With that would be great. With this, we are now ready to get started. Do I know if it's on?
Yes, we can start.
We can start. Okay. Welcome everyone in the room. Welcome everyone online as well. Thank you very much for joining us. We will be following the following schedule today. Feike Sijbesma, our CEO, will start with the main presentation on the strategy, then we will do some deep dives into our nutrition businesses, into our materials businesses, then I will round off with some of the financials that go behind the strategy. The aim is to reach the Q&A by 12:00 P.M., then we will have lunch for those of you in the room, of course, just out there at 1:00 P.M. That's broadly the timetable. There will be a break at some point, of course, online, we will let you know when that break is and for how long, depending on how the timing works out.
With that, I just have one comment, which is our safe harbor statement. I'm not going to read it. You're very familiar with it. Of course, this stands for any forward-looking statements as always. With this, it is my pleasure to invite Feike to stage.
Thanks, Geraldine. Thanks to all of you for being here. It is a full morning program, presentations followed by a Q&A at the end of this session, and then indeed, lunch. Appreciate it that you spent the time and the interest in DSM, a beautiful company to spend your time at. I totally agree with you. This Investor Day, we pulled it forward. Normally, we would hold this day at the end of 2018, when the strategic period 2015-2018 would end. Since we were struggling, so-called, with the overachievement of all our targets at the end of 2017, we said, "Let's pull it forward." Therefore, we give you already today, mid-2018, an update what you can expect for DSM in the years to come. Welcome also to those on the webcast. Geraldine already introduced. Appreciate your time and attention for our company.
I would like to do that in three steps. Look back together with you, what did we achieve? Where did we came from? Secondly, where are we today and what kind of company is it? What can we expect? What is ahead of us? This you know. We changed the company of 150 years. We will not go through the whole history of that 115 years, but we created a different company. More important is, what did we do in the recent periods? If I go back to 2015, when we started this strategic period, I should also refer maybe to the period 2010, 2015. You remember in that period, we divested a lot of businesses, as you see here on the left top, and we acquired a lot of businesses, as you see in the left bottom box.
On that basis, we started the period 2015-2018 because we wanted to show and we wanted to prove to ourselves, to the outside world, that the portfolio we have created can deliver growth. Growth in the terms of top line. You see that on this right box of our strategy slide. If the period 2015-2018 start with growth. Secondly, also addressing cost. Certainly, with the right capital management, also delivering returns in terms of return on capital employed. Therefore, our two main targets are high single adjusted EBITDA growth and a high double-digit growth of our ROCE. That is the way how we left 2015 and entered in the period 2015-2018, which is almost finished. Still half a year to go. For you, still three quarters to go in terms of reporting, and then we enter this new period.
To finish this period, indeed, I need to make a little bit of leapfrog to the end of 2018. Let's do that together and say, where are we in 2018? I know the year is not yet finished. I know still three quarters of reporting to come. You know also that we also have an outlook for 2018. Although this is not reporting season, it will only come in August. I would like to give you an update. Today, we reconfirm the outlook as we have made at the end of the first quarter for the full year. That means an adjusted EBITDA growth towards 25% for the full year. That includes the one-time vitamin effect, which we have distinct from our underlying business, and it is at the exchange rates as it is. Towards 25% for the full year.
We said that consists out of an underlying business, and the underlying business, as we said, because we distinguished it, I think, deliberately, this one-time vitamin effect, not to distract you. This underlying business, we said, will grow low double-digits, and we confirm that at constant exchange rates. What about the exchange rate? We said in Q1, the exchange rate will have an impact compared with last year of about EUR 80 million. If I update that today, I would say it will be a little bit better. Maybe it will be around EUR 70 million. The dollar is helping us a little bit, the Swiss franc not, the real is not. It's a little bit mixed bag, but at the end of the day, this will be a little bit better, maybe more towards EUR 70 million negative impact compared with last year.
Of course, this is all included in the total numbers. This one-time vitamin effect. We deliberately showed the impact of this one-time vitamin effect, especially in vitamin E, A, due to the outages of some of the industry player. We said, "Let's not being distracted and put that into our results and make it visible that we have an underlying business, and we have a one-time vitamin effect," especially in the first half of 2018. We make that, I think, very transparent. Very difficult to guess exactly what is the impact of that. We said about EUR 250 million to EUR 300 million. Today, if I need to update, I think it will be a little bit on the low-mid side of that range and not on the high side of that range.
Main reason of that is that the outages seems to be over at the end of this quarter. We see the player back in the market. Also this one-time vitamin effect is then disappearing for the rest of the year. Because of the volumes, especially in animal health, because this is mainly vitamin E and A. Mainly vitamin A, we have seen some hesitation in the second quarter in terms of volumes. I don't know whether that is due to the high prices that people wanted to empty their pipeline and be careful or a little bit lower inclusion levels. We need to see, but they were a little bit lower on the volumes. Times the normal prices, we have the normal prices, but the higher prices we put in it, one-time pricing effect.
If you have still that higher price, but at a lower volume, we have also a little bit lower one-time vitamin effect. The underlying business is performing very well. We see some impact in animal health of the strike of the truckers in Brazil. Overall, I feel for the second quarter and also the other quarters, the underlying business is performing well. I feel also for Human Nutrition & Health that the business is doing well and according to expectations, as well as our materials business. All the underlying business is doing as promised, I give you a little bit of an update on this one-time vitamin effect and the currencies. That means also that we reiterate our total forecast, our total outlook for the full year being towards 25% compared with last year.
In that sense, fully on track or even better than we ever anticipated in 2015. If we assume that and take that leapfrog to the year-end, we have basically finished 2018, and then we can make up the total balance of what we have achieved. If we take those assumptions, the underlying assumptions, then for 2018, based on that outlook, we conclude that we have been growing fast, faster than the market. We wanted to grow about 2%-3% at least, but in fact above, because our markets are growing 2%-3% in animal nutrition, in human nutrition. We have been growing 5% in human nutrition. And mind you, the gross figures on the left side on what we have been growing in the period before. We wanted to grow also faster than the market in animal nutrition.
We have been growing about 8% over that period. Mind you, also, the gross figure of the period before. We did well in all our animal and human nutrition businesses. Also in materials, we did very well. You see 5% growth compared with 2% the period before. I took here volume growth because with materials you need to be a little bit careful because the input prices sometimes drives up the selling prices and vice versa. Then you can see a little bit artificial growth figures, sometimes not linked to real growth, but linked to input and selling prices. Therefore, we took the volume growth here about 5%. Basically all our business growing well. Where have we been growing? In the high-growth economies, 44% of our sales is in the high-growth economies.
We have a target that we want to be about 45% in high-growth economies. Still also forward, I would like to stick to that target. We don't want to be overexposed. We don't want to be underexposed to the high-growth economies. Those are not without risks, but it goes with a lot of growth opportunities. About 45% we feel comfortable with, and we are around that. On innovation, remind you, products introduced in the last 5 years. You need to run fast because the last of the 5 years will every year drop off. You need to run fast to keep that up to 20%, and we are about 21%. Well done. Also our Brighter Living Solutions, ECO+, the People+ products, with a clearly lesser environmental footprint, et cetera, as comparing products, we want to be about 65% total portfolio and 62. Innovation.
Indeed, what we did in the recent period is focus our innovation more to a smaller number of bigger projects. I will come back on that because a lot of those bigger projects and also in the other presentations, you will hear more about that. Those are going to come on stream in the years ahead. 20%, about 20% on sales is coming from innovation, as we said here, normally at a little bit higher EBITDA than the average of DSM. Also the EBAs, the three new development areas in bio-based and biomedical and solar, are doing well. You see that we do about EUR 10 million in our innovation centers, all those new business doing EUR 10 million. It's not true. They do EUR 30 million, and we're on track on achieving EUR 30 million EBITDA.
We administrate and book there also our total cost for the total company of supporting our innovation. Not R&D projects, but the whole supporting machine with venturing, with all kind of other things for the whole company on innovation excellence. That is also deducted from that EUR 30 million. Therefore you see a little bit lower figure in our reporting on that one. Next to the top line, the growth. In innovation, organically, we have also been working on cost. You remember that we left with a EUR 250 million-EUR 300 million cost-saving program, half roughly from all the corporate staff departments, all the support functions, whether it is legal or HR or communication or finance or IT or whatever, we have leverage over the whole company, on materials and nutrition in Europe and the U.S., et cetera, and bound that to one organization. Being more professional, saving cost.
Also in nutrition, a big program of reducing our cost, especially in our whole supply chain operation and manufacturing. In total, ending up about EUR 275 million savings. Working capital, though I think it can improve still further, but we are below the target that we have set about 20%, we ended up around 18%. Also CapEx, around the number we have set, 6.5% of sales. We ended up at 6.4% of sales. Cash flow, 2016, 2017, 5%. There I would like to come back later on. I think we can make a step up in our total cash generation. How did we do that? With our own organization. Important that we changed the setup in the top of the organization already in 2015 with the installment of an executive committee, delayering a little bit, being closer to the ball, closer to the business.
That's what we did. Secondly, we changed this organization of all the support functions, as you see here in the second element mentioned, leveraging that over the whole company. Thirdly, we reduced the total number of executives. We had around 350 executives for the whole company. We have now 300 executives we run the whole company with. We made quite some changes. We added new people with new competencies. We created a mix of people having a lot of experience in the company, which is very important to build on the past and to be knowledgeable, but also some new insights and some new energy into the company and creating a culture of delivering. 50% of the executives we now have today were not part of DSM four years ago, and that needed also some adjustments in the company.
All of that, in what did that result then? The top line, the cost, et cetera. At the end, that should result in the bottom line and our EBITDA. We said we want to have an adjusted EBITDA growth of high single digit. As an average over the years, we did every year as an average about 13% EBITDA growth. Clearly outperforming our own, I think, ambitious targets due to all the things we did to the top line and the bottom line. The ROCE, okay, coming from a low level, just above 7%, I agree, but still, we set high double digits, so about 1% a year, and we have been growing about 2% every year over the last years.
I can go in details, I won't, in nutrition and materials, in human and animal, et cetera, and to the different parts of the company. You see here comparable figures. If you ask the figure, the success of DSM in the last couple of years, you've seen that success. Where did it mainly come from? What was the main business adding to the success? My answer is all. What is the main part? All. It is in human, it's in animal, it is in nutrition, it is in materials, it is in all the different sectors. They all have outperformed in growth, in top line, in cost, in EBITDA margin, in ROCE, across the whole company. I think we are very proud and very happy with that performance. The last thing what we did is monetizing our non-core joint ventures.
You remember maybe in the very first slide that I said we divested elastomers, we divested melamine, we divested agro for full cash. Gone. Three divestments, those three we divested in steps deliberately because we thought we could get more money if we do it in a more complicated way. Patheon was extremely complicated, but it generated much more money than we otherwise would have made. Patheon is, in the meantime, fully divested. As you know, in two steps, $1.5 billion came in last year and already earlier, half a billion, $2 billion in total. Of the right side, the caprolactam, [AGM], composite resins business, a substantial part is already divested, around $500 million, and still two parts to come.
The remainder of that business, where we now have an EBITDA close to EUR 90, which we own 35%, and in the pharma antibiotic space with the Chinese, where we have an EBITDA now ramped up to EUR 82, where we own 50%. You know exactly the EBITDAs of the remaining parts. You know our percentage of that. You can fill in your own ideas about multiples, you have a little bit an idea about how much cash is still coming in in the coming period if we divest these last two pieces and have divested all of those joint ventures. That is what we achieved. That is the basis of where we are today. Where are we today? This is a slide which says, "Needs not lacking numbers." It's a lot of numbers, I see already on your faces that none of the numbers is new.
That is correct. This is all coming off our annual report of 2017. All of the figures you know. Even some of the figures you don't recognize anymore, like the profit figure. You said, "You just showed me a little bit higher figures." True, because in the 2017 annual report, I could not yet include the 2018 anticipated figures. On profit, did well on all dimensions. I want to show in this slide that we did well on all dimensions in the company, on people, planet, profit. We have been firing on all cylinders. We have been doing well in profit. We have been doing well in our greenhouse gas emission. We have been well in our engagement of our own people who are absolutely motivated. People, planet, profit for all different stakeholders. Is that important that you do well on all those dimensions? I think so.
I think so. Here you see on the left side, I think where society and also this company was coming from more than 10 years ago when I became a CEO. What do you want? Making profit or making the world a better place? Can I do both at the same moment? No. No, you can't. It's either/or. That was most of the narrative in the world. Yeah, but we want to do both. I think it's even good to do both. True, the world doesn't work like that. Wake up. Today, we're on a middle column. I think we show that you can do well by doing good for the world. I think our company has shown that, and many other companies, several, some other companies are showing that also.
Towards the future, I dare to bet with all of you that in 10 years from now, those two things must go hand in hand together. Those companies who deny and still live in the first block, I think will fade out in the coming 10 years. The millennials will not work for your company anymore, or other generations. Those people will not buy your products anymore. Society will not grant you your license to operate. You will not be prepared for carbon pricing. You will miss out a lot of things which will hurt, at the end of the day, your top line, your bottom line. Your shareholders will not like you anymore at a certain moment because they see the risk profile you have.
I think we live in a world that is changing, I'm very happy and proud that DSM is very well positioned towards that right-hand corner and fully prepared for that future. It will not be hurt in a changing society, in a changing world. I feel even supported by one of the biggest investors in the world, Larry Fink of BlackRock, who's bigger than he is. In his January letter, he more or less said, I'm thinking it was my narrative, it was his, he's much more important than I am, talking about companies with a purpose. If you don't have a purpose, you will lose out. His statement. How do we do that as DSM? On the left side, what do we do? We improve our own operations We reduce our emissions.
By reducing our emissions, we decrease our own cost, we decrease our own risk profile. Secondly, we enable our customers to become sustainable with all our innovations, like Clean Cow, Green Ocean, et cetera. We will grow our top line faster due to that. We advocate. We advocate for a different world, internally, externally. With that, hopefully we get more engagement of other industry players, of shareholders, of employees on our journey. Where does that bring us? Where will DSM focus on? This is an important slide. On the left top, you see DSM box, how we have positioned and changed ourselves and our competencies. If you take all our competencies, if you take our positioning, more in sunrise, in markets which grow, which go up, future proof. You combine that on the left lower box. What's happening in the world?
Where's the world focusing on? On the mega trends, on health and nutrition, on people concerned about that, on the global shifts more to Asia or demographic shifts. People become older, or the concerns about climate, or the concerns about resources, or many of the mega trends. Even the UN Sustainable Development Goals, our global strategy in the world. If we combine our competencies, what is happening in the world, then you come to the middle, to the areas that we as DSM should focus on. On health and nutrition, on climate and energy, and on resources and circularity or circular economy. In those areas, I think we are addressing many of the mega trends in the UN Sustainable Development Goals. Not all, but a major part. Which part? The part that we, with our competencies, can make a difference. That part. That is important.
There we will focus on. You see also here, I made some examples around it. You see that those areas interact with each other. Clean Cow. Is that a new feed ingredient? Is that a new climate product? It's both. It's reducing the emissions, which is desperately needed, and it is a feed ingredient, it is a nutrition, it's in climate. Yeah. Many of those things are interacting with each other. Many of our innovations and growth potential in the future is interacting. If we focus on those domains, addressing global trends with our competencies, focus on those domains, we think we can continue to be a very strong growth company. Today, our company, you don't believe it, but it's true, already reaches out to 2.5 billion people. 2.5 billion people in the world know DSM.
