What we said at the beginning, I'm talking about 12, 13 years ago. We said that we wanted that with our competencies with respect to nutrition, That 1,000,000 people in the world that we made sure that the food aid that they get be nutritionally responsible, not only calories or carbs. Now this is a goal that we achieved rather quickly. And then we said, can't we move from €1,000,000 in 10 years to €25,000,000 And this is a goal that we also achieved in the meantime.
I think It's now 32,000,000, if I'm not mistaken. 32,000,000 people that we, as DSM, can help, Making sure that they and particularly we're doing this in cooperation with the World Food Programme. And then we set another target. Couldn't we improve food relief for people and make sure that people become self sufficient? And 3 years ago, we started a project Africa Improved Foods in Africa, working with local farmers, local production For local people producing healthy food, we started with 9,000 farmers in Rwanda.
Now we have more than 25,000 farmers. We buy everything they grow. We turn it into healthy food in a very large plant that we set up in Kigali. So we transport all their crops, all their products to Kigali, which is where we produce healthy food 4 local public population. 1,500,000 people benefit from that.
And the out of the 4,500,000 people in Rwanda that are stunted and onethree of the issues, the problems there have been solved over the past Yes. We don't have very specific targets there, but it's not that it's not numerical. And that's why I wanted to give you the numbers that I just gave you. Margin improvement in working capital, Geraldine, and also priorities On cash allocation.
Let me start with the working capital targets. So here, in the previous We said we wanted our total working capital to sales ratio to drop to below 20%, and we achieved that very well. Actually, we closed at 19%. And here, what you see as our ambition going forward is that we want to keep bringing that down. And hopefully, we will reach 16 percent by a year on year on year improvement on our efficiency.
So that's to clarify your question on that target. And I think your other question was on the share buyback and the capital structure. Now what we are aiming to do as a company, And we indicated that with the strategy as well is we want to remain a high investment grade company. So we don't want to take any risks, which in the capital markets As usually referred to as having a leverage of 1.5 to 2.5 times EBITDA. Now when we look at the health of our business, when we look at kind of growth we've been able to generate on the margins.
We see a strong ability to generate financial returns and liquidity and still retaining a lot of flexibility for innovation projects, for CapEx And for some acquisitions, we felt that we had the space to also return some of this cash to our shareholders and of course, very relevant to the conversation today here. So that's how we put in context the balance sheet structure going forward.
Okay. Thank you.
Next, please.
Thank you. Mr. Stephens? Thank you, Mr. Chairman.
My name is Tevans of the Foundation of Legal Protection Of investors, yes. Well, it was discussed earlier on. Possible split, Separation. We gave it some thought as well.
And
Acquisitions on two fronts. You cannot carry out acquisitions that can be that are good for both Businesses. So we're wondering how resilient is this situation? How sustainable is it? You can only do acquisitions either for one business or for the other.
But at some point, We have the distinct impression that things should become separated. We'd like to hear your opinion on that. There's something else that I forgot. I would like to congratulate you with your excellent performance. And yes, you conducted a great deal of research over the past few years.
Now what? Less research and Benefiting more from the products that emerge from your research, consolidation, How are you going to proceed now? And recently, You've conducted a great many acquisitions. Now we're wondering, given the question that I just asked, And this ties in with that question. Are you Going to buy more ready made products and stuff so that things that have been designed That you're going to work on that because, for instance, you have you will take an interest of 75% or 50% in a company.
So we're wondering What your purpose is? What is it that you see on the horizon? What is it that you're aiming for? Those are three questions. Oh, I'm sorry.
Okay. Well, I'll be back then later. I was afraid you would, says Mr. Sebasma. Thank you for your kind words.
I'm glad you hadn't forgotten to congratulate us. Split. Well, as I said earlier on, as long as we can add value, more value than the average of the market surrounding us, We're doing a good job. 2nd, there's more synergy than you would think at first glance if you only look at the end markets. I said that earlier on.
And then of course, I do understand the debate about splitting and the different markets and so on and so forth. But I've got to be careful and be careful what I say before people start correcting me. But you also have this Sort of trend, this sort of fashion, I mean, if you split a company, if you look at Nutrition, Of course, you can once again ask yourself the question whether it doesn't exist. It doesn't consist of different segments, and you can endlessly focus, As some people once said, you can focus towards insignificance. You can continue doing that.
And at the end of the day, you won't be significant anymore. No, no, no. That was never our idea. But it's just materials and nutrition. Yes, yes, I understand that.
But we're in both. And if we're talking about environment, health, medical, green energy, when I talk about biotechnological know how that we have To extract energy from plants, you see that there's much more synergy Between materials and nutrition, then you may think at first glance if you look at applications In the automotive industry or other applications. And you also see over the years that our portfolio and Dimitri worked very hard at this shifted Towards the higher value segment and also shifted towards things that have much more synergy with our Nutrition business. So perhaps you could even venture to say, if we would have called it green energy, you might not have had such a problem with it. And now we've Called it materials, and now it sounds very much as if this is something that has nothing at all to do with DSM.
But of course, you could put this into perspective. And for some parts of the portfolio, I would understand that, but it doesn't apply to each and every part of our portfolio. But and particularly in Materials, we will constantly work at changing the portfolio and shifting, As I showed on one of the slides, more research or have we already conducted enough research? Are we going to Slow down. Well, when you pronounce those last few words, I saw Mr.
Rob Valena saying, no, no, no, no, no, more, more, more, more Instead of less, less, less. And I think that's a good thing. We need to continue to invest in the future. And we do realize Well, perhaps not always everybody here in this room, but we do realize that a number of our innovation processes cover 5 to 10 years or even more than 10 years, which means that some things such as clean cow Rob, when did we start that project? I think it was 2,007, 2,008.
8, that's when the first ideas came up. So that's almost 10 years ago. So some of these projects simply take a lot of time. And we know that, That we have to deal with these long periods of time, which also means that you have to constantly invest. Otherwise, you end up having issues.
And that means that Mr. Van Lijn in recent months has been working very hard as I myself have and other members of our management have been working very hard For the benefit of future generations. And I think that you have to show good husbandry and you have to constantly Show good stewardship. And there's going to be a next generation in 5 years' time and then in 10 years' time. And then again, we will also have to be able to grow.
So no, we're not going to reduce Astrid Research. No, the purpose of our question was not to reduce research, But you make something and then you work on it. And then at a lower level, you focus on the future because you have to Constantly work on research, but at some point, you will have to expand or benefit what you From what you have achieved, yes, you reached a point that you've developed things that you need to introduce in the market, And that's a luxury position that we're in. We have carried out a number of large innovations, Stevia, Niaga, Clean cow, etcetera. These are the innovations that over the next few years, next 2, 3 years, will be introduced in the market in the short We've developed them to such an extent that now they're commercially feasible, and they will make a contribution.
And at the very same time, Besides the fact that we're doing that, absolutely. At the same time, we once again focus on things That will only be introduced in the market in 2025. So I think that we owe it to ourselves as a company to do that. Otherwise, it will just erode your business. And it's very difficult to so it's very easy to increase your profit for next And to stop our future oriented research.
And then of course, we will boost our profit figures next year. And you won't Feel the impact over the next 2 years because we will be still be working on the research that we started 5, 10 years ago. But that's not a good And I'm sure that you'll agree with that. Question on acquisitions. I don't entirely understand Ready made things, whether we buy that?
You have to help me out here. Sorry, I can't find it. Licenses. You just acquired a company with licenses. Yes, we do tend to do that from time to time.
So we were thinking, when they want to save on R and D And then buy ready made licenses from a company that can't introduce those things in the market. Well, it's both things really. From time to time, we purchase licenses, technologies that third parties have developed. Very often, they haven't been Developed rights to the hilts, and we have to continue to develop them. So yes, we have licenses with these And sometimes we have a small participating interest, as you quite rightly said, in smaller start ups.
We have DSM venturing funds that has a on top of our research. But they're very focused acquisitions, and we have an internal process For that, we only invest in those licenses. And those companies would have something to do with our mainstream operations. So we're not going to do something outrageous, Something that we found externally, something that we might think is interesting. No, it really has to strengthen our core business.
And, and thank you, Mr. Stephens. Can I request you not to repeat questions that have already been raised? I think this whole Members of the Managing Board, Supervisory Board, my name is Angelique Daskowitz. I'm Director of the Association of Investors For Sustainable Development, and I promise that I will ask 3 questions about sustainability.
I think I'm allowed to do that. But first and foremost, I would like to express my great appreciation for your performance in all respects. Obviously, for us, it's very valuable to see that a company can perform this well and can So embrace sustainability, something that we need badly given all the problems that we're facing. Yes, we do have three questions. Despite the good performance, We always try to encourage you To boost your efforts, in terms of climate, we would like to put forward here that we very much appreciate the fact that you have an approved science based target in which you really make a commitment to CO2 reduction in line with the climate agreement of Paris.
You play a leading role in the TCFD recommendation for implementation, and this is an extraordinary position. And we're wondering what steps you intend to take for this in this next year, what is it that we can expect with respect to implementation Both in terms of opportunities and risks. I'll quickly move on to living wage. Living Wage has been on your agenda for quite some time and has been on our agenda as well. It's in the annual report.
I would like to compliment you for that. You've been working on it. You're carrying out an extensive analysis. Can we expect a commitment in the short term in which you would say a living wage For all our employees is indeed a possibility this year or next year. What is it that you would have in mind for the Supply chain in this respect.
Now my last question about sustainability. You referred to this The SDG 12's sustainable production and consumption, you're Working on that and you are also looking into how to measure that, wouldn't it be an obvious next to say, okay, we are 100% circular as DSM company in the short term or in some term. Those are our questions for the time being. Thank you. Thank you, Angelique.
We appreciate your critical monitoring on the part of the VBDO. By the way, I agree with what you said about the SPTI. We are one of the first companies in our sector That has embraced that and has established clear goals. I think that's the only way to achieve the Paris Agreement, TCFD, Disclosure with respect to Financial Climate.