No, that's not true. That is not true. 2.5 billion people in the world should know DSM because they use, in one way or another way, DSM products inside. What does that mean for our strategy if we focus on that? Let me build that up. On the left side, you see those focus domains. Those focus domains will give a direction to DSM. The scope. Where do we focus on in the future? On nutrition, health, and sustainable living. I will come back on that. I will elucidate that further. How do we focus the company and on which areas? Secondly, how do we grow? Organically and inorganically. I will go into that, and what is the enabling programs. You will follow me on the right upper corner, you see a little bit the same structure with scope, organic, inorganic, and enabling programs.
Let's look to scope. If we said nutrition and health, climate and energy, resources, circularity, there we should focus on, then we are further sharpening the company today, then we are further positioning the company today as a science-based company in nutrition, health, and sustainable living. That is what our company will do, and on those crossroads of those areas, the innovations will be there, the growth will be there, the focus will be there. As we said on the right side, that offers great growth opportunities, that field. It should, because our strategy is called Growth & Value - Purpose led, Performance driven . That's what we stand for. All areas of DSM should grow like we have shown.
I don't want to stand here and say, "The growth will mainly come from those areas, and those areas are not growing, but they're still part of DSM." No. Part of DSM, you need to grow. Otherwise, you're not part. And we believe that with that focus, we can grow all parts of DSM in the areas more specifically mentioned below. What does that mean? Gives that a further direction to those areas? Yes, it does. Yes, it does. It gives a further direction to the scoping in those areas. In nutrition, we are strong in early life, in infant formula. In nutrition, we are strong in supplements. In nutrition, we've also food and beverage portfolio of ingredients, but we will further expand that. First point mentioned here. Solution capabilities in food and beverages.
Of course, we will continue to strengthen our own nutrition business in early life, in supplements, et cetera, with other nutritional ingredients. But also in consumer-based products, like we have with i-Health already. A quarter of a billion sales today, and we see further opportunities there. And also in personalized nutrition, making food much more personalized. By the way, we are very experienced in personalized nutrition, more targeted nutrition, but are more in David's business in animal health. Our animals, we really treat, and they get the food or the feed that they should have. Now, there's only one species left, mankind. Take care that we make the food for them also slightly more healthy. In animal, that means further focus on our premix. We have a very strong premix. We have all those big products, but we localize and specialize them locally in our premixes.
We have, David, more than, where's David, by the way? Sitting there. 50 premix factories around the world? 47. 47. Okay, you know better. Good. Entering also on the different species, not only in poultry, but also in swine and also in ruminants and also in aqua, and adding that with further specialties. What does this mean for our materials business? Our materials business will be more focusing on these domains. On health, fitting with the rest of the portfolio, on biomedical. On green and bio applications, on green products, on bioproducts, where we can use the competencies, other parts of the portfolio. New mobility and connectivity. So it will give a very clear direction and more cohesion of our materials business. I don't want to go too much in detail about nutrition and materials because Chris and Dimitri will do that.
If you would say They will correct me. You cannot say their story in one slide, and they maybe have another summarizing slide. What is important in the nutrition business is all the positions we have in our, what we call global products. We have quite a strong portfolio of products where we are strong in, and we can add new ones, as you see. And all those products have a functionality. Those products do something. And we apply those products in markets, in market segments, in animal, in the different species, from poultry to pet food, and also in the human nutrition, from dietary supplements towards food and beverages. And of course, we do that in all regions and all areas in the world. And that combination of having those strong global products with local solutions, applications, close to customer segments, are very, very important.
In the materials business, we will move further up to the right upper corner, where health plays a very important role, where green plays an important role, new mobility and connectivity. You see us moving up further over the years already, in this scheme. Dimitri will elucidate that further more in detail, where the growth is higher, where the margins are higher, where we with our competencies can contribute more. How was it possible that in the recent years we have been growing faster than the market at not deteriorating margins? Was a question that bothered us. We wanted to do that. We did in all our businesses. That's interesting. We want to continue with that in the future. We believe it has something to do with this. We have enlarged even this project of customer centricity for the coming years.
We need that for our organic growth. If we want to grow organically in the fields I just described, we need to be very clear that we can grow faster than the market. It has something to do with mindset. It has something to do on the right side, which is people. We changed some people. More important, we trained all our people what to do with a roadblock. It sounds maybe a little bit silly or simple. Yeah, what to do with a roadblock, but it is important.
Changing people, training people, having the right mindset, and then even more obvious, but it isn't if you implement it worldwide, choosing the right market segments, knowing exactly which part of the market are growing, which part of the market less, knowing exactly which customers are winning, which customers are less, knowing exactly where you focus and target your people at. Sounds maybe obvious. Yeah, of course, you should know where you can win. Yeah, true. To do that globally, in a global organization for all businesses is, my experience, easier said than done. We will build further on this. I think this is very important for us, for our growth profile towards the future. The growth is also supported by innovations. Innovations supported, again, by our technology, and this is a total mapping of the DSM technologies.
It looks maybe complicated, but it is six, seven main areas of competencies which all fit together. They're interacting with each other. Those technologies From our total spend in R&D, about 5% of our sales, which are growing sales, we continue to invest more in R&D every single year, resulting at the end of the day into innovations. This is an exciting slide. I feel the excitement in the room with showing this slide. Thank you. Now I'm with you totally. On the left side, you see products we have already introduced. They will grow because we have only introduced them recently. They will show a part of our growth. On the right side, I gave you three examples of things to come in the period 2021, 2025.
Maybe several of you say, "Oh, that's far away." Yeah, that's far away. Is future music coming further away? Correct. I can enlarge the list if you want, but I give you three important things. Most exciting maybe is the middle column. Things which are coming on stream in 2019 and 2020 and 2021, right in this period. Things which all have a negative EBITDA today because we're investing. Things which will switch to a positive EBITDA. Things which can be very, very big, and we are still struggling with giving the right figure. We give some figure that could be hundreds of millions of EUR EBITDA. Difficult to judge. Sometimes we have debates that it could be more. Sometimes we have debates, yeah. There are risks, et cetera.
This is exciting projects. We're on stream with all of them, with Clean Cow, with Veramaris, Green Ocean, with stevia, with Niaga. A lot of promising news with those products. Chris and Dimitri will tell more about that. I think this can support very strongly our growth organically in the years to come. Next to that organic growth, we will grow also inorganically. As you know, we have a debt of about, what is it after Q1? half a billion EUR, roughly. There's more to come from, of course, cash generation, also there's remainder parts of the joint ventures. Towards the end of the year or next year, whenever we have sold the things, we are maybe moving into a debt zero or slightly positive or whatever.
You can calculate a little bit what kind of debt, Geraldine will go into that more in detail, our company can carry. Yes, we will be back on the M&A area. Three remarks on the M&A. Value creating. Yeah. Gee, that's an obvious one. Yeah. We want to share with you that we are very well aware that our M&A should be value creating. Just to make that remark. Secondly, where? In what field? Predominantly in nutrition, which is now 60%-70% of the company, and predominantly in nutrition gives a direction to the total company as well. Why? Because in nutrition, we have a global leadership position. There's good growth potential. There's good value creating potential. We see what we can do. Predominantly, our acquisitions will be in that field. Thirdly, maybe this slide is more written to us than to you.
Thirdly, we realize very much that whilst evolving further the portfolio and doing this M&A, we need to remain focused on organic growth and preserve the synergy and all the things we have achieved in the company. It cannot be that the M&A actions will go at the expense of our organic growth. You might say all elements are pretty obvious. True. In the implementation, not so obvious. It will be a lot of work, and it will be important for us also to share with you that we are fully aware of that and will deliver accordingly. How do we do all of that? We come to the enablers. We talked about the scoping of the company. We talked about the organic growth. We talked about the inorganic growth. We talk about the enablers. Normally, we don't talk so much about the organization.
That's more internal stuff. Don't bother us with that. True. This is the only part of the slide which could also bother you, because this is the people, this is the organization which makes it happen or not. By the way, not only with us, in all companies. How are you organized? How did you do that customer centricity, really implement it in the company? Otherwise, you can say you grow, but you don't. What kind of leadership do you have, and how international is it? How strong are those people? If they don't perform, do you change them? If they have difficulties to perform, did you teach them and educate them? In what kind of culture and environment do they operate? How forgiving is that culture? How not forgiving is that culture?
If you don't perform, will you be hit, or will people help you also to perform faster and better? I think the elements of this culture, we'll not go in detail, but are very important, because those elements, at the end of the day, make it happen or not. Another one is digitization. We all know that we live in a digital world. We will invest more in digitization in the period to come. We believe that digitization can help us to grow faster, to improve our top line, having more data about our customers, knowing exactly on the stocks and what they're doing, connected to our systems. If we do that better, and we do that already in some places, especially in China, to be honest, then we're going to grow faster. Also in the functions to reduce costs further.
Digitization can help in the different functions to work more efficiently. Last but not least, we have had several sessions in the last half year of how digitization can help us to set up totally different business models and totally different interactions with our customers. For example, in personalized nutrition or other fields. We believe that with digitization, is a very good enabler for our growth as well. The last enabler, sustainability. We will step up further with our greenhouse gas emissions, the reduction of it, or our energy efficiency. We will even move to 75% of the electricity purchased coming from renewable resources, on safety, on the engagement of our people, et cetera. We will take a step up. I want to make one small plea.
As some of you know, I'm also global chairman together with the Canadian environmental minister for putting a price on carbon. This will come. Make my words. You believe me or don't believe me, it will happen. It is happening. I'm astonished about the companies who preparing and the companies who are not preparing. We will see. Our company will be prepared. Here you see also the targets we have for 2021 and 2030, further improving. At the end of the day, it fits back with one of my previous slides on sustainability, you remember either/or those two things will go together. This whole sustainability drive for me is a business drive. It's success of the company. It's being prepared for your future. It's being future-proof. It's getting your innovations from that field, and we fill with Clean Cow, Green Ocean, Niaga, [Feo Bios].
Basically, with all those innovations, we are addressing that crossroad between nutrition and climate. Our customers want that and want to pay for that. A big dairy companies who can only reduce their footprint if they collaborate with us. Great, we want to do that. Summarizing, we set clearly the scope of the company from today. The company will focus on nutrition, on health, and sustainable living. Addressing this crossroads of health and nutrition, climate, energy, resources, that is where the focus will be. That has consequences of where the different businesses will focus on and will invest in. We will be, in that domain, a growth company. In that field, we can continue to grow faster than the markets we operate in due to the way we are organized.
Organically, customer centricity, innovation plays a very important role, but also inorganically, with a clear focus on nutrition, enabled by our own organization, enabled by digitization, enabled by our sustainability drive. To what should that result? Geraldine will come more in detail about all the different targets, but I want to give you already the two main headline targets. A high single EBITDA growth. You had that already. When we were EUR 1 billion, around EUR 1 billion, in EBITDA. Today, don't want to look exactly to the consensus of the underlying EBITDA, but I think it's about EUR 1.5 billion or something like that. At least a much higher basis of which we had before. A high single-digit EBITDA growth on that higher basis. ROCE remains important, but we ramped it up from 7%+ to 13%+.
Although Geraldine will come back on the ROCE, will remain important, but we believe that maybe cash generation is very important for the company in the future. We showed 2016, 2017, we did about 5%. You remember one of my first slides. We want to ramp that up and double that towards 10% as an average annually on cash generation growth. Important to have that high single EBITDA growth and that cash generation growth as the two main targets, which is the outcome of all the efforts on the left side. Organically. Those targets are definition organically, they will be going together and accomplished and further enhanced, of course, by our M&A actions, value-creating M&A actions. This is another summary of saying the same.
The DSM competencies, addressing the right areas in the world in the right focus area with the right drive, creating a growth company in the chosen domain, resulting into ambitious financial targets, high single digits, adjusted EBITDA increase every year and over the period, an average 10% step-up growth of our cash generation With that, I think that we have created a company which is future proof, which operates exactly in the domain what I call where it's happening, that we have the competencies to play a role in that field and to show a magnificent growth and a magnificent future. I'm really excited about it. Okay. I may be not the most objective person about DSM. I buy it. True. I'm subjective. Still, I think that we are exactly well-positioned, and also with our innovation potential, to go into a bright future. Thank you for that.
We want to go from there more in depth. More in depth in nutrition with Chris and his guys, so to say, with Jeremy and David on animal and human, then with Dimitri. Then at the end, Geraldine will go further in detail what all of that means for all the financials and the targets, then we go into Q&A. Appreciate it. Chris, can you take it over from here?
Very pleased to be here, also for those on the webcast, to report on the cluster nutrition. I am not left alone. I have two strong colleagues here, Jeremy Xu, who manages human nutrition and health, and actually David Blakemore sitting quite next to him for animal nutrition. How did we start actually into 2015, 2018? I think we were very much building onto three levers to carry us through the next three years. They are mentioned on this slide. The first one is we made quite a handful of acquisitions. You remember we spent about EUR 3 billion on acquisitions that are mentioned in the first box. Five that are here represented are the big ones. We also started this journey into the next three years with a very comprehensive nutrition improvement program.
That is the most complicated slide I can bring to you later on, I dare to do that because I repeat that offense to you because I brought it already up in September. The last Feike mentioned already. We think that we have a very good business model. We on the one hand side have a complete portfolio of leading products, on the other hand, we are close to the customer. Not many have that in the industry. If you actually look into the competitive landscape, they are either left or they are right, we are the only ones who are on both sides. Now, it seems to have worked. When you look at, on the left-hand side, our targets, 5% organic growth, we did seven. High single-digit percentage EBITDA growth, we did 13 or 12.
The margin is coming up from 2016, 2017 previously to 2017, 2018, 2019. Yeah. We will see what happens in 2018. Now I have to say why I am proud about that together with my colleagues is also because it does not include the temporary vitamin effect. We did not want to kind of beautify 2018 and then later on say, "Yeah, it was a one-time effect." We want to be truthful in that regard, and you see it is mentioned here. That is not part of what I say here in terms of numbers. Now, ROCE, two percentage point per year increase is a very nice number. That is on the left. We are very proud about that. I think when you ask us how did we do in operating working capital over sales, we would still smile because in percentage it looks good.
If you go underneath and you say, what is the conversion of EBITDA into cash? Yeah, it looks a bit less pretty, which is depicted here on the right-hand side. How much of the EBITDA did actually come out as cash? You see that is less than positive. There's clearly something written on the wall that we have to improve on that, and you heard it from Feike, you will hear it more, you will hear it with our overall targets. Cash is important. How did it work really? What really made it work? Let's take human nutrition and animal nutrition. The organic growth. It went from a 1% in human nutrition in the previous period to 5%. That's not nothing if the whole market grows at 2%-3%. There are many factors that contributed to that, but 2 are mentioned here.
One is our Lift Off program. It's a comprehensive marketing and sales excellence program that we did the first part or let's say Jeremy and his people did the first part, and it has proven to be very important for that real lift off that you see here in the numbers. We have to say, and quite important also for our future, we were very positively, not surprised, but taken with the fact that our B2C business, which is when you think about personalized nutrition, when you think about strategy is not so unimportant, the next level, the consumer, that that has taken off as well. You remember our business was mainly in the U.S., 90%-95% of sales in the U.S. We are much broader now, and actually the second biggest market is China. Quite astonishing how this goes around the world.
That was human nutrition and health. How was it then in animal nutrition? A bit different. The numbers went up the same. We started a bit higher with 5% in the last period. We are at 8%, again, with a market that is about a 2%-3% growth. Here, the main levers for success are a bit different. One is this global products, local solutions. This plays hugely. David mentioned before 47 premix sites in the world, and a huge number of very determined sites that produce those global products is a fantastic combination. In addition, 3 years ago, we started a strategy. We called it Auctus. It was amazing that we had at that time, David, an American, and he came up with a Latin name for his project. It's quite amazing.
Auctus, David has to live with it now, but it has a few elements that are very important. One is, what is our core? Let's build it. It's basically premix. From that premix onwards, there are 3 main levers that we wanted to focus on. To the north up, solutions. Customers don't buy products. They buy solutions for their problems. They don't buy vitamin E or vitamin A. They buy a mix that fits with the starter feed for a swine. When you go to the bottom left, it's not only about our key species. What are our key species is poultry and swine. We call that monogastric. It's also about those other species that are so important, ruminants, pet, and fish.
We launched quite a bit focus on that, and I think you will hear later from David how important that was to create some of our biggest innovation projects that are currently running. Last but not least, on the right, B2F. The whole question about business to farm. With that, this is basically what has happened so far. I think this has a particular importance in this environment. We talked many times about vitamin E. I think I don't need to repeat that. Last time, I even mentioned to say I talked the last time about vitamin E. I think that was the biggest mistake I could make. We'll constantly come back to that product. But what you see here is in 2017, we have a very balanced portfolio in terms of how they contribute to the underlying profit.
I say here vitamin E is smaller than 10%. Actually, in fact, it's more like six to seven. It gives you a bit of feeling on how many legs are we standing with our nutrition business. On the right, left out a bit is 2018. What you need to understand is 2018 is exactly like 2017 in the vast distribution. What has now happened with the underlying vitamin benefit is actually in that box on the top. We didn't inflate the number of legs that we have and have again an imbalance. No. That is upstairs in that little box called vitamins A and E. We have a very balanced, and therefore, I think very resilient portfolio going into the future. Here's that famous busy slide, I can do it simple.
We talked a bit about what worked in terms of organic growth. That's the left-hand side of this chart. I think we actually proved that we can do that. I think the next vertical box with the different bubbles in there, what we call integrated business planning. We have put the backbone in place, but as I've mentioned before, we're probably not running on what Feike calls all the cylinders yet. Still some improvements to do. The next one, the spider in the web, was all about product management. When you grow year-over-year 7%, you need to put investments in place to actually supply for that growth. We did that successfully. He also mentioned the so-called nutrition program before delivering savings. That's the fourth box, very much in operations. While producing more, we produced it at less cost.
Last but not least, and there I'm as excited as Feike, innovation is a license to be there in the future. We have put a lot of effort into that, I think both my colleagues will come up with the nice examples that you want to hear about because it's not always new examples, it's the same, but with tremendous progress from time to time that we come and speak to you. A good delivery, not finished. This is the same chart underlying with a new focus for the next few years on it. I want to make it simple. In green. Marketing and sales excellence will be in the focus again with a very strong twist towards customer centricity. That also brings me to that famous long and strange arrow that goes through the whole chart here.
We have, in the past, improved all the different pieces of this puzzle. Now is the time to connect them. Obviously, if you have inventory problems, it's because the connection is not perfect. That's what we show here, end-to-end customer experience, because they also feel it if we don't deliver. The other part is supply chain and inventory management. There's a clear thing that we need to improve that, and I think there's some more things mentioned here that I don't want to go into, but you get the gist of what the next step is in our improvement. Let me focus a little bit on strategic trends and our strategy going forward for the last few minutes that I'm here. We constantly talked in the last few years about five major trends that impact nutrition, and they are mentioned here.
We actually believe, looking towards the next few years, two of them are much more impactful. They're actually disruptive. They actually are more important when you think about where we put our eggs for the future. In human nutrition, we would call this value chain shifts. Now, what do I mean with that? First of all, if you look at food and beverage, what is happening with our customer base? I'm telling you a story that you heard probably quite a few times with different twists, I'm sure, depending on who tells the story. If you look at food and beverage companies, the big winners over the last few years were local companies. Small, local companies. They're very close to their consumer base, but most of them didn't have any manufacturing or any R&D. Their focus was on marketing and sales in different channels.
Now, the other thing that happened is that the big companies, food companies, are on the threat, because their business model of global is not working so much anymore because the economies of scale of advertising, the economies of scale in their whole business are not playing so much anymore. They are on the cost pressure. They reduce cost. Where do they do that? In manufacturing and R&D. We have actually people that we deal with that shed some of the costs that normally did part of the work where we can forward integrate. On top of that, the less of strategy is taking place. Less of sugar, less of salt, less of fat. All those things mean that we have a potential to forward integrate, but not only product by product.
We need to bring these things together because the unifying force within our customers is either not there anymore or has been just cut in cost. Bless you. A big change that gives opportunities for us. Let me talk about specialty nutrition, specifically about dietary supplements. Also there, a big shift, personalization is coming big time. With it, the question about vertical integration of the value chain. You will see Jeremy talking a bit about what kind of opportunity that brings us to leapfrog actually, to be a partner of consumers rather just a B2B company. Exciting times. Equally exciting on the animal side, but totally different. It's all about sustainability. The words that I have marked here on the slide are words that you have all seen. Antibiotic resistance, the environmental footprint, the whole question of overfishing and greenhouse gas emissions.
We're well prepared. We are very well prepared, in fact. If I can end the strategic part of this slide, it shows you on what we will bank for the future. Let me start with human nutrition. There will be a Lift Off part two. It actually has already started. It's very much focused on customer centricity, Jeremy will go further into it. We also looked at the key strategic growth fields that we have in front of us. When you look at the lower part of the slide on the left, vertically are the different market segments, horizontally is a bit the value chain. What you will see there is that, first of all, the two biggest ones, we want to actually grow organically but also inorganically.
In food and beverage, we want to build out a food ingredient solution business bigger than it is today and much more based on application know-how in the rest of the world. Think about applications as local like premix. The other one is dietary supplements. It's not only about expansion of our business, it's about the personalization that will take place. We want to expand that both organically and inorganically. Then in the middle part, a very interesting business, early life and medical nutrition pharma. We have a lot to still do with what we have. What we need to do is find a way to use our portfolio in more interesting ways. We call this delivery systems. My two colleagues will further talk about that.
A product is not only doing what it's doing, depending on whether you have it in your mouth or whether it reaches your bloodstream. It's a huge difference or whether it reaches your gut. It has different functionalities. A very interesting story. Animal nutrition. Now here, you see a new logo. It's called Accelerate: Amplify Customer Experience. David has very strongly started this year with his own marketing and sales excellence program. You will hear him talk about what are the main deliverables on that one. His strategy is more known. That's the triangle below. You will see here a few things marked, what I don't want to do is go into details. I just want to say we will further strengthen the solutions part. We will further innovate species.
We will further focus on B2F, also we will further broaden the growth in the core, which is premix. All of that gives some opportunities also for inorganic growth, he will come back to that. That brings me to our ambitions. Feike already mentioned it, 5% organic growth on a much higher sales number is a different number in absolute terms. We are fully aware of that
The same is true or even more true for high single-digit growth in EBITDA. That's not a piece of cake, what is written here, that's something that we need to absolutely create. As a consequence of that, our margin should go beyond 20%. I think all of you were always asking that question: Do we go beyond 20%? Do we say below? Here we clearly say we have the ambition to go beyond 20%. By the way, not through a vitamin special temporary benefit, but through our underlying business. I hope that gave you a little bit of a feeling. I know that my two colleagues will go into more detail, especially on also my heartfelt topics, which is innovation. Before we do that, before I hand over to Jeremy, I would like to show you a little video.
A little video that actually amplifies the point that purpose-led and performance-driven is possible, and that we are so lucky to be in the business of nutrition. That this is something that is kind of so easily doable for us because it's what we do every day. Can I have the video of the Africa Improved Foods program? The initiative that started live a year ago in Rwanda. Thank you very much.
In rural Rwanda, smallholders, mostly female, are growing, harvesting, drying, and cutting their maize, preparing it for transport. This year brought better harvests, and their income has increased by 30%-40%. It's because Africa Improved Foods, an initiative of Royal DSM and Investment Partners, helps them to grow higher quality crops, improve their yields, and pays a guaranteed and fair price for their crops. At the state-of-the-art facility in Kigali, Rwanda, which currently employs about 300 local people, the maize, soya, and sorghum from the local farmers is turned into highly nutritious porridge flours and enriched with DSM's healthy nutritional ingredients, such as vitamins and minerals. These enhanced nutritious food products help the most vulnerable people, such as pregnant and breastfeeding mothers, older infants, and more specifically, young children in the first thousand days of their lives.
Just consuming the Africa Improved Foods products will prevent these children from being stunted, which means they will not suffer irreversible damage to their body and brain, but will learn better in school and improve their chance to earn a good living as an adult. The nutritious food is distributed via health centers and district hospitals to underserved beneficiaries in the country, via the United Nations World Food Programme, it reaches those living in refugee camps in Uganda, South Sudan, Somalia, and Kenya. Africa Improved Foods' high-quality products are also sold in local shops at an affordable price for African consumers. Soon, the 45,000 metric tons facility in Kigali will have the capacity to feed 2 million people with nutritious food. The Africa Improved Foods initiative is not only about distributing healthy nutrition.
Through its unique business approach, employing local people and sourcing local crops to feed local communities, it's about creating self-sufficiency and offering a structural and scalable solution to end hunger, malnutrition, and stunting, while also boosting sustainable economic growth. It's a proof point of how DSM, a purpose-led company, is tackling the issue of malnutrition and unlocking the human potential in every man, woman, and child.
Every time I watch this movie, there are always tear in my eyes because it connect me emotionally. Our business, Human Nutrition & Health, had very simple and humble purpose: to help the world's growing population healthy through nutrition. That motivate me and motivate all my colleagues every day. After a period between 2010 and 2015, we had virtually no organic growth of our business, but significant growth through acquisition. Now we are, since 2016, back to organic growth. We delivered solid 5% compound growth rate. It is in line with our long-term growth ambition. The purpose of my talk is to explain to you why we believe this 5% is sustainable and how we are going to achieve it. Remember last September, I explained to you we can structurally outgrow our market. If you look at the left-hand side, this is where our strategic segment lies.
The underlying growth is ranging from 1%-2% in food and beverage segment, and to 4%-6% in pharma. That brings the underlying growth of our basket of segments to 2%-3%. Structurally, we believe we can outgrow this market, and those growth drivers come from three areas. As you know, not every segment in each geography is created equal. By differentiating our offering in each geographic region in their relevant market, we can outgrow that segment. That's point number 1. Premix, we are in a service business. Many of our customers are decomplex their operations, so that creates opportunity for us. In fact, our board just approved the expansion of our Poland plant. We are building state-of-the-art, brand-new plant, premix plant, for our early life nutrition business. Last, we are very successfully to expand our B2C business.
If you put all those together, we can structurally outgrow our market. That's only half of the story. Knowing where to play is half of the success. We need to diligently to execute, and this is how to play. Our strategy between 2016 and 2018 did exactly that. It is important because those accomplishments will set the foundation for our future growth. Our horizon 1, we are meticulously focused on sales and operational excellence, from channel management to price and margin improvement. Let me give you example, our premix integration. Right now, we've fully integrated our 15 global premix operations, from procurement to operations to our systems. If you look at our horizon 2, we radically change the setup of global marketing, both in the global and regional level. One example I can give to you is our sales team setup.
Right now, we segment our sales force around the world based on segment. That allow us to focus on value proposition to the specific segment, and we're making huge progress here. Last but not least, in our B2C business, we continue to focus on our growth drivers through geography expansion, through channel expansion, we are much bigger now in our e-commerce channels, and through innovation to continue to expand our categories. This is why we are successful, knowing not only where to play but how to play. With these basics in place, we are ready to move to the new horizon. The essence of new horizon, we called Shape the Market. We'll continue to rigorously focus on customer centricity and agility, but specifically, we are going to drive in the few areas, as illustrated here.
We're going to work on continuing to strengthen our value proposition, our product and service. We'll enhance our end-to-end customer experience. We'll continue to enhance our innovation and application capability. As we believe, as a leader, innovation and application will be the sustainable competitive advantage for us. In the area of B2C, we will continue to invest to personalize nutrition area, and we believe this area, we can shape the market and create enormous value for our customers and consumers. Let me dip a little bit deep diving on why we select these strategic areas. As Chris already mentioned, there's a big disrupt shift in the value chain in our industry. That is value chain shift. On your left-hand side, look at the food and the beverage.
As Chris already mentioned, the big brand owners are under tremendous pressure from local brand owners because consumers are asking for it. Both for the smaller and big brand owners, they are looking for solution providers who can provide the ready-to-use solutions to them and at the same time, to deliver healthy ingredients. If you look at the right-hand side, specialty nutrition, consumers are increasingly to take over their own health and wellness. As the population growing older, people are also looking for solutions can keep them live healthier and independently longer. With all those trends, that give both the brand owners and ingredient suppliers additional opportunities. In addition to provide the product solutions, many consumers are looking for personalized solutions. Not only product, but also the measurement. They want to know where and how those solutions work.
They want to have data to prove it's working. They also look for the delivery systems that can be convenient to tailor their personal needs. With this insight in place, let me just show you probably the most important slide of my talk. That's why we are making those strategic choices in the respective areas. If you look at food and the beverage area, our strategy is to build out a food ingredient business model. At ingredient side, we'll continue to enhance our portfolio. We'll add, in addition to our existing ingredients, we'll add fermented stevia, gut health ingredient, and plant-based proteins. On the other hand, as I just mentioned, provide ingredient is not good enough. We are working extremely hard to enhance our application capabilities to provide the small or large brand owners the tailored and integrated solution.
We are going to do this through both organically and inorganically. If you look at the middle, our early life and medical nutrition and pharma, as Chris mentioned, our goal is to broad our portfolio, but specifically focus on formulation and delivery system. Just give you example. It is well-known B vitamins play a very important role in gut health. Currently, the traditional formula of B vitamins cannot survive the stringent digest system, so they cannot reach the gut. Our challenge, and we are working very hard on, is to develop a new delivery system, can protect those healthy ingredient to reach the lower end of the gut. That just give you one example what we are doing. We are going to accomplish this primarily through in-house development. The last segment, our strategy is expand and personalize our B2C business.
We also will continue to expand our channels. We are going to accomplish this, again, through combination of organic and inorganic growth. We believe through inorganic method, we can gain some critical capabilities we need for personalized nutrition and also accelerate our goals. This is the essence of our New Horizon strategy. Now, let me give you two specific examples. One in food and beverage, and one in specialty nutrition. In food and beverage, stevia. I hope it's not new to you, but we're making lots of progress. This is a perfect example to illustrate why we need to combine a healthy ingredient with application capability. Let me explain to you why. As ingredient, when the big health concerns like obesity, like diabetes, the fermented stevia provide wonderful solutions and sweetener replacement. If you look at this, it's huge business opportunities.