For the audience who is not that familiar with the acronyms, So TCFD is the Task Force on Climate Change Financial Disclosures, which is a big mouthful, but it's actually a very important milestone. And We're very proud that we're one of the early, early companies to commit to disclosing in line with TCFD within 3 years. And we have been acting very proactively in order to meet that target. Now you will have seen in our annual report, we tried to combine some of the Clearly, when it relates to governance, to strategy, etcetera, we're there. The very Challenging part of TCFD are the forward looking scenario disclosures.
And again, for those less familiar with this, One of the requirements is to say, well, what does a 2 degree world mean for DSM, both in terms of our Operations, so adaptation, mitigation, but also in terms of the end markets that we serve. Now one of the biggest challenges with this topic is that if every company tries to do this in isolation, The outcome will be of no use. You will have an inability to compare and to understand as readers Of these disclosures, what does it really mean? So in order to address that, we have been working very proactively with a number of organizations, WBCSD, the World Business Council For Sustainable Development, has actually been tasked to try and help certain sectors adopt these disclosures. And Our sector is one of them, and we're one of the companies very actively involved in trying to shape what can how can this be best done.
I am also the Co Chair of the CFO Leadership Group of Accounting for Sustainability that is also very proactively working together Because we truly believe the private sector here needs to have a combined effort to make this relevant. I would like to add maybe on the topic that we are very, very supportive of this development. For many years as a CFO, I have been on roadshows where the topic never came up and there was no interest from the investor part of the world In understanding these questions and now that it's become a requirement from a regulatory point of view as well, what are their climate risks As investors, as institutional investors, the fact that there is a demand there makes that conversation. I think it's going to evolve quickly. That's what I'm trying to say.
But there is quite a journey still to be done because it's creating a brand new way
Your other two questions about living wage and SDG 12. DSM's policy is everywhere in the world To pay a living wage. Now for Dutch nationals here in the room, this may sound Like something self evident, but it is not self evident in all the countries of the world. Many, many countries don't even have a minimum wage. So that means that there are also situations in all corners of the world The wages that you have to pay to employees could well not be a living wage.
So Indeed, all our employees, whatever their local customs may be, we would like to pay them a living wage. At this point in time, We are carrying out the analysis and pooling all the data that we have, and we have data for that. So Assuming that we've administered everything properly in the different countries, I think that we can safely say that we have the data in those countries, but we need to have it verified also With respect to our reasonable assurance. And Judith, our Chief Financial Officer, is Working on that as we speak. And in the course of this year or early next year, we will the data will be verified.
Am I correct or not, Judith? This is a comment off mic. The interpreter can't hear. So in 2020, We already have a policy in place. And to the extent in which we have the data, we are compliant.
The thing is that we want the whole system, the reporting of all the data that everything can be substantiated. And in the course of 2020, that will be available. And then the last one, SDG 12, sustainable production consumption and circularity. Well, we very often talk about scarce materials and that there's an end To materials and things like that, I've said this very often in speeches. The question is whether there are any scarce materials And raw materials in the world, it's a fable that Martians Come down to Earth and steal everything from us.
No, no, no. All these atoms and molecules that were ever on this planet Still here. A bit of helium escapes the planet every day, but most of it stays here in different places In other forms and very often mixed with other molecules and atoms, which we call waste. And then, yes, You would create scarcity. And that has everything to do with and you quite rightly asked that question, everything to do with how you develop and design your supply chain.
And we are convinced that You can develop your supply chains and design chains in such a way that you can always reuse everything and you can close the loop. And we do this in our sector along with the World Business Council Sustainable Development. Jeff, our Corporate Sustainability Director here in the front row Is closely involved in this process. We make life cycle analyses and find out where the different products end up. And we have great examples such as the renewable carpets, but also what we do with the 2nd generation biofuels.
Agricultural waste is being reused in order to turn it into green energy. We've got endless examples like that. And can we make our entire company circular or in part circular in order to throw out As little as possible. Well, I don't know the answer to that question. But we do see a great many opportunities, and we continue to Sometimes it's a matter of technology and obstacles, technological obstacles, and we need to develop technology.
In many cases, we succeeded. So at the end of the day, I would say that for the world with 9,000,000,000 people, there are A great many opportunities. And with many of our customers, we see that they're very, very interested because they ultimately See the economic benefits of that, so we'll continue to focus on that. Thank you.
Ron? Thank you. Mr. Spania, happy to see you again. Yes, for the minutes, my name is Spania.
I obviously have a few questions About the 2 70 pages I read in the annual report, really interesting. And let me start obviously by complementing the employees and Mr. Sibismar. But we have a very special employee, Mr. Sibesmaar's wife, because she allows him to do everything possible for the company, for the world.
And Ms. Stifesma, thank you very much. Not here today, unfortunately. She sometimes is around, but will certainly convey your compliments. Thank you.
Now let's get to business. In 2018, unfortunately, You lost a court case under Patent 808 in the enlarged patent court, which led to €546,000 and damages that were the court fees. And also you have been ordered to send a letter of apology within 10 days. Well, obviously, that This was very unfortunate, very unpleasant for you. My first question is why the supervisory board didn't act on this because the supervisory board It's the corporate body that needs to supervise everything that happens within the Board Or in terms of patent cases, I haven't seen anything in terms of reporting.
And what kind of reputation damage this case created because if patent number 808 is withdrawn by the Technical Board of Appeal, that's No fun, and it's very expensive. So I'd like to know how much reputation damage this has created And how much damages this letter of apologies has created? I want to know this. To the extent, we live in a digital era, That's question 1. Then on Page To column 1, 4th paragraph, lines 56, I quote the following.
This allows us in the future to invest, for instance, in new nutritional facilities in Poland and India. However, the question is this. Poland and India are countries where the health and safety standards are not exactly as high In the Netherlands, although we may question those in Netherlands as well. So if nutrition products have been manufactured in either Poland or India, how will you safeguard The safety of the products and how will you avoid recalls, that's not mentioned in the annual report because recalls are very expensive. And I'll stick in my third question to the issue of the 4th column, 4th paragraph Line 8.
And you say that Materials kept focusing on higher growth segments with higher margins. And those in particular, however, we will also invest in the near future For improving the Dyneema production capacities. So where is this happening? In what countries? In which Manufacturing sites, are you strengthening your footprint in countries where you're already present?
Are you moving towards new countries? What are you going to do with Dyneema? You said that because of Dyneema, you can increase the Technological margins, so with how much? And that concludes my three questions. I'll come back later because only 3 questions are allowed in one go.
That is correct. They always tell me. Thank you for your questions. I'm always impressed So with the level of detail you find in the annual report. Okay.
Patent 808, I have no clue. Okay. Do we have any disclosure on the company this concerns? Are we allowed to disclose this information? This is not exactly a private meeting, you see.
So can we disclose the corporate entity? Yes, we can because I'm not quite sure we always do this. Yes. Sometimes we have issues with a company in Denmark making enzymes as So we are and sometimes we have patent disputes, both ways because they are our competitor. You're already getting up.
I'm jumping up. Am I messing up already, says Mr. Fiebensmaier. Well, you see, we sometimes have patent disputes, and sometimes we win, And sometimes we don't win them. And then this is what may happen.
And I can give you a long list of examples So successfully concluded proceedings. However, life doesn't always mean you win. And in the procedures, We need lots of lawyers and pleasantly in the presence of case. I have to tell you they are not cheap. So you are right.
So yes, it does result in expenses. So it's nicer when you invest and then you win. I agree with you there. And we didn't win this case, and then we lost the money. That's how it happens.
Then nutritional facilities, production facilities in Poland, in India, what about supervisory bodies? Supervision may be different than in Western European countries, true. But at the same time, people do live in India and people in India do eat. They need food even if the regulatory framework in India is different. And many such countries, we produce for the local markets to start with.
And when we start exporting, you may think we'll take a risk. We don't think we do because Worldwide, we have the same standards for all our production facilities wherever they may be in the world. That doesn't mean we never make mistakes as a company because this is people at work. But we do have a That applies very high standards of safety checks wherever in the world. And we think it's important to produce locally and also economically speaking, this is wise.
Also given the fact that some countries have import duties For non locally produced products, a topic that is getting more and more popular in today's world. Then Dyneema. Dimitri? Thank you for your questions, Mr. Espana.
I know you're a fan of Dyneema, so I'm happy with your questions. And I can give you the following comforting news. We will expand Dyneema here in Holland, 5 minutes on foot from here. We are setting up an additional Udi train, And that will be up and running in H2 of this year. And the same is happening in Greenville U.
S, important for our global footprint. And it means that growth in Dyneema matches the demand. Then remains the question about the damages to our reputation. How can you quantify them? It's hard to quantify them, I think it would be the reverse.
If you look at the balance sheet over the years, I think we've won more than we've lost, but I'm not about other people's reputation. That will be a negative statement. I think our position in technology and patents is pretty solid. In the Netherlands, we We're in the range of the top 20 or top 40 of companies receiving patents. Our patent situation is solid and our reputation is Fine.
Let me use the opportunity to immediately live up to my waka waka premise and to share a waka waka with our Chairman. Is that speed or not? Thank you very much. It's quarter to 4. We're Still the first questions under item 2.
So if you have any very urgent questions well, that looks like a very urgent question. Thank you, Mr. Chairman. I'm happy you saw it was urgent. My name is Com Kordion.
I'm a retail shareholder. I would like to thank, following up Mr. Rautz and other statements, to complement the Entire team of employees of DSM for a fantastic year. And I think Mr. Sibesma understands which party should we thank more, himself or his colleagues.
Anyway, I have 3 very brief Most questions, I could imagine, have been asked, but I have questions left about the hard copy of the annual report. About 3 weeks ago, I requested a copy. And yesterday afternoon, at about 2 it landed on my doormat in Delft. I'm not sure there was any intention behind that. Maybe you don't want to second Mr.