If you only look at the fermented stevia, we're talking about EUR 3 billion sales by 2025. We look at the entire sweetener business, it's EUR 90 billion. You will say, "Well, you are in the sweet spot in sweetener business." The remaining challenge, of course, is application. As you can see at the right lower corner of the chart, it shows it turns out sugar play more roles, just provide sweetener. It have texture properties. When you simply replace sugar with stevia, the whole food system need to be redesigned. That's DSM's capabilities kick in. We are in the sweet spot. With our broad portfolio in other ingredients, plus the application capabilities, we believe we can play a leading role in this area. The top of the screen just show you the progress we are making so far. Everything's on track.
We are gaining the regulatory approval in Americas, and the first large-scale production will be on stream in 2020. Now let me switch to next example, personalized nutrition. It is a major trend we observe. I want to draw your attention to the left-hand side first. We already have lots of capabilities to play in this field. We have a B2C business to give us deep understanding of consumers. We have channels to access lots of consumers. We have traditional brick-and-mortar channels like Walmart. We have new e-commerce channels like Amazon and Alibaba, we also work with healthcare practitioners. We have lots of channels to reach consumers. In B2B area, we also bring lots of capability onto the table. We have our premix and for our solution capabilities. We have the largest healthy ingredient portfolio, and we also have unrivaled nutritional and advocacy capabilities.
It is still not good enough. If you look at the middle part, which shows you the value chain of personalized nutrition, it is a total ecosystem. If you look at the lower part of the two bubbles I show here, consumers need to know their nutritional value measurement instantly. We need to find a convenient, non-invasive, fast measurement. Also about data, we talk about digital. Consumers are looking for artificial intelligence, machine learning, big data to integrate those insights with other insights to come up with science-based advice. Also delivery channels. How we can find a cheap and easy way to deliver solutions to individual consumers. This is a very new area. Nobody has figured it out yet, but as a leader in this industry, we feel this is absolutely great opportunity for us to play, and that is what we are investing heavily.
If you look at the right-hand side, there are a few pilot projects currently we are running. We are partnering and financially investing in those startup companies. Mixfit is a startup delivering at-home dispenser for vitamin drinks based on real-time information on each consumer's health data. Tespo is already active in, we call, pod-based ingredient delivery supply. If you look at the Biomarker, it is also a startup. It is a data-driven company that integrates consumer data to brand owners and to consumers. We are investing in those areas primarily through our venturing opportunities, and those are the areas currently we do not have the capability yet. I want to summarize. I hope you share with me, all my colleagues and I share the noble purpose of our business. We want to make the world's population healthy.
We believe with our track record, with our strategy, we can continue to outgrow the market by a few percentage points. We are going to do this through building up our success in sales operational excellence, continue to drive the customer centricity and agility, enhance innovation and application capability. Last but not least, invest where the growth is. That is the B2C business and personalized nutrition. With that, I want to show you a very short video clip, to show the personalized nutrition. The tomorrow is closer than what we expected, and we are ready. Thank you very much. I will hand over to Geraldine.
Thank you very much, Jeremy. This is probably a good moment to have a bit of a break. We are doing very well on timing, so that is good news. What I would ask you to do is be back at 11:00, and at 11:00, we will keep going with David Blakemore on animal nutrition. For all of you with us, the coffee is this way, and on the webcast, please, we will be starting again in 20, 25 minutes. Thanks, everyone.
Eight. Eight's number 1. I've got eight, yes. Sorry. Just want to make sure. That's all right. Cool. Testing one, two, three. Loud and clear? Coming through? Can you hear me now? All right. Wired for sound.
All right. Welcome back. Hope you enjoyed the break. A little bit of nutrition, hopefully some caffeine as well. Hopefully, the webcast is back. We're live, ready to go. My name is David Blakemore, President, Animal Nutrition & Health. Now it's a pleasure for me to take you through the animal nutrition business. Like you've seen in the previous things, we'll start with a little walk through the financial performance. When you look at the financial performance of our animal health business, you can see over the historical period from 2010 through to 2015, you see we've delivered the 5% CAGR 2011-2015, getting to the 2017 number of about EUR 2.7 billion. Since that point in time, we have significantly outperformed our 5% organic growth ambition, delivering an approximately 8% CAGR over the 2016-2018 period.
Looking specifically 2018, you can see to deliver those numbers, we continued to deliver a strong underlying business, and we also call out, as you've heard several times today, the temporary vitamin benefit. All in all, across this level of financial performance, you can see we're very confident in continuing to be able to deliver this 5% organic growth across the period from a higher base as we go forward. Talking about the strategy and how we do that, we pull from the largest and most complete portfolio of ingredients in our industry. We've got great teams around the world, and we've got a global premix footprint that gives us a very effective channel to the market. Our strategy, what we talk about, is the concept, global products and local solutions. Our approach to the business is how we think, it's how we work.
Very simple, yet a very powerful concept. What we do is we employ global strategies on our actives across our formulations that give us a low-cost position, the scale, and the reach to be able to drive those ingredients across the world. It also gives us the scale and the capacity to drive innovation, drive the concepts, and also deliver breakthrough innovation in the industry. You partner that with the concepts of local solutions, where we pull our PhD nutritionists and veterinarians and our team of experts around the world that have a very deep, detailed level of understanding of our local markets. We understand the short-term, today's opportunities, and we develop unique solutions to meet today's customer needs. We also identify the unmet customer needs and the things that are evolving for the future.
Very powerful concept, both in terms of the scale, also in terms of our proximity to the market for the short and the long term. You've heard our Auctus strategy mentioned, and as Chris said, maybe it wouldn't have been the word I chose, but I like it now. It's depicted by the triangle, the four pieces of the triangle, starting with our core premix. This is where you get our focus, poultry and swine, continuing to drive optimum vitamin nutrition levels across our premix. Then you go in, new solutions, how we're bringing new concepts, new solutions, new ideas to our customers at the local level. The third box, we talk about our under-penetrated species, where we drive a new focus on aqua, on pet, in the ruminant sector.
Finally, our B2F channel, where we continue to look at the most effective channel to get our capabilities into the mouths of the animals. That's our concept. That's our approach to the market. You put that now into a context of the size of the market. We continue to see the animal nutrition market as a growth market, tied to providing sustainable animal protein as part of a healthy diet for the growing world. You look at that, we've got an underlying market that we think is growing between 2%-3%, driven by the increasing demand for poultry, swine products, but also contributing significantly by the faster-growing aqua and pet business. How we drive market-leading growth in this space is through our geographic presence, our mix, continuing to provide our solutions across all of the different species.
We've got a very strong focus in the fast-growing markets of Asia, where we benefit in our core species, but also the very fast-growing aqua segment. And we continue to drive new solutions into the challenges facing the industry. On top of that, our B2F focus. We continue to look at our channel to market, like in our Tortuga business, where today we've got 80% of our sales direct to ranchers. We also talk about our business in China, our [Chujia] project, where we go direct B2F. This gives us an increased presence in that B2F segment. It's specifically getting more penetration across the small and medium-sized operations in a fragmented but consolidating market in China.
Put all that together, we're posed to deliver this 5% ambition, again, in a market that's growing 2%-3%, so we think we can outperform at a 2x rate the growth of the market. We launched a global comprehensive commercial excellence program, code-named Accelerate, designed to build our global marketing and sales capabilities across our global organization. This whole program starts with elevating our ambition, really looking hard at today's operating model, optimizing our global operating model to drive execution, but also focusing on our metrics so that we also understand, assess, and drive performance. Wave two is really into the building capabilities. It's already started today, where we're building our commercial muscle, driving a more intense focus, a more intense discipline into what we do. Supported by a global operating model, but also supported by new tools, new processes, and new connections across the global organization.
Ultimately, sustain the gains through a new culture, focuses on performance, and also focuses on the things that you've heard about already today from Chris and Jeremy, our new focus on customer centricity and agility. All in all of this, we're not being satisfied with doing good. We're not simply trying to do better. We're trying to be the best in the commercial capabilities that we deploy around the world. Talk about sustainability, the intersection. Sustainability is a business driver. What you see across our four core innovation platforms is that these platforms are addressing the most pressing sustainability challenges in our industry. Starting with our enzymes portfolio, where we're very intimately focused on driving productivity, driving feed conversion, and addressing the environmental footprint of animal protein production operations.
Secondly, in our eubiotics area, one of the most pressing challenges is how to sustain high level of animal performance in an AGP-free world. You get into the under-penetrated species we talk about. We're addressing big fundamental sustainability challenges. First, with overfishing in the aquaculture space. This is the focus of our Veramaris joint venture, ultimately, the new specialty product that addresses greenhouse gas emissions or the environmental footprint in the ruminant sector. You take all of that together, our four core innovation platforms addressing big changes, sustainability challenges, radical innovation to solve that for our customers and to create new market space and new opportunities to drive growth. Looking today, the triangle comes back. When we look at this, we've had the strategy for a while.
We're continuing to execute the strategy and deliver above-market growth, we do continue to see opportunity space, both for organic as well as inorganic growth. If I talk about organic, I'll start at the core. We continue to look and identify white space in our markets to continue to expand our global footprint. You heard me mention earlier, we've got 47 premix sites today. In October, I will be on my way to India for the opening and launch of our newest facility in India. Just last week, our executive committee approved our new capital project in China, where we will add the seventh premix facility to our China network. Again, we continue to understand where the white spots are, expand our footprint, and drive growth in the core of what we do.
Also on the organic side, I'll talk more about this on the next few slides, we're very focused on accelerating our innovation platforms, delivering those products to the market, and also addressing what it takes from a more specialized commercial presence, commercial approach, commercial footprint to really achieve the maximum potential of those products. Going now to more of the inorganic space. We continue to look in the whole area of gut health, gastrointestinal functionality. We look outside. We understand all the new ingredients that may be available, very open to identify new things that would complement our portfolio and approach to this challenge facing the market. We also, in the B2F, continue to challenge ourselves, both in terms of new business models, new technology, and also looking very aggressively at the space of service data analytics.
We are in a leadership position today, but we continue to think like a leader to say, "What does it take to not only be the leader but do different in the B2F space?" Opportunities across the portfolio within the existing strategy for both organic and inorganic growth. I am going to jump now the next three slides. I am going to hit the four core innovation platforms. Before I get into those details, I think if you look at any one of these four things, to be here today, if you were talking about these, any one of them would be exciting. The fact that we are talking about all four of these in this period, 2018, 2019, 2020, is incredibly exciting. On this slide, I start with our feed enzymes.
We have got an alliance with Novozymes, where we pull together the two leading companies in this space with capabilities to develop, manufacture, and commercialize technologies for feed enzymes into the animal nutrition space. This is an alliance that we just celebrated about a month ago, our 20-year anniversary. Like most 20-year marriages, we celebrated some successes. We probably talked a little bit about some learnings. The most important thing, we renewed our vows to this marriage and this partnership to continue to be the market leader in this space, continue to expand our portfolio, and continue to aggressively invest in our innovation pipeline in this fast-growing market. Going to the right side of the chart now, very happy to announce we have also expanded that relationship with Novozymes outside of the feed enzyme space.
Today, we have got a great portfolio there today, but we have put together these two leading companies focusing on enzyme technology, but looking at new market space where we can develop new concepts. Proud to announce that we have got a new product launch planned for Q4. We have got a novel enzyme coming out of that pipeline that will address gastrointestinal functionality and animal performance. At the IPPE this year, we launched a concept to the industry, the leading industry association meeting of the year. What we did, we did not launch a product, we launched a problem. We launched a new issue that we saw in the solution to the overall gastrointestinal space, and we announced the fact that we were investing a new mode of action, a new chemistry to solve that problem. That solution is coming in Q4 this year.
We think this potential will be a blockbuster product into a market space that is already growing double digits. Very exciting times in an expanded alliance with our partner, Novozymes. Jumping now, Veramaris, the joint venture with Evonik, focused on the sustainable production of healthy omega-3s, EPA plus DHA, for the aquaculture industry. The JV has been established, it is operational today. Two weeks ago, we had the opportunity to go with our Evonik partners to Blair, Nebraska, for the roof-raising or the tree-raising ceremony for the facility. It was a roof raising, it was an excitement raising, it was an ambition raising when you see the scale of what is being put together there, and the excitement around the opportunity space. The investment is progressing well. We are on track for an opening of that facility mid-2019. More importantly, the focus today is now switching to the commercial opportunity space.
Big focus today, positioning our pilot materials with our key industry players in the value chain in a very extensive effort going into influencing the entire value chain for this new solution. It addresses availability of fish oil with the new marine algae produced sustainable source. It also addresses the sustainability questions in a focus on making sure that these healthy omega-3s, DHA plus EPA, are in the diet. We're excited about this. You can see here that we're targeting, starting in 2019, a market that we think has got the potential to be the €150 million-€200 million of sales in the period. Again, break changing, addressing a sustainability space with brand-new innovation and a partner that's making it happen right now in the timeframe. Finally, we'll talk about Clean Cow, the fourth of our core innovation programs.
Cows today represent an important source of animal protein, very important part of a healthy, nutritious, balanced diet. Unfortunately, cows also represent a significant % of the greenhouse gas emissions that come from the livestock industry. You take all that together, we see the opportunity, we see the need, we also see the challenge, and we have a sustainable ingredient that's come through the DSM innovation pipeline. This ingredient can deliver a greater than 30% reduction in the enteric methane production that comes from cattle. Again, a great opportunity that solves the challenge there. We've had an incredible amount of trials in peer-published scientific research that shows the product works, addresses the challenge. Today, we're very active at driving the registration, regulatory activities, the registration challenges.
We're also very active across the entire value chain, working to build the excitement around the concept and basically the model for how we will launch this product into the marketplace. We've got large-scale commercial trials happening across the world today, continuing to validate the performance of the product at large scale and also build excitement across the value chain in terms of what's possible. Again, as we've talked before, a very attractive market at the EUR 1 billion-EUR 2 billion opportunity space post 2019. You put all of that together, what you're hearing from the animal nutrition business, or what I hope you hear, we're operating in a market that is a growth market. It's going to continue to grow at the 2%-3% per year.
If you take a look at our strategy and what we deliver through our commercial excellence program, we're building commercial muscle that's going to give us the opportunity to continue to expand our leadership position and continue to launch these new concept in the marketplace. Again, with the challenge not to do better, but to make sure that we're best in the commercial capabilities in this industry. Secondly, radical innovation. I hope you go back to the last three slides, look at what I've talked about. These are big game-changing innovations at the intersection of sustainability and market growth, new market space. One, two, three, coming in the period 2018, 2019, 2020. I hope you share my excitement about what this can mean for DSM and for the growth that we're committing.
Finally, further investments in our B2F, our go-to-market model, and also our go-to-market capabilities. Again, as the leader in this space, not being satisfied with doing the same, not being satisfied with doing a little better, but also looking for where are the things that we can do different and truly lead in this capability space. You put all that together, we think we've got an opportunity to continue to grow at 2x the underlying market, and we recommit to our 5% organic growth across a much tougher base, but with lots of opportunities to make that happen. Thanks for the attention. I hope you're as excited as I am about animal nutrition. I hear it. That's fantastic. It's a pleasure for me. I turn it over to Dimitri. Thank you.
Thanks a lot. I'm impressed, and I'm excited about animal nutrition.
Awesome.
You sold me. All right. Good morning. Good to see you. An update on materials. After the animal presentation of David, is always to be excited to be after David because he's known as the animal guy within DSM, and I think after this presentation, you know why. Let's focus on materials. I have today 2 components in my presentation. First of all, looking back a little bit towards what we have said in Strategy 2018, although 2018 is still full up and running. I want to give you an update on what we see for the future for materials. It's all about growth and value, purpose-led, performance-driven. Let me take the first component, and let's go back a little bit in time to understand the journey we have within materials. It started in 2010, 2013.
Still remember that picture with, on the left side, lower left side, still the bulk chemical business with caprolactam, HCN, composite resins. In that time, we decided to divest it by a partnership, do it intelligently, and that is ongoing. I think Feike already alluded to it. After that period of portfolio restructuring, we moved into a portfolio where we've added, on the upper right part, biomedical and solar. We said, "Hey, this portfolio, we now need to upgrade in quality." That's the period 2014 and 2015. After 2015, we were happy with the portfolio we had, and we tried to dissect this portfolio in different strategic categories. We wanted to grow that portfolio. From restructuring the portfolio and upgrading the portfolio to growing that portfolio, and that's what we did. Let me zoom out a little bit on that last graph.
This is the Strategy 2018 slide. Just quickly refresh your mind. On the left-hand side, the market growth expectations. On the lower end, the differentiation capability, so the capability of DSM to extract value. We've looked at the materials portfolio from three strategic dimensions. One is where we should maximize return, where we should grow the business, and where we would accelerate growth. We choose that because we wanted to have high single-digit EBITDA % growth and related high double-digit basis point on ROCE growth. We wanted to move our portfolio towards a quality of the portfolio with an EBITDA margin above 15%, with an above-market sales growth and being very strict on cost discipline and capital discipline. That's what we did. We were very consistent in executing where we put our money within materials.
On CapEx, the majority of the money we put in accelerated growth, a bit in growth, and hardly in maximized returns. We did the same on R&D, predominantly R&D and innovation in the accelerated growth area, a bit in growth, and minimum, more maintenance R&D and maximize returns. We've put our resources and our money where the growth is and where we can differentiate ourselves. That led to a portfolio transition which has moved from 2011 to 2018, where the accelerated growth and the growth piece was the gravity of the portfolio today. That resulted in volume growth above market. Over the period, about 5% annually year-on-year, with the market growing with 2%-3% clearly above market. Within that portfolio, the accelerated growth piece was even growing with 8%. Within this portfolio, we had an innovation sales of over 20%.
Just pause there for a minute. Over 20% means you renew your portfolio every five year, even within every five year. The global sales were about 40% coming from high growth economies, so well-balanced. Last but not least, sustainability pays off in materials. Sustainability is a business drive. Within our portfolio, more than 65% is Brighter Living Solutions qualified. By doing so, we have clearly outperformed our profitability ambitions on all three main targets. First of all, the EBITDA margin, depicting the quality of the portfolio which we have built. The ambition was above 15%, and you all know that we are today above 17%. High single-digit EBITDA growth, and over the period we have achieved about 10% annual EBITDA growth. The ROCE growth. With strict capital and strict cost discipline and the top-line growth, we have seen 200 basis points annually growth on our ROCE.
That means that today, within the materials space, we have a return on capital employed of more than 20%. That created a great foundation for the next step in the strategy for materials. Let me take you on that journey step by step. It starts with what's happening in the external world. It starts with the mega trends and the SDGs where Feike also alluded to in his presentation. Out of these mega trends and the Sustainable Development Goals, we see three focus domains for DSM: nutrition and health, climate and energy, and resources and circularity. Out of these three focus domains, we see three fantastic growth platforms with huge opportunities for materials. It's improved health and living, it's in green products and applications, and it's in new mobility and connectivity. That's the scoping from the outside, what's happening in the world.
Now let's combine that with the competencies of DSM. You see that on the bottom line. We have very strong DSM competencies in our advanced materials portfolio. We have great R&D application and biological science know-how. We have global reach and access to all leading customers. We have a culture which is definitely performance driven. Therefore, we can benefit from four growth drivers which bring our business into growth. One is choosing the segments to play in. We call them winning segments. Within these winning segments, we will benefit from substitution. We will substitute traditional old solutions with new, more innovative, more sustainable solutions, therefore it will drive and accelerate growth. In all these three growth platforms, we see an enormous innovation headroom, and we will benefit from that. Last but not least, sustainability is definitely a business driver in their area.
We can grow faster and more profitable if we come up with sustainable solutions. Let me give a bit of color around these three growth platforms we see. We start with improved health and living, which will drive new opportunities. Let's look on what the trends are we see in that space. We see definitely global aging population. We see slowly but surely consumer demands more sustainable solutions. We see healthcare cost rising. That describes new applications, innovation materials in that field. Those are growth opportunities. There's not only a need for cost-effective solutions, but also higher performing and more healthy material solutions. Within that space, we are already ideally positioned. We already have a biomedical materials business. We have 3D additive manufacturing business for medical applications, and we do develop sustainable resins for more healthier wall paints.
The second fantastic growth platform, green products and application, which drives more toward bio-based resources. A few trends. First of all, the trend to circular, and you've all seen that, and it's happening. Also here, consumer demands is slowly but surely shifting. They are requesting more sustainable solutions. We do see governments stepping up the plate around the globe, and there will be more regulatory pressure. In this space, this is fantastic news for us because it drives innovation and it drives substitution, certainly in this growth platform. Also here, DSM is ideally positioned. We already be present in the solar business and in the windmill business. We supply materials to be more efficient in solar and windmill. On top of that, we are developing a bio-based portfolio in the polymers area, but also in the resins area.
We're definitely ideally positioned to benefit from these trends. The third growth platform is new mobility and connectivity, and you've seen that around the globe, an enormous drive for electrification, autonomous driving, light-weighting, but also far more intense data integrated value chains. This drives innovation into new application, but also new materials. Today, we see radical new designs in the new mobility and connectivity space, and that requires hugely new innovative, new applied materials. Secondly, light-weighting is the name of the game. Within this area, DSM is again ideally positioned. We are one of the leaders in lightweight, high-performance plastics, not only in the automotive space, but also in the electronic space. We'll see in the future that these two segments come together more into new mobility and connectivity than ever before.
We're also market leader in the fiber optic materials for internet connecting at high speed, 4G. We're definitely moving into 5G. On all these growth platforms, we are fantastically positioned, and if you then plot them into where the growth is and where you can differentiate yourself, we want to move up to the upper right corner. You already see in this picture that the improved health and living, the green products and application, and the new mobility and connectivity, that upper right corner becomes slowly but surely more crowded. That's a good thing, because there where the growth is and where the higher margins are. If we do that well, we will continue our above-market growth of about 5%. If we do this well, then our quality of the portfolio can make another step into the range of 18%-20%.
If you do both growth and the quality of your portfolio well, you end up in a continuous high single-digit annual growth for the material space. Taking these opportunities in all these three platforms means basically that we feel comfortable on continuing that journey. We have two programs which underpin that strategy. One is our global customer centricity, and the second one is the commercialization of large innovation projects. Let me give you a bit of background on these two programs. First of all, customer centricity. We have started a customer centricity program within DSM for quite a while, but we're going to intensify this. We will anchor growth performance into our company. We have scorecards, we will have growth performance meetings, and we will monitor customer engagement.
We'll not only monitor, but we'll also learn from it, and we'll bring it back in how we approach our customer. The key of what we will do is that we differentiate our value proposition to the customer, not only geographically, but also in tuning innovation and application, as well as tuning towards upcoming brands and leaders within the pack of our customers. That is what we call customer centricity. Listen to where you can differentiate yourself and what the customer need. The second program are our innovation programs. We have in all of the three growth platforms, we have innovation ongoing. Let me pick out one or two. Let me start with the new biomedical products. Within the new biomedical products, we are innovating materials to make sure that there is no adhesion after surgery.
I hope you never had surgery, but if you had surgery, there's a risk that after surgery, adhesion takes place, soft tissue. We are developing a product which is called an adhesion barrier, who prevents that adhesion. In most of the cases, sometimes an additional surgery is needed to remove that. That's an area where we see high innovation ongoing. The second example is Niaga. Niaga is 100% full recyclable carpet. I don't know if you are aware, but the biggest waste stream in the world are diapers. However, the second largest waste stream in the world, indeed, carpets. This waste stream is 85% landfilled. It's just thrown away. Landfilled. This is no longer acceptable. Governments are stepping up the plate.
There will be legislation in place, but also customers, and even the younger generation will push us that they no longer allow that 85% of that carpet is just landfilled. This is going to happen. We have started our concept for full 100% recyclable carpet. We have launched our first concept last year. We have an innovation campus started in Geleen in the Netherlands, where we test and pilot, and we have sold our first concept, machine, adhesive, recyclable carpet, to one of the biggest carpet producers in the world, which is Mohawk. It's just the start. It is just the beginning. All of these programs together should deliver at least EUR 250 million after 2020, with an EBITDA of about EUR 100 million. This is definitely one of the enabling programs to have our strategy executed. Let me wrap up.
We will continue to future-proof materials with a focus on sustainable living. We do that based on three key growth platforms, improved health and living, green products and application, and new mobility and connectivity. Within these three growth platforms, we will benefit from substitution, we will benefit from sustainability as a business driver, and we will benefit from the enormous innovation headroom in all of these three growth platforms. That coupled with two programs, one, the customer centricity program, with intense focus on the customer, and secondly, our big innovation programs. If we do that, we build a business where we continue to grow above market at approximately 5% year-on-year. We will continue to deliver a high single-digit annual EBITDA growth year-on-year, and we will bring the quality of our portfolio into the range of 18%-20% EBITDA.
Ladies and gentlemen, the successful journey continues. Via restructuring our portfolio towards upgrading our portfolio to growing our portfolio, we will grow and value our portfolio for the future by focusing on higher growth, higher margin applications. Thank you.
Thanks, Dimitri. I have to say, my colleagues have been exceptional at their timekeeping, so a big thank you, which means that I'm the only one that can mess it up from now on, as this is the last presentation before we go into Q&A. You've heard a lot about the business developments. You've heard the headlines from Feike about the numbers, but let me just run you through a few more slides just so that you have the main elements in order to do your modeling, amongst others. If we have a look first at this slide, you've seen it a couple of times already. This is what we hold ourselves accountable for. High single-digit EBITDA growth and an increase in operating free cash flow on average of 10% over the period.
Before I go into the how and some of the ambitions that underpin those two big numbers, which are the outcomes that we really want to deliver, I just want to highlight, but I think it's been mentioned already a few times this morning that while you may have heard us talk about high single digit EBITDA growth for two or three years now, it's not exactly the same high single digit EBITDA growth than it was in 2015. Without pointing out the obvious, in 2015, we had an EBITDA of EUR 1 billion. We're starting from a very different base. If I looked at the ROCE, and I'll come back on ROCE, we were at 7.6% at the time. We're now after Q1 above 13%, so continuing to improve 1% per year is actually from a very different base.
As for the cash generation, I had that discussion over the coffee break with some of you, what we have seen is that while we've grown the business very well, our cash generation was maybe not entirely as we would have liked it, and that's why going from a 5% to a 10% step there is something very meaningful and certainly will grab the focus of our organization internally. Let me go through a little bit the how. The what is on the left, and the how are these different elements. Rather than run through them individually here, I will go straight into the different slides. Top line growth. What you have heard from all of my colleagues is how we have positioned our business in order to grow substantially faster than the underlying segments that we serve.
You see here, putting it all together, that most of the markets that we serve grow 2%-3% at present, and we've been able to grow 5% and above. One thing I would really like to highlight is that we spent a few months doing a strategy review, and a lot of that time was spent on this. As you can imagine, to get the EBITDA growth, this needs to happen. We went through a lot of analysis as to our end markets, not only today, but where are they heading to, with a horizon of 2025 and even beyond in some cases, and how do we position our capabilities compared to that?
There's been a lot of work behind this, and while the numbers again may seem somewhat familiar, this is based on a lot of soul searching, but also a lot of fact finding to make sure that this is more than just a working assumption, but is a very valid and solid ambition, and you will have heard it across all the presentations this morning. That's the top line growth. Let me just share one picture on geographical footprint, because we didn't share that much yet or talked about it much today. This is actually the 2017 split. Just as a reminder, we clearly have a very good geographical footprint. If you were actually to slice it by region, we're very well balanced between the Americas, EMEA and Asia.
That is of course important when you want to grow above markets, that you also have a nice diversification of your end markets in order to compensate some short term patches along the way. That's still there. Of course, there's also another message in this slide, and that is foreign exchange. You know we've had rather turbulent times when it comes to foreign exchange rates, and I wanted to point out here that of course the Swiss franc remains a cost currency for us. CH stands for Switzerland, by the way. As for Europe, we're actually pretty balanced. We do remain long in terms of US dollars. In Latin America, you see there it's primarily Brazil. We do have a bit of an imbalance, but it is still primarily a translation exposure.
Not a picture that has shifted much for you, but I just wanted to make sure it's in your minds as well to complete the picture. That's the top line. Now, if we have a look at our margins, you have been hearing the headlines, and that is the nutrition business heading to above 20% and the materials business heading into 18%-20%. I just wanted to highlight where did we come from. If I come back to nutrition, we had launched our strategy 2015 giving the indicated range of 18%-20% margins. As you see here, we have nicely gone 17, 18 towards 19, and there is a certain continuation that you see here of, I think it was very well said earlier by Chris, this is something we work on. It doesn't just happen.
The above 20% is very much in line with the trajectory we've been having. Of course, we're parking the vitamin effect of this year. When you look at materials, there we had started at above 15% in 2015. During the period, we actually went to 15%-17%. As you see there, the last 2 years, we were actually ahead of 17%. Same comment applies. The 18%-20% does not come just out of an ambition. It comes out of a continued transformation of the portfolio, which gives us the kind of mix which can support these margins very much in the specialty space and very much supported by all the operational efficiency work that we're doing as well to back up that profitability. Now talking about costs, of course, that is still very much part of our daily diet, efficiency and cost management.
I'm extremely happy that the programs that we announced in 2015, which were very sizable, have delivered. If you remember, we went through a whole reorganization. It wasn't just a few programs. We basically changed the way that DSM operates and particularly putting the functions in a much more verticalized model. That by the end of this year will have extracted about EUR 270 million of savings growth. If you remember, our ambition was EUR 250 million-EUR 300 million. That is a sizable transformation. What you see there on the right is that we have basically made our functions lighter for the organization going from 6.1% of sales to 4.5%. You could argue is that driven by the top line or by the cost reduction? Of course, as I just said, we have pulled out real costs out of the organization.
Actually, nearly 1,000 positions have come out of the support functions. The key word for me on this slide is anchoring. It's one thing to change, but now it's a new way of working, and it's really important that as we go into this growth focused mode, organic and inorganic, that we continue to really, really anchor. With that, I could talk a long time about all the work that we're doing on digitalization, harmonization, all the process work, et cetera, to make sure that we retain and we stay top quartile in terms of our lean structure behind the organization. That's on programs.