Espana to arise. I hardly had an And I had a second question that I don't have to raise because one of the slides show the spread of sales. I do have a last question. I could read nowhere about the spread of the plants of DSM all over the world. I would like to have that information even more because this returns to another question about wages.
We are talking about risks here. We're talking about strategy here. I couldn't find that information. If you can share the information, I'd be very happy. So on your report, why are things going wrong?
You should have received it before. I can't understand why it went wrong. Thank you, first of all, for your words of appreciation. And I'm not going to compete To see whether your appreciation or my the appreciation of the supervisory board is more important. However, the It is expressed at the meeting of the shareholders, and I think we highly appreciate the Gratitude of our shareholders.
Hard copy, we'll try and make things happen faster. At the same time, since early March, The annual report has been published online. It's been available on the web page. The digital version has been around for a long time. No, I understand it's not always comfortable.
I personally like to consult documents in print in the company, so I'm the last one to comment on this. So we'll make sure you'll get it faster. And we'll try and figure out why Mr. Pioneer did get it and you didn't. Then the spread of sales.
I'm not sure what page you're referring to. I think we have a page called Sales by destination and sales by origin. Sales by destination indicates where we sell goods. This is the sales spread I shared with you a moment ago. And then we have another Page €177,000,000,000 You find sales by origin reflecting essentially the origin of goods Now this is reflected in euros, which means it reflects the Sales that we generate from specific plants, it doesn't reflect a number of production facilities.
We have another overview of the geographic spread of our plants, but I'm sure I'm not sure it's contained in the annual report. But we updated from time to time showing the plants as little dots worldwide. We have more than 200 production facilities worldwide, really spread all over the continents. But we'll try and see whether you can get a more detailed overview. Thank you for the question.
Thank you for the answer. Well, 2 more then. Thank you, Chairman. I have a question about the cash allocation policy As laid down in the June 2018 strategy, we see a list, 1 to 4. And the last priority is in the absence of value creating M and A capital to be returned to shareholders, what Should we now think that you have already proceeded to the last point by buying back shares?
It's the lowest on the list. Does it mean BSM sees no opportunities for larger acquisitions at the moment? And in this slide, I'm interested To see how you look at the current valuations of the Nutrition Sector segment. And then something more also interesting about the But if you currently look at the share price, it's wonderful obviously. But many tools of analysts Indicating a lower price.
So you may buying at too high a price. So I wonder whether you thought about the super dividend Or whether you still opt for a buyback? And I'm specifically interested in the method you use to In nutrition, what's the cause of that? Thank you. Thanks for the questions.
Very much to the point. I thought one of the questions had already been answered. There can be a brief follow-up.
Please go ahead.
Sure. So cash allocation, I believe we addressed it actually earlier referring to the capital that we're looking for. So indeed, we have a 4 tier cash allocation priority with investing 1st and foremost in our organic growth. Then ensuring, and we showed it in the slide, to maintain the dividend policy, a very firm promise from the company 3rd, M and A and 4th, then a return of cash to shareholders. Now when we looked at the strength of our business, At the same time, as we looked at the strength of our balance sheet at the end of 2018, we felt that we have the possibility, and of It is a privilege as a company to have that, to actually add in an element of return of cash to shareholders in addition to the 3 others.
So it is not Either or. It was more actually an ability to do it as well, while retaining very good flexibility For our organic growth and for our inorganic growth. So I think it's probably very important that it's understood that this is not one or the other. When it comes to valuations of targets, we are extremely careful and mindful that acquisitions should create value, And we've always been very disciplined about that. The main point is much more ensuring that, that will be the case than necessarily speed of Going about making acquisitions.
So we do a lot of work, a lot of studying and make sure that when we move, we have a high degree of confidence. This is in the interest of DSM and of its shareholders. So that's really looking at the cash allocation and the share buyback. Now given that the nature of our share buyback is much more about a strategic direction and the strength of the company, We feel comfortable that the share buyback is still the right thing to do at the current share price. Now I will absolutely not comment about what is an adequate share price for DSM.
I leave that entirely in the hands of our investors And shareholders, you all have an individual view, no doubt, as to what is a good share price. What we do look at, of course, is return on capital, but also retaining that flexibility to invest in innovation and in organic growth. So we are comfortable that The share buyback is a balanced measure and is also a very appropriate measure at this stage for now. And I believe your first question was inventory levels in our Nutrition business. Now as was referred to earlier, 2018 was a very unusual year for our Nutrition business because of this temporary vitamin effect.
It created all sorts of unexpected demand and supply momentum, sometimes an acceleration, sometimes a little bit of a slower demand. And at the end of the year, We just ended up with a bit of a higher inventory level than usual. But beyond that, there's Not much to refer. Business continues. Now we are in the targets, and we mentioned that earlier.
It is our ambition to reduce our
One small addition to Geraldine, as you said that we are normally not a big fan of share buybacks, and I've said that Many, many times, it's also priority number 4, but it is clear signs of strengths and our trust in the future That we came to this point number 4 because there are 3 points like Geraldine said. We go priority above this. So this is more a sign of strength Anything
else? Okay. I would like to proceed with the meeting and conclude this opportunity to questions. You'll have opportunities under other agenda items. So let us conclude this item now.
We've received information about the Turnout at this AGM, and I can inform you that at this AGM, 3,058 shareholders are present or represented. And they represent a total share capital of 152,8708,320 shares, representing or resolutions has received proxies or voting instructions. These proxies concern about 152,600,000 shares And they amount to 99.85 percent of the capital represented at the AGM. These votes have been introduced into the voting system. That brings me to item 3, remuneration, which has 3 points: 3a, implementation of the remuneration policy for the Managing Board in 2018 3b, an amendment of the remuneration policy for the Managing Board And 3, amendment of the remuneration of the Supervisory Board.
Ms. Van der Meer Moore, Chair of The remuneration committee of the Supervisory Board will give a brief explanation on the amendments to the policy. She will also address the proposed amendments to the policy of the remuneration of the members of the Managing Board and the Supervisory Board, items that are being submitted to the vote for your approval. The explanatory note is based On the comment on the implementation of the military policy in the annual report, the remuneration Report in the integrated annual report and also in the explanatory notes to the financial statements and in respect of the amendments to the remuneration policy of the Managing Board and the Supervisory Board, you also have the explanatory notes to the agenda of the AGM. And after this You will have the opportunity to ask questions.
Ms. Van der Meer Moer? Thank you, Chairman. Thanks also to our shareholders and the representatives The shareholders for sharing their view and opinion on the remuneration policy in the many consultations that have been conducted In the preparation of a new policy, in 2018, remuneration of the managing board has been implemented in Notes to the financial statements that can be found on Page 131 through 135 and on Pages 224 to 229 I would like to highlight a few elements of the policy in my presentation. First of all, as for the base salary of the members of the Managing Board, I can tell you that the amount has been amended in July 2018 By 2.4% for the CEO and Chairman of the Managing Board and by 2.9% for the other members of the Managing Board, in line with the salary dynamics in the Max in the peer group of similar companies, but also in line with the salary dynamics of DSM executives in the Netherlands.
Subsequently, in respect of the dynamics of the long- and short term variable duration of the managing board members, we Determined that the targets set for them had all been achieved or overachieved, 2018 being an excellent year once again for the company Where the company performed well on all fronts, all members of the managing board substantially invest in DSM shares, All three convert the maximum of 50% of their gross short term remuneration for 2018 in Shares that will be held for a longer period of time. And in doing so, they express their confidence in the strategy of the company. And thus, the long term interest of, respectively, the shareholders and the members of the managing board will be aligned. Today, we seek your approval for a number of amendments in the remuneration policy of the managing board. Allow me to highlight a few aspects.
The remuneration committee of the Supervisory Board has reviewed the remuneration policy in light of the following considerations. We've looked at possibilities to further simplify the policy contributing to greater transparency. The remuneration policy tends to be very complicated and simpler and the more transparent, the better in our view. Secondly, We tried to make sure we could maintain and strengthen the link between the remuneration policy for top management and All shareholders of DSM in the light of the drive to achieve long term value creation. And Thirdly, we aim to maintain the possibility to attract and maintain the right type of people for managing this company.
Given the fact that the current remuneration policy meets all the above points, the points mentioned above, and we appreciate your support for this policy. We decided only to make a small number of amendments to the policy. The current policy knows a base salary, which approaches a median from below and remains unchanged. A long and Short term remuneration also applies, which when the set targets are Achieved represents 50% or 100% of the base salary remains in place. In this system, both the short- and long term variable Remuneration are for 50% linked to the financial performance of the company and for the other 50% to targets in the field of sustainability, planet environment on one hand and people or society on the other hand.
And in addition, in terms of the short term variable remuneration, we also have individual targets. This remains unchanged. The limited amendments proposed are the following: First of all, a simplification of the system for setting the targets and the relative weight of the short- and long term variable duration components, Meaning, we can always align them with the strategic targets of the company. Let me give you a tangible example for 2019. We will move from the gross free cash flow to adjusted net operating free cash flow.
And for the long term incentives, we move In the determination and the achievement of targets, obviously observing confidential corporate information as usual. Thirdly, we wish to align the current our policy with the current market practice in which shares must be held For a term of 5 years in total. For the LEA, we wish to increase the standard for a holding period by other members of the managing And finally, we want to introduce a policy for hiring, including a noncompete arrangement in the hire policy for new members. We also ask your approval for an amendment of the remuneration of the members of the Supervisory Board, Best Practices in Corporate Governance. Thank you.
And the word is for the Chairman. Thank you for those comments. Any questions to Ms. Desmond? Yes, please.
Microphone D. Thank you, Carole van Hu, on behalf of Rebecca. I'm speaking on behalf of the Geppen White parties I mentioned before. Thank you for your explanation. Thanks also for the consultation DSM conducted with shareholders about the amendments to the policy.