Maybe one thing as a key message is you do not see a carved out big program as we had in 2015 because we don't have an organizational shift, but you will continue to see a lot of very focused activities, both in terms of support function, but in the businesses as well. That's actually the bottom part of this slide, which is the marketing and sales. You must be hearing as a bit of a mantra, customer centricity. That's exactly what it's all about. That's the next phase. There, we're not looking at taking out costs. We're looking at getting a lot more impact for all that we're doing. You will see some costs relating to that, but it's not at all in the scale of what we had to do over the last two to three years in terms of operational efficiency.
Going on to the balance sheet, working capital. In terms of our track record, if you recall, we had the ambition to bring our total working capital as a percentage of sales to below 20, as we started the period at 20.7. We succeeded in doing this, we are heading in the right direction. Having said that, we believe there is still quite a journey to be made, and we continue to therefore focus on this. The official ambition is 50 basis points improvement year on year, heading now towards 16% of sales that you see there in the dark blue for the total group. There is no secret here that in order to get there, the big heavy lifting is in the nutrition part.
Our materials businesses, although they have to stay disciplined, are actually doing pretty well on working capital, and the effort will come from nutrition. Chris covered that in his presentation, how we have been working on individual parts during the last two years very well. It's about connecting all the dots and getting that working capital down. Hence, on the right-hand side, you see my comment on inventory, and that is primarily inventory in the nutrition businesses. Looking at capital expenditure. These numbers should be pretty familiar, in the sense that we have been tracking at about 6%, 6.5% of CapEx in order to support our growth. We believe that that's broadly the kind of capital intensity we will be needing in the next three years to 2021 to deliver that part of our strategic period. Same ratios apply.
It's about two-thirds nutrition, you will see that more than half is growth related. Here really nothing very new to report. Return on capital employed. I think Feike mentioned it, I've mentioned it. This was by far the most unhappy KPI in 2015. I mean, 7.6% was really not something that we were proud of, and that's why we made it the big priority with EBITDA growth in 2015. The good news is that instead of increasing 1%, we actually jumped 2%. If you recall our Q1 press release, we were at 13.3% at Q1. Of course, that's a quarter, not the full year, but it gives you a flavor that we've reached that level. This is not the end of the journey.
Of course, the working capital work will help this, and we want to continue to add a percentage point year on year. There is a bit of a little comment there on the right-hand side nonetheless, a little caveat, which is that when you do M&A, this KPI takes quite a hit because we calculate our return on capital employed with goodwill. Therefore I wanted to highlight here that even if we do do a number of transactions and that impacts our return on capital employed, that we will put all efforts to get it to 15% in the midterm, because we believe that is a good number for us to be shooting at in terms of our return on capital.
If you put all of this together, and you're of course, familiar with this, but if you're driving your top line, you're driving your margins, you're driving your earnings, and you're keeping your capital well under control, that will result into two things. Our key target, which is mentioned there, which is our increase in adjusted operating free cash flow of 10% on average during the period. A logical mathematical outcome, but of course, with a lot of hard work to be driven behind it. I've added here an earnings per share growth, growing faster than our EBITDA growth. These should be two logical outcomes in terms of our financial performance, and we certainly hold ourselves accountable to those. Oh, minor detail here. Just for the modeling, the tax rate we expect to keep between 18%-20% during those three years.
What does that mean in terms of capital? Our capital allocation policy is, as you can see in the title, unchanged. Having said that, of course, we all are aware in this, that the context is a little bit different. The hierarchy remains the same in the sense that we want to prioritize supporting our organic growth, which means deploying the capital on our capital expenditure, our innovation programs, and doing everything it takes. The new premix plants my colleagues have been mentioning that we've just approved, et cetera. We want to continue to do this because we have seen that this is a very efficient, effective, and meaningful way of continuing to expand our business into the markets that we serve. That will continue. Second is the dividends. I will come back to that in a few minutes. Third is acquisitions.
I know that there's a question out there on do you have any set KPIs or matrices around what kind of transactions you're likely to do? The answer is, we do not have any specific parameters that we're going to put out there as defining what is a valid transaction, yes or no. It is very, very clear that it is all about creating value. It's all about shareholder value, and we're very mindful that that needs to be and should be our ambition. In the absence of value creating M&A, then we will resort to the fourth capital allocation bucket here, which is returning some capital to our shareholders.
That would be very much as an outcome once we have had the time to really look and work very strongly on deploying the capital to grow the business, because we are a growth company, and we believe we can create very good returns by doing that. What does that mean in terms of our leverage? We see that structurally, a balance sheet leverage of one and a half to two and a half times EBITDA is a sensible sort of structure to be looking at. That means that we, of course, then committed to a strong investment grade rating for DSM. The dividend. Here, I would like to highlight that our policy remains stable and preferably rising. As a result, given that DSM has never reduced its dividend, even through the financial crisis, we have had a very measured approach to increasing the dividend.
Today, we are actually stepping it up by 25%, which on the back of this kind of policy, I hope you realize, is a very strong signal of the confidence that we have in the growth momentum, but also in the cash generation step-up that we intend to achieve with the company. This is a very meaningful step-up, and it should be followed by then a continuing growth in dividend in line with the way that we're growing the company. If you want to translate that into some sort of a payout ratio, although the policy is stable, preferably rising, we will be looking at probably an averaging of about 40%-50% payouts over the period. Don't hold us to that on any given year. That should be broadly what you should be thinking of us being able to do.
Of course, we will start with this proposed dividend step-up with the interim in August, as we are rather confident that our shareholders won't decline it at the AGM early next year. Final slide on the financials. As you know, we have a healthy profile when it comes to our debt maturity, so no concerns here. The second bullet I'm very proud of. We've renewed our RCF a couple of weeks ago. We've got a $1 billion there. No problem. What's nice about it is that we actually managed to link the spread that we would pay on this facility to us achieving our greenhouse gas target reductions. That is pretty novel. In fact, I think pretty unique. I'm very grateful to the 15 banks who were willing to go with us on this.
Everybody got quite a lot of attention, including from some national governments who called us and said, "Hey, this is very interesting. Tell us more about it." You can see that we're linking performance and purpose even in our financing structures, which is very nice. You know, our net debt is kind of just under EUR 600 million at Q1, and we will, of course, continue to monetize our remaining associates. We still have the businesses that remain in Chemical Invest to monetize our DSP. That, of course, puts us in a strong balance sheet position. With that, just a few assumptions. I'm not going to run through them. In short, what we're saying here is that these strategic targets and financial numbers are taken in the context of the world as we know it.
Should there be a massive shift, we will reserve the right to see how that impacts us. That is broadly what this slide is saying. With that, back to the summary slides. We will be now going to Q&A. If you can forgive us for a minute or two, we need to do a little bit of furniture shuffling, and my colleagues will be joining me on stage to do the Q&A. Couple of minutes pause.
Yeah. It's okay. Here's the thing. Chris. Maybe it can be higher.
Sorry, bit of hydration. Look what we prepared. One for Dini. Yeah. That's okay, just one. Thank you.
Thijs. Thijs. Good. Q&A. Yes.
Oh, thank you.
Mic's on the table.
Mic's on the table, yeah. If you could do that so that the webcast can hear the questions, that'd be great.
Can we-
I basically have three questions from Andreas Heine from MainFirst. The first is basically on innovation center materials. I realized that a number of products I am used to knowing the innovation center were mentioned now in the material segments by you, Dimitri. Is it a change so that the products move into your space and are managed differently from now on? I think about these medical products you mentioned and the advanced solar. Secondly, on the last M&A route you had, you have done a number of acquisitions at a time, which was quite difficult then to integrate, causing some hiccups. Going forward, is that you might limit yourself to, let's say, one acquisition a year? Can it be if there are enough opportunities available that you spend the money as quickly as you did it the last time?
The last on the cash management, you will be almost debt-free next year if you do not do anything on M&A, you have quite a lot of loans and bonds outstanding, your gross cash is quite strong then on the balance sheet, probably returning a negative return. At what time, how long does you sit on that pile of cash until you think of this shareholder return topic? Thank you.
Okay, thanks. Dimitri, will this strategy give further direction to materials? Is the short summary of your question.
With an additional question on whether it's a movement from innovation center to materials.
Right.
I think the strategy definitely gives more direction into the three growth platforms, which I depicted on, based on the focus domains. Part of that is definitely more attention to the upper right corner, higher growth, higher margin. If you remember well, in the past strategy, we always included biomedical and solar from a strategic perspective. This is not new. I'm already cooperating quite intentionally with Rob van Leen from a strategic perspective. In terms of operations and how we organization manage it, at this moment in time, we don't incur any changes.
Like Dimitri is saying, next to the organization part is fine, but it gives direction to our materials business because everything which has to do with health and bio and green, et cetera, we like very much. You can imagine 100,000 things you can do in materials or chemicals, et cetera, but we are not going to do 100,000 things of that. We're going to do the things fitting in those domains, and that fits very much with the rest of the company. It does give direction. Building on that, you said previous acquisitions, you had some hiccups. Well, we can nuance that, but nevertheless. In the future, we will do acquisition without hiccups. That's the change. Obviously, there's always, and some of the hiccups has also to do with people.
If you acquire a company, it's very difficult to step in and you say, "You know what? You're all crap, you're all out." That's not the way you buy a company. It's also not smart because you buy both the resources. Over time, you find out that some of the people can make the move into the new setting, and some people cannot make the move in the new setting. Then you need to bite the bullet. That some of the hiccups have a lot to do with people. At the end, you need to bite the bullet. I promise that almost every acquisition has certain hiccups, and it has to do with people who can make faster or not faster move. It comes back to your next question, how many acquisitions will you do then at the same moment? Will you overeat yourself?
Apparently not. That we want to watch that. Even stronger, we mentioned it deliberately on our slide. If I remember that on slide on inorganic growth. I started with value creating M&A. You might say that's pretty obvious. Maybe still, it's not always that obvious. The third line, I said predominantly in nutrition, gives the direction of the company, gives the direction of those M&A activities. Certainly, I said in the slide, we need to continue to show our organic growth whilst acquiring. Sounds also obvious, but it's not that obvious. Why did we put it on slide? Because we want to share with you that we are totally aware of that.
We are aware of valuations, we are aware of value creation, we are aware about the domains, we are aware about your correct point of overeating, we are aware that we need to do M&A. We can do M&A, but we need to continue to growing also. That means also a way how you organize it. We have been discussing already which is how we will organize that, and who will we be involved in acquisition. Of course, it's fun for every person in the company to be involved, but not everybody will be involved in order to take care that we also continue to grow organically.
Can I add?
Please.
If you look at the 2010 and 2015 period in human nutrition, for example, we have made four major acquisitions. If you look a bit more into detail, three of them were in North America. A question of whether you overload a certain part of your organization is classically important to look at. At that time, we clearly overloaded North America. Would it have been possible to do those same acquisitions and have them Yeah, I know it's not possible, but have them in different parts of the world, I think the jury would be out differently.
Right. The third question,
Yeah.
Okay.
The third question was about our cash generation and our low net debt position. Indeed, particularly if we monetize our remaining associates, our net debt will be pretty low. The timing of when we may consider that in our capital allocation policy, we're reaching the fourth element, is really dependent on how much progress we've made in terms of assessing whether the transactions have not happened because they cannot happen, or they're just not there, or whether they are still at timing, and they are in the pipeline, but it takes time to get there. It's extremely difficult to put a firm timeframe. It's more about have we reached the point where we're saying, "Yeah, okay, now can't do anything of sufficiently material nature, that we should not consider it." We will take it in as a progressive evolution.
Okay, I move a little bit in the room. Over there, please.
Hi. Thank you very much. Tom Wrigglesworth, Citi. Two questions, if I may. In terms of the margin improvement that you have, both in the materials and the nutrition business, how much should we think of that coming from the innovation pipeline being higher margin products, versus you effectively underselling the current portfolio and lifting that up? How much is kind of margin recovery? A second question, if I may. Clearly you are talking about shifting higher up the value chain with regards to your sales, and yet you're targeting lower working capital. How do those two square? Because obviously you've got more value through the chain, more specialization. That seems to be a strain on working capital, and yet you're suggesting that you can further improve the working capital conditions.
Could you elaborate a little bit more on how those two things square up? Thank you.
Maybe Chris and Dimitri can say something, because with both businesses, we go into an increase of EBITDA margin in nutrition above 20%, and in materials from 17% today to 18%-20% bracket, part from innovation, part from the business. Chris, help me.
I think in the context of nutrition, you have seen some really big innovation projects looming in that next period. That part is in the period we're talking about, still relatively small in terms of what the impact is on the total business in nutrition, you can imagine. Nevertheless, there are many more smaller-sized innovations that happen every day. You've been talking about formulation application. There's constant renewal, as Dimitri mentioned in his business. There's also one other thing, and that is the whole platform. The economies of scale from driving that business to higher and higher overall sales creates economies, creates higher margins. It's a combination of the latter two. I think the one at the beginning is one that we hopefully see very much happening towards the end of this period coming.
Dimitri?
Let me build on that. I think I've mentioned two areas of innovation. One was the innovation sales in the current period, above 20%. That definitely is one of the drivers to make that step up in quality of EBITDA within our field. The second element were the innovation programs, where we basically say, "Hey, that's more into the area after 2020." There are two areas. The big innovation programs would basically drive our business post-2020, and there is an area within the current period where innovation sales is key on what we're doing. Not only on top line, but also improving the quality, moving into the 18%-20% range.
Thanks. We had another question, Chris, a dangerous question. Is moving up the value chain now making the reduction of working capital more difficult?
Why do you ask me? Why don't you ask Dimitri?
No, no.
It should be Chris.
And then-
Okay
I think that that question counts more for nutrition because their working capital's higher than in materials. Chris, your answer, please.
Okay. Thank you for the question. Puts me on the spot. First of all, I have to tell you that when we look in our B2C business, actually, they are not the culprits for our increased working capital. We really can't say that. Jeremy, if you look at the i-Health business, as we call it, they are not the ones that make this inventory being too high. It's clearly that when you look at our business model, global products, local solutions, the more you say they should be different because there are different key success factors on both sides. For working capital, they need to be very much aligned, and we still have a way to go. I think it's very clear what we need to do. We actually have already set up our supply chain differently. As we speak, we are reorganizing that.
We make it simpler, we link it to both sides, demand and supply. It's not a supply topic, it's a demand and supply topic, therefore, we have put it much closer to products, because in the end, that's where it is. I'm very confident that over time, we move this down. It has nothing to do with the value chain, although I fully understand the question. Actually, if you would look into it, the guys further down the chain are better than us.
Okay. Next.
Two questions. First, to get to EUR 1 billion from innovation in 2025, do you need a lump of CapEx outside this period, or is the 6.5% CapEx to sales sufficient? Secondly, in the sense of not overloading on M&A, does that imply a limit to the scale of M&A in one transaction rather than number of transactions? Is there a limit in the size of a deal? Does that also imply a preference for more partnerships along the line of these Novozymes and Syngenta partnerships?
Okay. Maybe Geraldine can say something about the CapEx and 6.5% being sufficient also for the innovations. On the acquisitions, I don't want to limit ourselves today. Yes, we do a set of small acquisitions, or we do a bigger step, et cetera. For me, the most important one is if we can create value by not overeating, by being able to manage it, et cetera. It depends on the context, whether it should be or could be one or the other. I think it's not meaningful now to limit ourselves. Would the implementability or would the value creation of it, would that be a clear factor next to the fact? Yeah, it fits strategically. Okay, fine. I assume so. Can you also create value? That one will be a big driver, but I don't think it's meaningful now to limit us to exact size.
Sometimes, not always, sometimes size has something to do with the executability, the CapEx.
If you recall, what we have said is that broadly speaking, we try to absorb the innovation in our CapEx. When you look at something like Veramaris, we had also flagged that if we need to use that CapEx space to support our organic growth, we may stretch over. Particularly, your question was to 2025, to the bigger number. That probably would require a bit extra CapEx. The good thing is it's very ring-fencible, and the returns are very clear to see.
By the way, you asked also something about partnerships.
We don't look for partnerships for partnerships, but if it's worthwhile, and I think indeed the alliance with Novozymes on the feed enzymes is a very good example. 20 years now?
20 years partnership, it works very well. Other question. Over there. Please.
It's right there.
It's here. Andrew Stott, UBS.
Andrew.
I had a couple of questions. Maybe a high-level one first for Feike. I think most presenters have alluded to this high-water mark, the 2018 benchmark, a bit different from 2015, which is fair. When you think about the organization today, where are you not firing? If you think about some of the business units, where can you still push on into a higher gear? It just seems from a high level that you're doing exceptionally well across the piece, which was what you said in your introduction. That's the first question. The second question is just a follow-on from the previous one. The one and a half to two and a half times is obviously a guidance range. If the right deal came along-
Okay
would you go somewhat higher than that two and a half?
Okay.
All right.
By the way, fully agree. That is more structural midterm leverage structure. Now, for the right kind of transactions, be it several or maybe larger or smaller, et cetera, we could consider going down a couple of notches. One thing that we would certainly want to see if we did that is the deleveraging curve being quite clear so as to get back to at least a BBB+ type range, which is more towards the two and a half. I think you can even do a three times and still be in that rating range. For the right purpose, we would stretch, but this is more an indication of where we see the midterm structural positioning of the company.
Andrew, where are you now compared with a couple of years ago with the organization? Can you still improve? Can you get more out? I think you're never done with an organization. If I list at least two areas where, there are more of course, but at least two areas which I think is very important. I come back on this whole customer centricity project. We even enlarged it recently for the coming years than what we did before. Even knowing exactly sharper your customer segments. We did a whole project recently. We started on our service desks, the people who are in daily contact with our customers. Our sales force, not daily in contact. Our customer service desk have daily interactions with our customers. About logistics, about communication. Exactly. That makes the customers happy or not happy.
This whole focus on customer, I found it very important. Also Because if we do acquisitions, we need to continue our organic growth. I realize we can only promise to grow faster than the markets we operate in without giving in on margins if we do this well. This is a very strong focus area and determines a large degree the success of the company. The second thing is innovation. I think we can get more out of innovation, hopefully even than what we showed and promised today. I think we are exactly right positioned in the right growth fields, and we feel that the market wants our products and solutions. Now, can we tune that even faster than what we promised here? Can we develop the solution even faster than we are doing today? Those two will be important areas.
Of course, we need to work also, like we said, on cash generation, on operating working capital, continuous cost improvements. There are numerous areas where we can all have a step-up. If we manage to get the customer centricity there and the innovation there, then money flows in the company. If we then manage that properly internally, our profit will increase continuously. Yeah. Oddo. Take the mic. Yes.
The first question is on acquisitions. You quoted on Bloomberg that you might spend EUR 3 billion-
That I spent what?
EUR 3 billion on acquisitions.
That's nonsense.
Just wondering how we should see that phasing, how quickly will you spend that money? Secondly, on materials, if I understand correctly, there's no M&A budget or no significant M&A budget for materials. There's no growth CapEx. What would you say to someone who says that you're readying that business for sale post 2021?
Is that a question to me or to Dimitri?
Both.
Dimitri will do the Bloomberg. I'll do the Bloomberg first. I think Bloomberg is listening to, although they quote me, but they're listening to Geraldine. Geraldine said between one and a half and two and a half EBITDA. The midpoint is two.
Times 1.5 equal
2 times the EBITDA. The EBITDA we have is about 1.5 minus the debt, and the debt is at the year-end, most likely close to zero. You come close to EUR 3 billion. That's a mathematical calculation. Andrew said also, do you want to Who was it? Yeah. Could you, in exceptional cases, be a little bit above 3? Yeah. Also, Geraldine said, yeah, it could also be two and a half. You can stretch it further. Is 2.6 also doable? God knows. It could also be one and a half, et cetera. In that range it is. How much time? We deliberately did not put a timeframe in there. Also in the slides of Geraldine was, we cannot sit endlessly on the money. What is endlessly? Well, I don't know.
If we are at the end of the period in 2021 and still didn't do anything, that would be far in the period. We'll be at the end of the period. At a certain moment, if we can't or we want or we have to pay too much, then other returns will come on the agenda. Is it our priority and focus now? No, not at all. We want to grow via acquisition, and we think we can provide money for shareholders. If we can't, we want to be very clear and very open. We need to have that option as well, because without that option, you will force yourself to do stupid things, and we don't want to do that. In the materials, I didn't say, we give clear direction with the M&A in the direction of nutrition. Predominantly nutrition. Nutrition is now, what is it?
65%, 70% of the company, we want to give clear direction also. If we keep all open on M&A, the distribution of the portfolio and direction of the portfolio of the company and also the weighting could go all directions. No, it can't go all directions. We give a clear direction of the future of the company without pinpointing exactly to every dollar left and right. We give clear direction. It's also not true that there is no CapEx-
No
for Dimitri’s business. It’s true that the majority of the CapEx will most likely be spent in the majority of the business which we want to grow. Within that framework, Dimitri has to grow smart every single year in top line, in bottom line, in EBITDA margin. Is that possible?
Yes.
That’s the outcome of the strategy. Yes, Feike. Maybe I want to build on that, because I think it’s an important question. I start with what Feike alluded to in his beginning of the presentation, and one I started with, let’s look what’s happening outside in the market. We see three focus domains happening. One is nutrition and health, the other one was climate and energy, and the third one was all around resources and circularity. Based on these focus domains, we have defined a space where we can differentiate ourselves.
Therefore, I alluded to on the three growth platforms where we want to build our business on, nicely linked to the macro trends. The scoping for the new DSM for the future has been clearly defined. That’s around these three focus domains.
I feel very comfortable in growing that materials space into an above-market growth with an EBITDA range between 18%-20% and a high single-digit EBITDA growth year-on-year. Why? Because we still spend considerable CapEx. You saw my slide, 5% on sales. We still invest in R&D, 5% on sales, which is higher than if you see in the competitive field, just to fuel that innovation effort. If I would feel being restricted, I would have given you a different answer. I don’t feel restricted. We still can add value financially to DSM, but even more important, even strategically if you look at the scope.
Appreciate. I'll come back to the left side of the room.
There's also the front.
Front. Ladies first.
Laura Lopez from Liberum. First on animal nutrition. The business has a high exposure to your premix business. How high are actually the barriers to enter this business? Why don't BASF or any other of your competitors also enter this business? You clearly have had much stable margins than your competitors.
Sure
with high exposure to vitamins. How long can that be? Secondly, on human nutrition. In stevia, it will be interesting to know what is the business model you're going for. You already mentioned B2B business. What kind of clients are you looking for there? I think that marketing will be an important part because there's already another stevia. I know it's different, but to change also the image that people have. For Coca-Cola, it didn't work, and they took them out. What will be the strategy there, and what kind of clients are you looking for? It's also like beverages end customers. Lastly, on M&A. During the presentation, we heard a lot about marketing, delivery systems, and technology and digitalization. Will this be important or key end markets for your M&A strategy moving forward?
Let's do it in reverse order. You can start with M&A, Geraldine.
Sure. I'll say a few words. You picked up a lot of the keywords of the focus areas where we believe that it will be a combination of organic and inorganic. I pick up your word on digital, digitalization, data analytics. When you look at personalized nutrition, I think what comes out very strongly is that we have the ingredients. We have a part of the go-to-market, but the piece that it's not in our hands yet, or we need to partner with someone, is very much the data side, the monitoring devices, be it the wearable, but any kind of other monitoring. Of course, to some extent, if it goes all the way to the B2Me, the actual dispensing type of technologies, and hence, the little movie that we shared here.
These are all definitely areas that we would put as part of the areas where we would consider to gain those capabilities in some shape or form. Venturing, partnering, acquisitions, we'll have to see how that takes shape.
Philippe, can you add something on stevia?
Yeah, I can. The stevia that is currently in the market is plant-based. You're right. It's also what is called a Reb A. What we will bring to the market is a Reb D, which tastes much better than what is currently existing, and we will sell that primarily in a B2B way to big customers like Coca-Cola, Pepsi, et cetera.
One thing to add to expand Philip's potential. Basically, we look to stevia as a sweetener, and therefore, in light products, et cetera. That is a huge market. However, different than all other sweeteners, it could also be partly a sugar replacer. You open up the market not only for light products, we can open up the market for sugar-rich products to reduce the sugar component and to add stevia to that. If that could work at the end of the day, we open a huge market because the total sweetener market, including sugars, is about?
EUR 90 billion.
EUR 90 billion.
Yeah.
This is a big market. That is what some of the beverage companies are looking for with especially stevia. Can you use that also for sugar-enriched drinks, but then with lower sugar?
That's different than the so-called light market.
Yeah.
Good.
It may be worth just mentioning, of course, that the most exciting part of this is that it's all about a solution. When you start tweaking an important ingredient like sugar, then here goes all the other things, the texture, the nutritional ingredients, the coloring, et cetera. To Jeremy's point on that slide was the puzzle picture was saying by introducing stevia, which is clearly meeting a need of reducing sugar, you also create a lot of adjacent needs. Where we feel strongly positioned is to combine those.
Could we add on the full picture? We want to dwell on stevia. Philippe said in the side track, the competition is plant-based. The implication of that is that the plant-based, due to the availability, due to complexity, will never be huge product. The big companies like Philippe is referring to. We will only make a switch if we get the fermented product on the market as well. That's what we do. We are dotted in the plant extraction business. Animal health and the premix, Chris?
Yeah, this is a question that I love. This is exactly core. I'm sure I saw David smiling also when this question came up. Now he explained already, we have this business model that on the one hand side counts on many products, and on the other side, on many premix sites to be close to the customer. When you ask how sustainable is that? How quickly can somebody enter? It gives you a little bit the feeling there's a lot to catch up to. Today, when you look into the realities, you have one company named in Germany. They play only on the product side. They have no premix plants. Catching up on 47 or soon 49, as David referred to, is a bit of daunting exercise besides that it's a bit of reversal of their strategy.
What we hear very much, that's for me much more important from customers, is that this unique combination is very much helpful. Let me explain why. If you are in premix, that's great. You do a service job, you mix something the customer wants or something you propose to the customer. If you can add innovative new ingredients, then you really play a different game, that's what they want. The combination of the two is highly successful from that point of view. David, anything to add?
I think you summarized well, Chris. Great question. I think some of our competitors who have been in, have been out, have been maybe a little selective there. You mentioned our big footprint. We go there. It's not just an asset, it's a business model. To Chris's point, you bring the portfolio, you bring the innovation, you bring the team of expertise behind driving the nutritional solutions. You also bring the technology and the expertise in terms of delivering that to be high quality, reliable, traceable solution provider and the DSM move fast so that that white space we see, we fill it quickly. All of that adds up together to a good strategy. More than just an asset play.
Good.
operationally, what are innovative additions like an enzyme, like for Clean Cow or those are the innovations, like mixing it with fibers?
Yes, absolutely. All of the things that David mentioned in his presentation and much more, we just focused on some of the highlights, but that is really what the customers are going for. In the end, it's more for less. It is no antibiotic growth promoters. It's the whole gut health and the performance driven business that needs to work. In this environment, there's so much innovation headroom still. Just when you think about antibiotic growth promoters leave a headroom of easily EUR 3 billion by being reduced to only medical kind of functionalities and not anymore for growth promotion. That is a huge market that needs to be filled.
All right, well, other questions here in the front?
Hi, it's Chris Counihan from Credit Suisse. My question is for Chris and Dimitri, actually. You guys are both targeting to drive volume growth ahead of market. Could you talk to us about how operating leverage in your business works and how that will support your margin targets?
Dimitri?
What do you mean exactly with operational leverage?
Fixed cost leverage.
All right. Yeah. Let me start with volumes ahead of market. I've depicted a few of these growth drivers where we feel why we could grow faster than market. One was winning the right segment, then substitution, then innovation headroom, and then basically also sustainability as a driver. The key driver for that growth is more into being customer oriented, choosing the right differentiation towards your value proposition, to a lesser extent in terms of cost. However, if you look at one of the competencies we have, we have a strong performance culture. If you look at where we look at costs, we have still strict discipline. We'll tumble the quarter every time. There's a bit of a culture in us. However, the biggest step up needs to come from that volume growth above market.
We obviously try to be very strict on cost, and then you get a double positive whammy if we do that. We are aware that we need to be cost aware. Then if we grow the top line, it will bring our EBITDA growth year-on-year.
Chris?
Yeah. When we talk about global products, we actually mean that we produce it in only one place. That gives you obviously the feeling if you produce only in one place, you make sure that the plant is still there, but you actually reap enormous benefits from economies of scale, that brings that leverage in a very strong way.
Move to the left. Back end of the room. You win. Just speak.
No, with the mic.
No, with the mic. Just speak.
Thank you.
The microphone catches up.
Banks speaking. I would have two questions, please, on your innovation pipeline, particularly on slide 28. The first is how you've got the confidence that you're going to be able to make 40% EBITDA margins in this area. The second is on product concentration. I see i-Health is included in this slide. It was mentioned earlier that this division is making about half a billion of sales currently. If you assume it continues on a 10% per annum trajectory, that's about EUR 500 million by 2025. If you add in the guidance on Veramaris of EUR 150, you get to EUR 650, that would imply across the rest of the innovation pipeline, the 10 or so projects shown, there's an average of about EUR 30 million sales per project. Is my reasoning broadly right, even if you can't give me guidance on individual projects? Thank you.
i-Health is not included.
What you now do is you take all the separate slides of Chris and Dimitri, and you looked all the figures there, and you compare that with my slides. You say, if I calculate correctly, all the figures of Dimitri and Chris, and also the things that they did not mention, where they give specific examples with quantifications, they come to a figure which is higher already, which we present now than your figure. That's correct. My figure is less than the sum of their figures. That is correct. My figure could be higher, but I don't want to commit myself to that one because I know the risks. I know things happened. Although partly the figure is already risk converted. I feel comfortable about the innovation potential that the company has.
By the way, I prefer also that it is this order and not the opposite order, that my figure is much higher than their figure, and then I feel really concerned, to be honest. You're right. You're also right that the EBITDA margin, which we see so far for those new innovations are pretty good. Chris, you want to add something?
Yeah, just.