We highly appreciate that. We are satisfied that the principles of the current policy remain in place, and we are positive about the drive for simplification And also about the proposed amendments to increase the shareholding norms for the members of the managing board. 1 point demands attention in the new policy. The supervisory board asks for flexibility to amend the terms for the bonuses as long as it is in line with the strategic targets of the company and with long term value creation. We make a public appeal to report on the measures, the tasks, the targets that you have chosen in the information report And to reply to them, to react on them.
Then the sustainability targets for long term bonus, energy efficiency and greenhouse emissions reduction. For both targets, the scores were significantly better than last year, which led to a maximum payout. Is there a trend here? Or was this a one off? And can you explain how the supervisory board determines the targets?
Pauline, yes. The first question was an easy one. The answer is yes. Obviously, we will report on this in the appropriate way because it's important for us to have the flexibility that allows our strategy To follow the breadth of the organization, but you deserve transparent reporting, and we will do so. Then the sustainability targets.
That's always an interesting question. It's a give and take. Where how do you set the targets? Because it's about the amount of investments you want to conduct in order to meet the targets. If you invest in targets And sustainability targets, you can't invest that money anywhere else, and that is a consideration that we have to make a supervisory board.
And then achieving or overachieving such targets is something we can only be very grateful or thankful about. But that doesn't mean the targets weren't challenging. And every year, once again, we have consultations with from the field of sustainability to compare the results of this year with appropriate targets for next year. This takes a lot of time. We have our own committee headed by Marlene Kennedy.
She is the chair of this relevant committee, and a lot of time is dedicated to discussing the targets and their achievement. So this is not a trend or a one off. This is rather a permanent issue in the board. Yes. It's a permanent item on the agenda of the board.
And if you would like to suggest that we place very low targets In order to guarantee bonuses, then I would reject that. No, that was not my insinuation. My name is Spanja, for the minutes. I have a problem with Item 3 CY. Let me read it out.
Chairman, why 23.6% needs to be granted as an to €105,000, where Mr. Sebesma Has a potential increase of 2.4 percent on Page 24, column 1. 2nd paragraph, Line 6. Mr. Sebasma has moved this company from bulk chemicals to what it is now, and he has an increase of 2.4% And now you have 23.6 percent.
I disagree. And let me carry on. Why should the Vice Chair have an increase of 25% From 15,000 from 60,000 to 75,000, while Ms. Marciek and Mr. De Vrida have an increase Of 2.9%, Page 24, 1st column, 2nd paragraph, line 6 as well.
And your colleagues have an increase of 16%, moving from 60,000 to 70,000, Mr. Chairman, with 85 €1,000 and an increase of 2.4%, which would be in line with the trend. You had €87,000 Which will give you a decent slice of bread with some decent cheese. Why do you have to have such an immense increase? Mr.
Sebesma is the one who made the choice to move from bulk chemicals to the current operations. He had to use his force of conviction to achieve this. So he had to convince people to work in a more organic way, in a more green way, and now you want more money. No, Ladies and gentlemen, give yourselves the same increase as Mr. Sebesmaier.
This is way too much because really, How do you think the HR manager of the company would feel if this would be approved? Mr. Raut, how do you I think Lika de Jong, who does the media communications and who will have a maximum increase of 2% would feel. How do you think Dave Housing would feel a person who serves the company so well and who has a maximum increase of 2%. This really is outrageous.
You are simply on another planet. Mr. Rautz, what do you Think. We shareholders, owners of the company, think. When we talk to your employees, your employees feel like 2nd rate citizens, people who are not worthy to work with DSM.
Well, we can replace you, Mr. Raut, but the ladies and gentlemen who work And the factories cannot be replaced. You can we can replace you, no problem. And now international flights would be reduced from increased from 45,000. I don't know why we have mobile Phones, we can send apps, messages.
We can communicate all over the place. And then you want to have an allowance of 12,000 This is too much. The increase of the managing board is fine with me, but this goes way too far. Very rarely I heard you speak with such flair. Let me start with the Chair of the Reputation Committee, Rob, this is a very awkward question for So let me ask it answer it on behalf of DHL.
You may not appreciate that we're not talking about And a salary increase. This is a change to the remuneration of the Supervisory Board. That doesn't happen annually. For the past 3 years, the amounts We're not changed. We review the amounts every 3 years, and we then look at a peer group of companies and What they pay to their supervisor directors.
We also look at the makeup of the supervisory board. Mr. Rauter and myself are the only Dutch members. DSM has become a very international company With a very international makeup of the supervisory board, we have people who have lots of opportunities to serve supervisory boards elsewhere in the world, and still they have chosen DSM. We're highly grateful for them joining DSM, But we can't expect them to fly all over the world to come to our board meetings for a remuneration way below what they could earn With other companies, and this is why the remuneration is reviewed every 3 years.
We do this with an open conscience. We are not even on the median level of the peer group, The peer level that is always approved by the shareholders, we are still below the median level. So it may seem to be a significant increase, but actually in line in comparison with the peer group, it is a very modest increase. I need to correct you here. You say you're below the median.
But what is the median? Is it Rwanda's median? No, certainly not. For the supervisory board, we look at the Dutch AEX funds, well, the peer group for the managing board is international. But for the supervisory directors, we decided to restrict ourselves to the Netherlands.
So the median is even lower than the international peer group, which we could have used. We could have also compared ourselves with U. S. Companies. You would have run out of the room Screaming then.
Well, if you review it, in 3 years again, it will be more than 7%. Mr. Siebesmaa, Mr. Dovrera, the CFO, the people who build up this company only have 2%, 2.5%, maximum 2.9% salary increase. And you are giving yourself 7% per annum.
I hope that in the committee, you will make changes because This is outrageous. You are making appeals on the unions to call out a general strike. You are making an appeal upon us. You are creating problems because how We can look in the eyes of the employees when we have a drink with them. I object.
I understand you object, but let's not get personal. I'm not getting personal. It's a general statement. Mentioning your name was by accident. Well, maybe I can involve myself in this Fine with me, but I think the link with the committee chaired by Mr.
It's really inappropriate.
And the major backers, Netha Rayfreund.
You just referred to employees. We are Very happy with our remuneration and our increase. And I'm not only referring to The people here at the table. But even Mr. Housing, Ms.
Lika de Jong and all these people you mentioned, I know. I know that they're happy. So you can keep that in mind. And there's no problem for drinks later on. These people, as I said, are happy.
And second thing I would like to remark is that we, as a company and also as a board, we very much benefit from a Strong Supervisory Board, and we can only hope that the Supervisory Board can be paid in such a way that we have a strong Supervisory Board. And I myself personally are incredibly pleased with my Supervisory Board because they help us out. They supervise us. And in the benchmark, as Ms. Van der Merrimore just pointed out, in the benchmark, they're given Much less than our peers.
You can do that for a while, but you can't do so indefinitely because Somehow or other, you will end up having problems. And I'm saying this, I don't think we should want that. But why can't we just have an increase every year for the Supervisory Board along with your Increase, the EUR 2.9 billion. Why does it have to be every year? Why does it have to be such an enormous increase?
Why not Small increases every year. I think you have raised your questions. I'm sure you'll never be satisfied with the answer. So let's proceed with the vote. Apologize.
Sorry, I didn't see you. Thank you. My name is Jose Fernandez. I'm Small shareholder. I listened to the arguments that were put forward and one of which I think It's horrifying, and this has got to do with what's going on in our society, the changes towards sustainability, transition other technology.
And DSM is making money on the back of that. And of course, costs In society are increasing as well. The argument that you spend more time and as DSM, I think you're turning your back on the population because people have more and more paperwork to do, More responsibilities to bear, whereas people are being fired. Other people took care of that work in the past. So I protest against using that argument that more work is being done, but everybody has to do that.
Everybody has to shoulder that. And this has to do with changing society, Has to do with health and all sorts of responsibilities are given to citizens. So this is on the increase. That's what I wanted to say. Thank you.
Yes, the holding period. Yes. Directors have to hold on to these shares. The holding period of 5 years is reduced to 2 years. I hear Ms.
Holomiromo say that this is what is customary in NADA, but I don't really think it befits VSM. And then these arguments about sustainability and long term thinking, and all of a sudden, you're shortening the period from 8 to 5 years. So I would like to hear from Mr. Sebasma how he feels about the shortening of this holding period. Well, it's going to be a long, long answer.
Comment off, Mike. The interpreter can't hear.
I don't think that DSM is really walking away from a 5 years holding period. I think the way that we have counted a 5 year holding period is very different to how the market does it. The market simply includes the 3 years vesting plus the 2 and gets to 5. I think we've been different in that we have in the past not included the vesting period in the counting. So we still get to 5, And we're now counting as everybody else does.
And I think it does fit with DSM. It's still 5 years. And we also wanted to make sure that Performance is also rewarded nearby when performance actually happens. So 8 years felt like a very long time if you include the vesting period.
I'm sorry, I was somewhat Confused with your question. And by definition, I will just take it that you're right. So that's why I was looking. I'm glad Judith was able to add to the answer. As far as myself personally concerned, you can find this In the last 12, 13 annual reports, since I've been CEO, I have purchased shares, saved shares, never sold one single share.
And I can also reassure you, as long as I'm CEO, I shall never ever sell one single share. I can reassure you. Thank you, Freca. Can we now proceed to the vote? Thank you, Chair.
Time To activate the handsets, so I would request you to insert your voting card with the gold colored chip Pointing upwards and then inserted in the handset, and you'll see a welcome message appearing in the display. Should that not be the case, I would request you to raise your hands so that we can help you out. I'm looking around to see whether everything is sorted. I don't see any raised hands, so there are no problems with the handsets. Great.
You will also see on the screen that you have 3 In the vote, as always, you will choose between numbers 1, 2 or 3. If you want to vote in favor, press 1 against 2. And if you wish to Abstain from voting, please press 3. And you'll see your choice appearing in the display. You can always change that as long as the vote is open and your last choice I shall inform the meeting that every share entitles you to issue to cast one vote, and you'll see The results of votes in favor against an abstentions because abstentions according to the articles association Non cast votes, you'll only see percentages for the votes in favor and against.
So now we can proceed to vote on Agenda Points 3b and 3c. Well, I just explained what the numbers 1, 2 and 3 stand for. I'm not going to repeat that. So now we can proceed to vote on Item 3b of the agenda. You still have a couple of seconds.
I'm looking at the Civil Law Notary, I think most of the votes are being cast. And so yes, the vote is closed. The results for this item on the agenda, 97.48% has voted in favor and 52% have voted against. And given the results of the vote, I note that The meeting has approved 3b. Now 3c, the amendments with respect to remuneration of the Supervisory Board.
Once again, you can vote press 1, 2 or 3. I'd like to vote the open the vote on 3C. I see that the votes are being cast. I'll give you a couple of seconds. The vote is closed.
We'll just wait for the results. 98.45 percent have been cast in favor and 1 point 55 against. The amendment of the remuneration of the supervisory board has been approved. As I pointed out at the beginning of the meeting, some items of the agenda will be clustered, and we'll deal with agenda items 4, 56 together, after which you'll have the opportunity to raise questions. And after that, we will proceed to the vote.
Item 4 being the financial statements. The financial statements are submitted to the general meeting for them to be adopted. The financial statements 2018 have been approved by the advisory board on March 7, 2019. You'll find the financial statements and other details from Page 158 onwards in the annual report. The financial statements 2018 have been audited by the auditor, and the auditors' opinion has been included on Pages 230 through 234.
Now I'd like to invite our auditor, Mr. Wertzen, To give a brief presentation on the audit work of ClearPMG, should you after that have any questions with respect to the financial statement or the audit, You can always ask them later on. Eric? Yes, Chairman, thank you very much. My name is Eric Lawson.
I'm the KPMG auditor, and I'm in charge of auditing the financial statements. We've been in charge of the audit since 2015. I'd like to briefly present our auditors' opinion, and our presentation will follow The order of the opinion we have audited the single and consolidated financial statements of DSM. And for the first time, as one of you said, we issued an opinion of reasonable assurance with the sustainability In the past, it was limited assurance. So it used to be limited.
Now it's And by the way, a reasonable assurance is the highest degree of assurance that an auditor can issue. So that's as high as you can get. And another point I wanted to make in this context is that a company cannot ask an auditor to issue an opinion with reasonable assurance. I mean, a number of prerequisites need to be met to that effect. And Judith said so when she answered one of The company has to have sufficient checks and balances with respect to the assumptions and the data and has to Lay that down to such an extent that the auditor can audit it.
Now my presentation, I would like to zoom in on the financials. The opinion or the auditors report, the end product of our audit is our auditors report, and we've issued an unqualified opinion, which means that the financial statements give a true and fair view and are in accordance with IFRS and Book 9 no, Title IX, Book 2 of the Dutch Civil Code. By the way, the financial sorry, the Annual report and other information is congruent with the financial statements and does do not contain any material misstatements. During our audit, we focus on a number of elements. First of all, risk assessment.
During our audit, We make a risk analysis focusing on those areas where chance where there are the greatest risks of misstatements. So these large numbers and things that require assessment of management. What is new in this statement is an explanation with respect to our audits concerning the risk of fraud, Risk analysis, the identified fraud risks and the work that we carried out to that effect. And this The scope and depth of our work and also the evaluation of any mistakes or misstatements that we might find. At DSM, the materiality for the financial statement 2018 was €40,000,000 which is 3.4 3.2 percent Of results before extraordinary costs, and this is within the bandwidth that is generally accepted, we report any deviations that exceed €1,500,000 And we report that to management and supervisory board.
From the perspective of efficiency, we decide Which work we would do more centrally and which work we would do more locally, particularly goodwill acquisitions, divestments, Taxes, legal proceedings and extraordinary items are audited as much as possibly centrally. This selection of local entities is based on the scope and our risk assessment of those entities, and this has led to coverage of 73% of sales and 80% of overall assets, I would say. And for 2017, that was more or less the same. The remaining 27% of sales consists of a large number of small entities. And in general, these entities are smaller than 2% of the total of DSM.
And these entities, by the way, we Analyze the figures. And if there's any reason to do so, we conduct additional audits. In a number of countries that we've selected to that effect, the local KPMG auditors carry out work in order to audit For the benefit of the group audit, for most countries, we carry out mandatory statutory audits Carried out in part by KPMG auditors and also in part by other audit firms. And the foreign Auditors that report back to us follow strict instructions, and we assess their impartiality and competencies, and we've In touch with them constantly and we also assess their reports and files. Important Foreign DSM Organizations and auditors are periodically visited by us.
In 2018, the countries We mentioned in our report were visited organization in the U. S, Switzerland, China, Brazil and the shared service center in India. In complex matters, we will involve our internal specialists, and this would be these would be specialists in the field of assessments, IT, taxes and pensions. And last but not least, the core elements of our audit. We spend the entire year on audit, and we periodically speak to the CFO, Geraldine Machet and CEO, Feike Sipusmaa.
And we also are in touch with John Ramsey, the Chairman of the Audit Committee. We attended all audit committee meetings, and one time we attended the Supervisory Board meeting. Our findings have been laid down in our report or our management letter and our auditor's report, and we've sent it to the Supervisory Board and management. With respect to the core issues, we've We've issued a detailed report. All these items have been included in the report in the opinion given their financial importance, complexity And the assessments involved, judgments involved.
Goodwill and evaluation of goodwill just as last year was Key audit matter given the magnitude and the estimates that require. We feel that these estimates are within The bandwidth that we find acceptable, which is what we said in our opinion. A new key audit matter is the sale of DSP. And this has been included given the magnitude of this transaction and the financial significance thereof in the financial statements. What we have not included is evaluation of the participating interest in Poet DSM and the divestment of Pejian.
This concludes my presentation. Thank you very much for your attention. And of course, I'll be happy to answer any question you may have. Thank you, Mr. Verster.
After Agenda Item 6, you will have the opportunity to raise questions. And we shall now proceed Two agenda items 5a and b. The reserve policy and dividend policy 5b, adoption of the dividend for ordinary shares 2018. The reserve policy 5a is unaltered with respect to last year and is Connected to the dividend policy, the dividend that DSM pays to its shareholders It's dependent upon the circumstances and the conditions in which the company is the financial performance of the company and other relevant factors. DSM aims for A stable and preferentially an increasing dividend.
Mr. Sibiu Sma already pointed that out. The management board, with the approval of the supervisory board, may propose The dividend be paid out both in cash and in ordinary shares DSM optional to the shareholder. Item 5B is the determination of dividend for 2018. Financial statements show that 2018 A net profit was achieved of €1,077,000,000 And pursuant to the articles of association, the Management Board, With the approval of the supervisory board, we'll determine which part of the profit will be reserved for the year 2018.
The amount is EUR 6 €65,000,000 That is the amount that's being reserved. The remaining profit will first be paid out as a dividend. On the cumulative preference shares, A, and this payout amounts to €8,000,000 And the remaining part of the profit is then available to the general meeting. With the approval of the supervisory board, the managing board will propose a general meeting to pay out for 2018 an amount of €2.30 Per ordinary share by way of dividend. Keeping in mind, the interim dividend paid out in August 2018 amounting to €0.77 ordinary share, the final dividend amounts to €1.53 per ordinary share.
Optional to the shareholder, the closing dividend the final dividend in cash or in ordinary shares shall be made available by This year once again, a maximum of 40% of the total dividend will be paid out in the form of shares. This in order to prevent Any additional taxes for DSM should shareholders together indicate That they wish to receive more than 40% of total dividend in shares, these shareholders shall receive the shares Proportionately and the rest in cash. In the explanatory note to the agenda, you'll find further information with The dividend payout will be available as from June 3, 2019. And then item 6, The discharge of responsibilities and members of Managing Board and Supervisory Board. You can individually cast your vote with respect to The discharge of liability, the members of the Managing Board and Supervisory Board.
This concerns the discharge concerning any information reflected in the financial statements or otherwise notified to the general meeting before the financial statements are adopted. So now I'd like to give the shareholders the opportunity to ask questions Or make comments concerning Item 4, 56. Depending on the substance of your question, I shall indicate who can best answer your questions. Who would like to kick off? That microphone A.
Oh, no, someone who's leading. Mr. Espana, please. Chairman, could I also ask a question with respect to the auditors' presentation because that's not on the agenda? It's not item 4, 5 or 6, which is why I'm asking.
I would like to hear from the auditor because You have quite a patent portfolio. Did you involve a patent expert to assess that or to evaluate that? Because Patents are worth less every year. And how did you assess that patent 808, as you know? And of course, I know which company is involved here, but that company suffered damages.
Didn't the auditor see this coming? And What did he say about that in his management letter? Thank you for your question. Pleasure. Patent, first of all, are not valuated in general.
So we I don't have a valuation expert for that. But what we do, do, there are a number of other issues, but those are other fixed And I mentioned that in my presentation, those are valuation specialists. Those can be specialists in the field of Tangible fixed assets and intangible fixed assets, not for patents because patents are not being evaluated. Well, pity Because in this organization, it is quite a large portfolio. Well, if we're talking about acquired patents, yes, they can be evaluated But in general, says Mr.
Sebasma, we hardly have A position in terms of value of patents on our balance sheet. We do have a lot of value in patents, by the way. Yes, yes, of course. Thank you for your question. There was a question over there.
Thank you. I have a question on the scope of the audit. 73% of the audit and 80% of assets are covered by the scope of the audit. And compared with other listed companies, these percentages are relatively low, Although the part that was not audited concerns smaller businesses of the organization, how did you get sufficient security with respect to The fairness of your coverage. I'm sorry, Chairman, but we are in charge of Scoping.
And so the company doesn't have a say in this. So that is something that the auditor determines, which is why I like to give And answer myself. You say 73%, 80%. You say that that's relatively low, but I also have companies in which the percentages are higher, Either higher or lower. And what is the situation here at DSM?
I mean, if I were to Draw a line, I would say there's a line in which you have a limited number of large companies that are quite risky. They will contribute to the first 78%. And then if you go further down, you see smaller entities, lots of small entities where there Can be no material misstatements. What it is that what is it that we do with those entities to check and double check? We analyze the numbers of these entities.
We do this centrally here. And we ask questions, if necessary, to central management here. And it can also be that we Send our local auditor to check up on things. I can give you example, not of this past year, but 2 years ago here. We saw An item, indirect taxes, which is VAT amongst others and exercises.
You saw an increase in country that was not in scope. And then we asked what the reason was. And then there was an answer here, essentially, that it had nothing to do I mean, this was a formal point, a formal thing that needed to be settled. But we do see what happens In the entities and our opinion covers the entirety of the business. It doesn't mean that if we fully audit 78% that we or I have no responsibility whatsoever for the rest.
No, Whatsoever for the rest? No, of course, everything is covered by our responsibility, and the risk of a material misstatement in this case is negligible. But once again, I also have companies in which the scope is higher or lower. So it depends on the type of company. Thank you.
Okay. So you're happy with the answer. For those of you who have your doubts about the impartiality of the order term, there you go.
I can remain in place or you can remain in place. I have one question. I've read the report of The supervisory committee and the audit committee so by the board and the audit committee, we read about your letter. And in the management letter, there's a recommendation for strengthening the internal controls of the company. And your recommendation was To take the internal control level to a higher level of maturity, what did you intend?
Yes. I have some limited presentation instruments, but I can show you Page 110 of the report. These are the pillars. Do you have a copy at hand? Let me take you through it because it's difficult from this distance.
Look at Page 110. You'll see an illustration that I refer to. These are the pillars of the total framework of DSM. And as you see, the pillars for those who don't have the book represent risk management, management reporting, controls, internal control framework representation, letter operational compliance and corporate audit. And DSM has turned this into a beautiful framework that can be found to a certain extent in other companies.
And in comparing this with other companies and with the norm, We have very little observations about most pillars. We had to remark about the internal control framework pillar, in particular, about strengthening Not the type of controls happening. We are fine with them, but the way they are recorded. And it's important for management and for us as auditors for these outcomes to be verifiable. It's not under par, But we would like to turn an average score into a top score.
So this is a recommendation, but not To the extent, it would amount to an insufficient score. And as we said in our comments, there are no One other question. This is about the paragraph about what still went wrong in 2018. Complements for 20 for the DSM-four, including such a paragraph. Not all companies are so open about this.
I noticed One issue. There was fraud at the DSM Innovation Center. What was the amount? I remember there was another attempt for similar fraud in 2016 that was out in the papers. So we see it happen again.
And maybe next time somebody will buy it. How is it possible this happened to the company? Was there insufficient attention? Well, we give a lot of attention to this kind of fraud regularly. And sometimes I'm not the author of the e mails, but it looks as if I were sending e mails.
This is called CEO fraud. And the most frequent requests are about payments, asking people to make a quick payment because I, as CEO, think it's necessary. We give lots of attention to this. We carry out tests Regularly, we did so some time ago. We sent out fake messages, fake trials.
So then it's us Getting into another chair and seeing how many people buy it, we try and inform people. And in most cases, almost always, it goes well. Things go well. And I have a certain style of communicating, so people very quickly see a message couldn't have been sent by me. So most people understand what's happening, and we give lots of attention to this.
We have a rule that you have to call the person concerned and not send an e mail back because then you send an e And not send an e mail back because then you send an e mail to the criminal who told you to go ahead with the payment. So we conduct This kind of education, but last year, there was a miss not for a Immense amount, but an amount that didn't make us very happy. And the money is immediately gone. It's moved it's funneled on, and you can't retrace it. And I think that the damage to the company is extremely limited, that we have control, but this is people at work.
And any employee can be exposed to this. Anything to add? Thank you, Mr. Chairman. I have a question to the CFO and a question to the auditor.
Well, the CFO. It's a general policy that you have shareholdings From 45% to higher level, 60%. Do you do this in order to reduce goodwill? You want to have some feeling with the company. You Want to see what Johnson and Johnson is doing, for instance, but doesn't that lead to too much control on the balance sheet?
Companies' minority stakes and sometimes we increase again to a majority stake, it's true. And is that to have a lower goodwill on our balance sheet?
No. The dynamics are never about the goodwill. It really is on a case by case. We have very different reasons to invest in companies. So in some cases, we go for an investment of even below 20%.
In fact, we have a lot of venturing investments, which are very related to our innovation. And it was referred to earlier by someone that sometimes that's the best way to get access to new developments in science and technologies is To actually make a relatively small equity investment in order to know what's going on and to contribute in our own way. So To every investment, there's always a very different picture, but it's not guided by goodwill or no goodwill.
Then another question. IFRS 1 auditor reports on IFRS 16. Others don't report on IFRS 16. And despite the fact That it's not compulsory this year, auditors could still make a statement about IFRS because it's in the financial statements anyway. You have almost one page in the annual report on IFRS 16, so we'd like to hear the point of view of the auditor.
Eric, go ahead and keep it short. Thank you, Mr. Stevenson. Thanks for the answer. Indeed, some auditors in their statements address IFRS, IFRS 16, the new Some don't.
IFRS 16 is about activating leases and rental on the balance sheet, and DSM applies this starting February January 1, 2019, the current year. In 2018, it made it to the notes, and it's a whole page seeing that the assets have increased by 200 something million. We Incidentally, we have spent a lot of time on this working together with DSM. DSM started. We checked it because the amount is material.
However, our conclusion wasn't that it should be included in the auditor statement because the level of subjectivity and the level of judgment involved was limited. This is about gathering the number of contracts, assessing the lease obligations. But we have worked on this, But we didn't choose to include it in our auditor statement because I couldn't add statements as a critical note. We have no further questions, and that means that items 4, 5 and 6 Thank you, Mr. Chairman.
I reiterate The menu, if you wish to vote in favor, 1 if you wish to vote against 2 abstentions 3. We now move to item 4 on the agenda. The vote is now opened. A few more seconds to cast your vote. We now close the votes.
And we see that 99.49% of the votes The AGM has therefore adopted the financial statements 2018. Then 5, b, the adoption of the dividend for 2018. Yes. It's on the screen. You know the procedure.
I now open the vote. I hope we'll have been able to cast their vote. We now close the vote. 99.60 percent have voted against. My apologies in favor, 99.6% in favor and 0 point 40 against.
I would like to know who the 0.40% are that don't want a dividend. I now proceed. Well, we first of all, we See that the dividend has been adopted. Then we come to 0.6. Yes.
Let's place it on the screen. You can cast your vote on item 6A. I open the vote. A few more seconds for the last votes coming in. I now close the vote.
And as you see, 98 0.78% of the votes were cast in favor and 1.22% of the votes were cast against. And that means that the members of the Managing Board have been granted the release from liability. Now the same 6b for the Supervisory Board, It's on the screen. Voting devices have been activated. You can cast your votes on item 6B.
We now close the vote. 98.78 percent of the votes Cast in favor, 1.22 percent of the votes cast against. That means that members of the Supervisory Board have also received release and viability. And on behalf of both boards, I would like to trust you for your confidence, for the confidence that you have in both teams. We now move to Item 7A, the reappointment of Ms.
As a member of the Supervisory Board. According to the rotation scheme, she can step down next year. However, at the end of this AGM, however, she's available for reappointment and in line with Article 24.2 of the Art The negotiation supervisory board nominates Ms. Pauline Fademiemo as a member of the supervisory board in light of our broad experience the field of human resources, management, corporate governance and her international network. She has a very broad experience As a supervisor director, as she has shown in her previous terms of office as supervisor director and more recently as Vice Chair of the Supervisory Board.
With Mr. Van de Meer Moore nominations, the Supervisory Board also keeps the profile in terms of Corporate Governance, PeopleManagement Compliance and Legal Affairs. Ms. Van den Meehrmoor is an independent Supervisory Director So in the sense of the Dutch corporate governance code Article 1.4 of the regulations of the Supervisory Board, The proposal is in line with the nomination to reappoint Ms. Van den Maemore as a member of the Supervisory Board of TCM as of the 8th May 2019 for a term of office of Tujia ending at the closure of the AGM that is to be held in 2021, Which is in line with the Dutch corporate governance code.
Under Item 7B on the agenda, we find the appointment of Ms. Mann As a member of the Supervisory Board, the Supervisory Board proposes to appoint Ms. Mann as a member of the Supervisory Board. The nomination is done in light of her long experience in the field of infant nutrition, CPG, FMCG and pharma in science based businesses and also in the light of her international experience, including her experience in emerging markets. With the appointment of Ms.
Mann, the Supervisory Board would strengthen his profile in the field of general management strategy, marketing, sales, emerging economies and DSM's nutrition business. Ms. Mann is an independent Supervisory Director in the sense of the Dutch Corporate Governance Code and the regulations of the Supervisory Board. The appointment would be for a term of office of 4 years ending at the closure of the AGM to be held in 2023. As said, Ms.
Mann is present at the AGM today, and I'm very happy to give the floor to Ms. Mann to briefly introduce herself and to indicate Why she wants to become a Supervisory Director of DSM?
Well,
good Medag, I should say. Firstly, thank you to DSM because of its focus on its people, innovation and sustainability. And of course, DSM's purpose For creating a better life for all is something that truly resonates with me on a deep personal level. I have over 30 years of experience across various industries such as pharmaceutical, Infant nutrition and most recently, over the counter medicines. I believe I'm a truly global executive.
I have lived and worked and managed significant P and Ls across 4 continents. I have deep experience in emerging markets, especially in Africa, China, Russia and Brazil and have successfully established businesses here and grown them successfully to gain market share. I am particularly interested in the digital age and how this is impacting consumers And their behavior and how they interact with companies and brands. And I trust and I do hope that my experience will add value To DSM overall, and I thank you for this opportunity.
Thank you.
Thank you, Erika. And as I said, Thank you, Erika. And as said before, it would bring us to full parity in the Supervisory Board in terms of gender, And we are very glad that we have reached that point at last. Any questions about this nomination? Yes, please.
I have a question about the reappointment of Ms. Van Damir Amor. You managed a whole she has a long list of positions within a bank and auditor firm, and that is fine in the light of the relation policy. But it was just said that the supervised directorship of DSM would demand more time. My question is, do you have More time available for this important directorship.
This is a question the Dutch financial The supervising authority and the British National Bank asked me, this takes 30 days a year, and I have a nice booklet. If things get really exciting here and the number of days would grow, I could still live with that. So no concerns about my availability. The answer is yes, I have sufficient time available. Mr.
Stebbens. Thank you, Mr. Chairman. That was a question on my list as well. I also would like to know Whether Ms.
Van den Bermo would sign up for 2 more years as Supervisory Director, maybe she can expand on that. And then there's a question about the rotation program. With the appointment of Ms. Van der More from 2 other years, things get worse even next year. Four members will step down.
The following year, 3 will be stepping down. We 50% of the supervisory board? Good question. This is why we have invited Erika Mann to bring some new blood to the supervisory And we'll carry on doing so. We have some other ideas for next year.
So this is a topic of the nomination committee of supervisory board is looking at you very carefully. We keep control, keep check of the process. And I'm very happy so far with the quality we've managed And about the 2 year tenure. Yes, the 2 year tenure is about the corporate governance In the Netherlands, after 8 years, you can be reappointed 2 times for 2 years. So we have to break up the term for that reason.
And some words about her motivation maybe to carry on. My motivation, why I want to move To continue for 2 more years? Well, because this is the best company of the Netherlands and maybe of the world. As Mr. Seebesma said, People who step down can be reappointed.
Yes, but she is stepping down and reappointment is a second. But the issue is that she is stepping down. And if 4 individuals would step down next year, No, that's not how things work with DSM. We have a very high level of loyalty. Well, never say never.
Any other questions? If not, we now proceed to the vote. Yes. We will now vote on Item 7A, which is the reappointment Ms. Van den Mermeau.
Yes, we have it on the screen. 1 is in favor, 2 is against, 3 is abstention. The vote is now opened. A few more seconds for the last votes. The vote has now been closed.
And we see that 99.9% have voted in favor and 0.1% against. That means that Ms. Vanden Memo has been reappointed. My congratulations. Thank you.
Next item 7b, the appointment of Erik Hammann. A few seconds for the last voters. And now we can close the vote. And we see that 99.9% of those were cast in favor and 0.1% against, The meaning that Ms. Mann has been appointed as a member of the Supervisory Board, our congratulations, well done.
And based on her joining the Board today, we see a big promise At the 2014, AGM KPMG accountants and V has been appointed to the auditors for an initial period of 3 years, 2015, 'sixteen and 'seventeen. At the AGM of 2017 'eighteen, KPMG Accounts X N. V. Has been We appointed for the financial years 2018 2019 in line with the policy of DSM and in line with the corporate governance The audit committee has carried out an annual evaluation of the external auditor, and the outcome of the evaluation was positive. KPMG has a very robust process of audits.
And based on the recommendation of the audit committee and managing board, the supervisory board proposes to reappoint KPMG Accountants N. V. As auditor and to task them with the audit of the financial statements for the financial year Any questions? No questions? Yes, we do have questions.
I was too fast once again. I was already waving, but maybe not clearly enough. I have a brief question about the evaluation. You just To the evaluation of the work of the external auditor, you said it was positive. That's a very summary comment.
And also the report and the annual report about This is brief. Can you highlight the most important criteria of the evaluation and the findings?
Yes. Thank you for the question. Well, the evaluation is done in 2 stages. Essentially, every 3 years, we do a very deep evaluation across The company essentially involves the executives in the company that are involved in the connection with the audit. They have a connectivity with the audit processes.
And then following that, each intervening year between those three is we do a more higher level assessment in terms of more sort of central executives in terms of their judgment on the audit. There's criteria really about their effectiveness. So we have a standard process of asking how well do they get into the issues, how well are they understanding the issues, what is the extent of to which they are able to get into the assessments of the internal controls and checks and balances, The extent to which they're actually liaising with the staff in terms of determining what needs any correction And the extent to which they're liaising with the senior executives and the management board and giving them good feedback in terms of what is Their assessment of the company, largely outside the very specifics about the financial statements. They do give us our broader assessments on the internal controls, is very useful to management. So summing all that together, the audit committee review that and then come to judgment as to their effectiveness.
Thank you.
Thank you, John. Thank you, John. Then we can now proceed with the vote on Item 8. Yes? Let me just wait until the item is on the screen.
You can cast your vote once again. The most have cast their votes. We have some last voters, And I now close the vote. And we see that 99.76% of the votes have been cost in favor, 0.24 percent against, meaning the AGM has approved the reappointment of the external auditor. Then we have 5 last remaining points of a more technical nature.
These are the next item on the Agenda 9A, the authorization of the managing board To issue up to 10% ordinary shares, up to a maximum of 10% in regular shares and To exclude preemptive rights and the authorization of the Managing Board to issue an additional 10% in ordinary shares in connection with a rights issue, Under 10, we have the authorization of the managing board to have the company repurchase shares and 11, we have a reduction of the issued capital by canceling In the explanatory note to the agenda, you see further information about these items on the agenda. You now have an opportunity to ask questions about these issues. Yes, please. Mr. Espana?
Mr. Chairman, if I look at 9b, the designation of the Managing Board as The body authorized to issue 10%. That means you don't exclude preemptive rights. So if you have a rights issue, you have an extraordinary AGM or EGM? Not necessarily.
We don't have to have an EGM. If we want to do a rights issue, we don't That's different than issuing ordinary shares, and this is the reason we have separated the 2 issue. We have, First of all, issuing ordinary shares, 9a and then under 9p, you have a rights issue, which has a different procedure. And indeed, we are not asking for a depreentive right, which complicates matters for the company. But our notary is telling me I should add something.
Yes, please go ahead. Officially, we do exclude a preemptive right, But then contractually, we can give it back. So in regular Dutch, it means there is no preemptive, right? But legally speaking, it has been worded in that way. Thank you.
Any other questions? We now proceed to the vote on item 9A, I assume. Indeed. We start with 9a, and then we'll have a few more items. You can cast your vote now.
A few more seconds. I now close the vote. For this item, 86.32 percent of those were cards in favor and 13.68% Against. Yes. One aside, we need a twothree majority for this item on the agenda.
And I think we have reached the twothree threshold. So I concluded that the AGM has given the authorization to the to issue up to 10% ordinary shares and to exclude preemptive rights in line with the proposal 9b. That's correct. The same applies to the next item. Less than half of the issued share capital would be A few more votes to be cast, a few more seconds.
I now close the vote. And we see that 86.84 percent of the reversal costs in favor, 13.16% against, Meaning that the Managing Board has been granted authorization to issue an additional 10% of ordinary shares in connection with the rights issue. Now we move to item 10. Yes, 10.9c, which is the authorization of the Managing Board to have the company repurchase shares. The vote has been opened now.
The vote has now been closed. For this agenda item, 99.02% of the votes were in favor, 0.98 Against, the AGM has granted the Managing Board authorization to have the company repurchase shares in line with the proposal. We now come to item 11, the last voting item on the agenda. It's on both screens. So I open the vote now.
We will close the votes in a moment. 99.16% of the votes cast In favor, 0.84 percent against. I conclude that the AGM has created the possibility to reduce the issued capital by canceling That brings me to items well of any other business. Who would like to take the floor? Yes, please.
Thank you, Mr. Chairman. Mr. Saibis Ma, since 2000, you have been in the Board of this company. Since 2007, you are the CEO.
And according to my information, you're almost 60 years old. And let me first say that we're not dissatisfied. On the contrary, Things are going wonderful, but the succession discussion will arise sooner or later. You're not available for reappointment because You are still a member of the Board from before the rotation system. So what is your outlook?
For how many years would you like to be CEO? And then another question. Another question to the supervisor of the Board, how much time are you spending on succession? Seiber, please answer this question. But let me start.
Succession is one of the most important issues on the agenda of the Supervisory Board. This is about the continuity of the company. And honestly speaking, we have been working on the succession of Mr. Siobuzma for many years. This is not a matter that will arise 3 months before he will leave us.
This is an item that is on the agenda of the Nomination Committee permanently. And we are scanning the company internally. We are scanning externally for potential replacement in the case, he would step down. And now a few questions to you about how much time you spend on supervisor directorships. First, my outlook of the future, very positive.
And you are right. The period I will remain CEO will be shorter than the period I have been CEO. I think that is a forecast I'm willing to make, And I enjoy it every single day. Is that a sufficient answer? Mr.
Espana. Mr. Chairman, under 3, there were 2 We spoke about the Moore Committee that Mrs. Moore chairs. But there is another issue, which is the Dutch Governance And it's not uncommon to mention the name of the chair of the committee, and therefore, we call it the committee More and well, it's a pity that she is also your Supervisory Director.
Maybe she could do something different When the salaries of supervisors go down. Then there was a second point that received no answer, and that's the following. Why don't you include the remuneration of the supervisory board on the annual Not every 3 years. Why you don't put it on the agenda every year? That's not customary.
There always is the possibility to do it. Are you going to use it, yes or no? So putting it to the vote every single year, That's a waste of time, don't you think so? No, because in every year, we will have a lower amount Because then it will be 2.4% annually, and some companies Allow this instead of the ridiculously high percentages that we have now. Thank you for the input.
We won't do this. Any other questions? Mr. Stavans? Stefan Masanier, on behalf of the SEB.
Something that intrigues me every time is this. When people turn 60 or slightly beyond, they're always asked about succession. Today, there was an article in a newspaper about elderly employees and less attention being given to them. And I was deeply shocked by this. We're getting older every day.
And I still have this impression that people look at somebody age 60 5, someone you should lock up in another people's home and a 70 distributors to doing anything. And after that, well, the end is nigh. Well, that's not how I work. I hope to be here in 10 years from now. Is that a threat or a promise?
Up to you. I think companies should Give greater care to people over 50, Keeping them up to date, I think people will have to get used to the fact That people aged 80 or 90 may be on board. That is simply coming our way. We assume we'll turn 100 100 plus. So this is why my conviction is something that I will voice with other companies as well That people age 60 can be perfectly up to date and are worth investment.
Well, I feel great sympathy for this. But the fact that Mr. Sibismar We'll leave the company age 60 or 61 or 62, doesn't mean he'll stop working. And it certainly doesn't mean I'm not getting up to date, says Mr. Siemsma.
No, I mean not only about me, but about the company. I was born in 1959, and that won't change. So you can remember the €59,000,000 and then you can forget about €60,000,000 plus and they say €60,000,000 is the new €40,000,000 So I hope to turn 14 soon. So done that. Now if you look at the company, we are working very hard, particularly within DSM Netherland, On sustainable employability, and this is something Edith Schippers will work on.
We try and do exactly what you're saying. We try and make sure that all Stay up to date and can carry on. Everyone over 45 is shown A mirror picture, a mirror image. How are you doing in terms of health, in terms of shape, in terms of knowledge, in terms of Skills. We try and help people look at themselves critically, to keep working on themselves, to be employable On the long run, because indeed many of us will have to work until age 67 or beyond.
Some want to work on, some have to work on, And it's important for us to help people to be able to do so. So that's an important spearhead of our HR policy. Well, if you look at the maximum age if you look at aging, you can say the following. I visited a company last week with a 75 year old CEO, and the question was asked to him, how long are you going to hang on? I think it's ludicrous.
I think it's a ridiculous question. How long are you going to hang around? I mean, keep on going, Keep on going. And I think that's the most important society. Fully agreed.
Granny Schleute.
Okay. So now we can proceed to close the meeting. Oh, I forgot someone over there and over there. My name is Dara Verstain. I have a question.
Have you ever thought About aiming at organizing the AGM Earlier in the year, I think that it would be more interesting to have an earlier date for the AGM. That would have a positive effect. I mean, the auditor is ready and the Supervisory Board meeting has already been in March. So why can't you pick a date Earlier in the year for the AGM. Well, there's a certain legal period of time That stipulates how many days you have to take into account after the announcement the publication of the agenda of the documents.
So the date is always So many days after our announcement. And on the date of announcement, we have to have all our documents ready, financial statements and annual report So that means that you need a certain amount of time in order to comply with this requirement. And that's Why there's so much pressure on some of you because all the companies have to deal with this period of time and end up somewhere around this date? I understand that. But is it not your aim to organize a meeting earlier?
Or Doesn't it really matter to you? Or would you say we would try to pick an earlier date? I must say, out of all the problems that I have, I don't think this is the biggest problem that I have To pick a date earlier in the year. To be quite honest, I mean, I'm prepared to take anything on board that you say here, but It's not right at the top of my list of priorities. Microphone A.
The question to you is why you would like to have a date Earlier in the year. Gentlemen, I was I would always think that once you've concluded a year. There's always a number of people who are working on that. And then the questions are asked about previous year. And I would say, why not concentrate on the current year, the present time?
And the more people who are involved with the past, The worst it is for an organization. To be quite honest and Chairman, in the past, but that may have been long, long Time before many of you were around. We had this blue flag that was given to the company that would Issue, would we that would be the first to issue its annual report of the year. So that just goes to show that People appreciated swiftness, swiftness in reporting, swiftness vis a vis the outside world. Chairman, I think that's an important argument.
Well, thank you. You have a fair point there because Geraldine and myself, Yesterday, we dealt with Q1 2019. So we've got everything clear in our minds. And we were thinking, okay, tomorrow we're going to 2018, and we're going to give it some thought and think, rack our brains what the situation was now, of course, because we're already concentrating Thank you, Mr. Chairman.
Thank you for giving me the opportunity to ask you something. But first of all, I would like to point out that I did my best to get the floor earlier on, but I suspect that you seem to be looking towards the right, Mrs. Schippers, and I was unable to catch your attention. And so now I have to go right back to the first point. First of all, I would like to thank everybody at DSM for contributing to the performance of this past year.
And I would also like to take a moment to concentrate on safety. I think it's wonderful to see that so much attention is being paid to safety and also accidents that took place quite near here. Also in view of what I read in the annual report, I would like to say something about the future. One of the questions That I have is it says that you expect a lot about salt and sugar in the future. But what kind of salts are you thinking of there in the innovation pipeline?
I'm thinking about potassium and things like that. I don't really know what you are referring to, so I would like to hear a bit more about that. And furthermore, The fact that meat here in the Netherlands in the Western world, I mean, there's a lot of attention for Products replacing meat. And even though the Netherlands is a small country, I mean, How do you see the future? I mean, all these pigs in China that no longer are no longer alive, I don't know.
I'm just saying things. These are risks that you have to take into account. And as far as sustainability is concerned, I mean, you can't always express everything in money, but things that have disappeared In terms of sustainability, is there birds, flowers? I mean there's no money in the world can get that back. And What about the food chain?
Algae, now you can turn that into proteins and that can distort The balance in the oceans, the food chain there, the fish and everything, have you researched that? Would that be enough? And research very often leads to answers to questions that you have. And then last but not least, I'd like to know how about ICT. There is this idea That with digital data, you may want to support products, develop products Personally, but also in terms of animals, I can imagine that those data be used for that.
But what about the people who are skilled in that. I hear that there's a big shortage of people skilled in ICT. Sorry for all these questions. I mean, We were just about ready to go for drinks. But sorry, Chairman, you demerit gave me the floor.
Well, salt, salt replacement in food. We've got a lot of salt in food, sometimes to preserve food very often because As humans, we like salty taste and salt replacements and enhancing substances so that you can Reduce the salt content in a product and get the same feeling, that's what we're working on. And That's important for our health because in general, we eat too much salt, meat and meat replacement products. Yes, Those are things that we do look at. And we may be making announcements in terms of what we are doing.
We have several technologies. I mean it sounds creepy. Yeast is involved and things like that. But in many areas of the world, people hardly eat meat Now, but as soon as development increases, the first thing they will want is to have a bit of meat. So there's a difference between the Western world and developing countries.
And as far as sustainability is concerned, the birds, the flowers, biodiversity, I already mentioned that. It is absolutely something we want to pay attention to because biodiversity is under pressure in the world. And our Algae project, what we're doing is leaving biodiversity in the oceans the way it is, and not to touch And we're not removing algai from the ocean. Yes, a tiny one, a tiny little algai. And then we put that in the fermenter, and then we replicate it.
So for the rest, Except for the tiny little Al guy, I mean, we don't really touch the oceans and we just leave it intact. And that is precisely the technology that we have. ICT digitization, very important point. Geraldine has that in her portfolio. And We do concentrate on our digital road map, the functions and also its business models.
Can I then ask you another question, tying in with what you said that in other countries than not being the Western countries, there's not that much concentration on vegan lifestyles? What about Large part of the population that is Hindu that does eat vegetarian food 6, 7 days a week. Well, food is determined by culture, and there's so many differences in the world. And in India, Of course, is an extraordinary country because India has many, many vegetarians. But many other countries, if you look at the development of African countries, when you look The development of Asian countries, I mean, these when these countries start to develop, the first one of the first things they would do is, apart from eating crops, So they will eat meat.
And that will start with chicken and then pork and then on to beef. That is what happened to us as well. I mean, there's very little I can say about that. Okay. Chairman, my name is Baum.
I have a brief question. If I remember correctly, Brief question. My name is Baum. If I'm not mistaken, DSM split the share in 2,005. Share price increased substantially in excess of 100 or was in excess of 100, I don't know.
Would you consider new share split? That's it. That's all I have to ask. Well, yes, we always look at that, and we've done it before on a number of occasions. As DSM, there are all So theories about that being important, and this would mainly concern the private shareholders.
And prices around the €100,000,000 would deter people because people are prepared to invest €60 but not €100 or something like that? I mean, that would be if you buy one share. It doesn't really apply if you buy Two shares. All sorts of theories prevail as to whether or not that is interesting or not. From time to time, we look at it.
And in the past, it never was an issue, but it may come back come up again. My name is Stephens, SRB. I would like to say something about what we said about holding this meeting earlier in the year. What does this gentleman want? Just as basic fit that only 2 shareholders turn out instead of 30, I'm in favor of keeping the dates as they are because the last 2 weeks of April, I mean, Can hardly keep up all these meetings.
Okay. We've taken note of your request, and we will also take note of what you have just said, Doubtlessly. Thank you. Okay. That's it.
Okay. It is 5:30. For those people who have to travel back to the north and want to watch the Ajax match. They need to leave on time. But allow me to make a few closing remarks.
The draft report of this meeting will be available at the latest 90 days after today on the website and after which you have 3 months to submit your comment. And please, when you leave the room, hand in your handset And your voting card. After the meeting, as always, you will have an opportunity to talk to us and to enjoy a bite to eat and a drink. Hope to meet you there. And I'm looking forward to see you next year, May 8, 2020.
Thank you very much for coming, and it's great to see such a turnout.