And not-
little side issue that is not so much a side issue. You kind of pulled in the whole i-Health business into this. We did not.
Some of the new innovations.
We did not. The i-Health business as such is not calculated in for that. The expansion of that is not in. When we go to more the personalization, that is in, but not i-Health as such.
Yeah.
That makes it a bit more close, the numbers. The gap is a bit smaller.
Is it the majority of the i-Health business as it stands in that innovation pipeline?
We can read.
It's a portion of, not the whole thing.
You mentioned on that slide in-
Yeah
2027, that a part of the new innovations in i-Health are indeed into this. Chris, correct, it's not the whole i-Health business because the whole i-Health business is a new expansion part, because the whole i-Health business will be a quarter of a billion already today from the sales, EUR 300 million. Obviously then a large part will be already existing business and not the growth.
Yeah. Still a lower number, it's a bit less lower.
Christian.
Yeah. Christian Schlegel, Allianz Global Investors. A quick one for Geraldine. Could you share with us the starting point of adjusted net operating free cash flow to which you refer, which you want to grow by 10% over the next two years?
Uh-
In absolute terms.
Yeah. Okay. I will have to remind myself. I don't have it off the top of my head. The definition is EBITDA. It's EBITDA minus working capital, minus CapEx, minus provisions, minus tax.
Dividend.
Before dividend. The reason that it is adjusted is that we're taking out the APM. It's like your adjusted EBITDA. It starts from an adjusted EBITDA starting point. I'll have to have a quick look for you what the equivalent is, sure.
It is in the footnote in one of the pages, if I'm correct.
Yeah. Let me have a quick look. I'll come back to you in a.
On one of the pages where Geraldine is describing it. If you read the unreadable small footnote-
Yeah
I think the definition is there.
Okay.
Yeah, you give away your turns three times, take it now.
Hi. Chetan Udeshi from J.P. Morgan. I had a question on B2C and B2F strategy. At what point do you start competing with your customers in that business with that strategy? Second question I had was, apologies, more short term in nature. In 2Q, we've seen the vitamin prices, especially for E now almost approaching where they were before the BASF outage. We've not seen BASF up online fully yet. Can you explain what is happening in the short-term dynamics, why have the prices corrected so much before the resumption of production from BASF?
Okay. Chris, B2C, B2F outages pricing. All you.
Thank you. It's actually a very good question. Do you compete with your customers if you move down the value chain? We ask ourselves that question all the time. If you look more into the specifics of those two examples that we have. Let me start with B2C. We are the world's number one probiotic in dietary supplements, starting in the U.S. now expanding globally, mainly also in China. That is not where we actually hit our customers very much because probiotics is more on the fringes with us as B2B. It's a different story. Actually, in that regard, we rather gain with our customers because they think we have experience what it takes downstream. It's actually helpful. You need to play it smart tactically, but it's actually not a problem. B2F. We have, as David explained, two B2F businesses.
One we acquired is Tortuga. There we directly work with the farmers. In essentially there's nobody in between. It's a bit different than you would see in other parts of the world. In that market, that was already the way business was done. Therefore, we didn't push any customer away. In China, it's a very interesting story. In China, actually the whole distribution That is, for example, in Europe or in North America, so much ingrained and even in concrete is not there. You actually go on virgin land by building this up. You know how it is. If nobody's there and you build it up, once they come in, you're already there. It's not the same thing as you compete with something that is already installed. We are on virgin land in that regard, or on virgin products that we're normally not in.
To your other question. Maybe I repeat the question to make sure that I get what you really said. I hear you saying why is the vitamin E price going down ahead of BASF reentering the market? Is that what you're saying?
The question was that if we see from Q1 to now, the vitamin prices have already fallen to the levels they were before the BASF plant went offline. BASF is still in the process of ramping up. They have not essentially started putting all the volumes in the market. Has something changed on the demand side, which is causing this price correction? Or was there some pre-buying in prior two quarters, which is now normalizing? Or in other words, the question is, will the price go down more if BASF comes up with the capacity fully?
Yeah, look, it's always the same. Markets don't happen just because product is physically available. Markets are changing because you know that something will happen. I think that's also here the case now that the market knows that BASF will come back in the third quarter. They anticipate. The other piece is what Feike mentioned actually during his discussion of the full-year results. We see that there's a certain hesitation in the market, especially on vitamin A, to commit now because they want to not be caught on the wrong foot. Therefore you see in quarter two a bit of a hesitation, and the hesitation creates also a little bit fluidity in price. Will we see it lower? We don't think so in vitamin E.
We don't think so because it's already reaching quite levels where some of the competitors get to the cost of their product rather than the price. It becomes marginal interesting for them. Time will tell in the next quarters. As you know, we have gone through a few of those cycles, we're not totally shocked by what is happening.
Sure. Over there. Yeah, please. Table nine.
Sorry. Greg Watson from ING. You've given us upper bounds to the margin guidance in materials, but not in nutrition. Why is that?
More than 20%?
Yeah. Well, that's limitless, isn't it?
That is mathematically correct.
I guess as a rejoinder to that, you're in danger of going through that guidance as in above 20% this year already. Your three-year guidance is effectively-
Let me not answer the question, but say something else.
Have you thought of going into politics?
If it fails here, that's an alternative then. We say deliberately above 20, and we didn't, and I'm not going to give any narrow range. However, I do say we ever had a margin range of 2023, and people tried at that moment to push me above 23. I said, at a certain moment, increased EBITDA margins are not particularly of our own interest because they attract a lot of newcomers, and they attract maybe on short term that is interesting, but on longer term, that attracts in a lot of new misery. If this answers partly the question that indeed, theoretically, mathematically, there is no upper limit of above 20, but for me, there is an upper limit of where it becomes very dangerous.
As an interpretation of that, the reason I wanted clarification is because it could have been interpreted two ways. One, you have no confidence that margins will go much above 20, or two, that you simply don't know where your margins will end up. It sounds to me, if I can reinterpret your answer, that you are not going to allow margins to get too high.
Now you're the politician.
As in you're not going to gouge the customer.
Listen, if I end up in politics, I will hire you as my first assistant.
Thank you. I'll take that as a compliment.
We will form a great duo. Indeed, I think your answer is correct. I think, of course, we have a clue what we can do. Of course, we feel confident that we can ramp it up above 20. Indeed, you are right. It's not in our interest to have that unlimited. We have been in some of those spaces before, where at a certain moment, and I even give you a number, at what ranges already if you come north of 23, you really attract other people in your business, which we should not attract. There is deliberately something like there are limits in here for our own interest.
Maybe let me add one element, and that is mix. In any given period, you may have somewhat different combination within our nutrition business, which is a very broad business. I wouldn't, and we've deliberately put margins as an ambition and not as a firm target. Our target is to get that EBITDA high single digit growth. That is what we're aiming for. Now, we have, of course, an assumption of where we think the business is going to be, we're not going to hold ourselves back if it means at some point it's a little bit below, it's a little bit above, et cetera. That is not a concern. The concern is the perfect mix that we can get.
Thanks. I'd like to turn to M&A. All of the questions about M&A so far have been around acquisitions. When we look at that map of the materials businesses, traditionally, what has happened is that the materials that are the products that are in the low bottom left-hand quadrant have traditionally been divested. Do you expect that to continue in the next strategy plan?
Dimi?
We've clearly described that we're happy with the portfolio we have, including what you've seen in that lower box, which basically is powder, caprolactam, and it's the polymers in the engineering plastic business. These are still performing pretty well, but they may be a bit more mature on their life cycle, and that's why we put them in there into maximize returns. We'll continue doing so, but those are profitable businesses with good returns. In our period, we're not foreseeing that. I think we have a good track record in looking at our portfolio all the time. We continue doing so. The key of the strategy is that we differentiate ourselves towards the upper right. That's the trending.
Thank you. Geraldine, can I press you again, please, on the timescales for Option 4, use of cash?
I appreciate you need to look at everything that's available, but it would be helpful if we could understand, is this a 12-month grace period you're giving yourselves, or is this a 36-month grace period you're giving yourselves?
Well, I thought that Feike gave a great answer to that after my answer.
Me too. Was seen as too political.
Which is why I'm pressing you both again.
Well, our joint answer is the following. We said jointly already. We don't give a limited time period, but if at the end of our time period, we still didn't spend anything of cash, and that is in 2021, it becomes time for considering share buybacks. Could that be earlier? I don't know. We will see, and we will cross that bridge when we are there. We will take some time because it's absolutely important that we need to continue to show our organic growth and find value in creating opportunities. It is possible, and we have confidence, but it is not a piece of cake. You all know better valuations than I do sometimes. We need to have also the time to make the right decisions here.
I absolutely understand that. I'm a firm believer that acquisitions choose you, not the other way around, if they're going to be value enhancing. Equally, you will end up sitting there.
I agree.
surplus of cash on your balance sheet, which is not optimal.
I totally agree. Not forever. Absolutely. We give an indication if towards the end of the period, we are still sitting there to give at least a limitation, not a full tuning, but a limitation, then, of course, it will be stretched.
Okay. Thank you.
Thanks.
We are approaching time, so a couple more.
There are still some pressing questions on the right side. Not that you're the wrong side, but you're the left side for me.
No, there's one hand up over there.
Over there? Yeah, please.
There were two questions. Okay.
A couple there from me, please.
Sure thing.
Just a point of clarification on the margin and operating leverage questions that have gone before. Is it safe to assume, or if I'm interpreting your answers, that operating leverage will probably contribute the greater proportion of the margin uplift in the businesses than the product mix? That's the first question. Second one on return on capital. You've mentioned that you're prepared to sort of postpone the target in the event of M&A, but you also talked, Geraldine, about the possibility of some larger lump sum organic investments should the innovation opportunities arise.
Would you, in those circumstances, allow the return on capital ratio improvement to stall or to remain stable for a while if that were the case? A very specific question, thirdly, on some of those larger innovation projects, I'm thinking of the Niaga and Veramaris. Those sorts of technologies tend to see rapid adoption when legislation changes. You mentioned in the context of Niaga that there was some legislative change. Can you expand a little bit on that, please?
Okay. Who starts with the margin uplift?
No, I go first. You asked the question whether it is more the leverage from the size of the company versus the mix. I can't give you a split. They both play a role in it. Sometimes it's one more than the other, next year it's a bit the opposite. It depends very much, but they both play a big role in it, and we count on both going forward. Dimi?
Yeah, I think I echo that. We are where we need both. It's not one and not the other. It needs to be both. I already alluded to, I think, a former question. For us, it's creating that top-line growth within the upper right corner who creates that product mix improvement going forward. It's end-to-end.
Okay. Geraldine, on the return on capital employed and a few larger-
Yeah. I caveated clearly the acquisitions because we have seen from our history that goodwill is pretty chunky, and that really does skew your return on capital employed significantly. I would have expected that in terms of the more lumpy innovation projects, that that would not have as material an impact, and hopefully also get a much quicker return on it. It would be, say, we have to scale up Veramaris times two, times three, something like that. We would be able to get the benefit of that relatively rapidly. I don't want to say a firm, not a problem, but I wouldn't expect it to be at the scale of what a goodwill chunk on the balance sheet would do to our return on capital employed.
Regulatory context, Niaga-
Yeah.
-to what extent that could help you or not.
Yeah, I think normally we find stricter requirements from government a bit difficult. In this case, we enjoy it quite a bit. It started with additional requirements in the U.S., in California, where basically the eco-redesign has been applied. In the past, all the carpet manufacturing just put landfill in, and there was a percentage which need to be recyclable. They defined recyclability as, "I will burn part of my carpet because I generate energy, so I recycle carpet." That was a bit of a camouflage. The government of California applied stricter legislations, and now that burning of carpet can no longer be used in your addition to what is recyclable, yes or no. Second element, we've seen that in the EU. There's a new Eco Circular Redesign Directive being applied, where we basically look at more circular business models going forward.
I'm pretty sure that in the next years to come, those will be more strict and will help us into fast adoption of these type of circular developments and circular business models. Yeah.
I think those kind of things, Chris can say something maybe about his business, Veramaris or Clean Cow regulatory things, but it will play increasingly an important thing. Not in the last place in the country, in the world, where most of you think it's the most dirty, but it is not in the future, that's China. Regulatory movements in China, some of you know I'm in the advisory body of the Chinese Premier, are going very fast. Already our waterborne coatings are benefiting today from increased sales, especially in China. It goes very fast. Chris.
You mentioned Veramaris. I want to say a few words also about Clean Cow. Legislation is one way of turning issue management into a different direction, let's not forget, consumer behavior is the other one. Just take antibiotic growth promoters. In Europe, legislation has changed. In the U.S., the whole thing came from the consumer side. In Veramaris, it's very much the consumer. The consumer sees that 17 million tons of fish are fished out of the oceans to feed again to fish, which we then eat. The so-called fish in, fish out ratio is a bit outrageous. You need about double the tons of fish for the ton that we then eat, which is called farmed fish. That creates a lot of consumer sentiment that this is wrong and that we need to do something about it.
It's very strong happening. At the same time, the fish in the ocean are limited. Actually, they go down. Therefore, there's a supply chain need. The combination of the two, availability and sustainability, are driving very much this market. The market needs it. Actually, the fish need it for health. Not only for our health, but the fish health for farmed fish. It's both. In Clean Cow, it's a bit different. In Clean Cow, carbon pricing will drive, as we heard from Feike, will drive the world. Clean Cow is a product that will thrive on this. The key issue in Clean Cow is that we have a value to farmers. That's what we call the push value. We have also pull value, which is we are reducing greenhouse gas emissions. The question is obviously, who is paying for that?
The farmer, in the future, will pay, but today he doesn't. Our initial start is to find parties that pay also for the pull. You mentioned already one, dairy companies. When you read the annual reports of big dairy companies like Danone, FrieslandCampina, and others, they already have the targets set for themselves in years to come. The only thing they have not set for themselves is how to do it. They know they don't know how to do it. This is one of the big things they bank on to actually make that happen, and they will pay for it. Ultimately, you can imagine, the consumer will pay for it, but you need to make that whole vertical value chain work. Legislation will help, but it will not do the whole thing.
It needs also a lot of convincing of the consumer that this is the right way to go, that actually dairy, which is linked with green and healthy and farm, needs to have a little bit of a brush up.
Yeah.
I think there was one question left. The lady here on the left.
Thank you.
With that, we can maybe close. Please, go ahead.
Thank you very much. Evgenia Molotova from Pictet Asset Management. I had actually two questions, but they're connected. One is, when we are talking about the growth until 2020, you said that the larger innovation products probably will contribute post-2020. If we look until 2020, the most innovation will come from application and customer centricity. Do I understand correctly? The second one on EBAs, because we had solar in previous Capital Markets Day in EBAs and the previous Capital Markets Day before, and In previous plan and the same for Biomedical I'm just wondering, because you give very strict benchmarks for your main businesses, but for EBAs, we don't know what the time horizon is, and unfortunately, financial markets are very short-sighted.
To understand what sort of targets do you put in front of business, and when will you be able to transfer them to business units to scale them up? Thank you.
Correct. Thanks for the question. A couple of answers. Our total innovation portfolio is contributing every single day to our current EBITDA and also in 2019 and also in 2020. The big projects we mentioned, especially on this famous slide 27, I guess it was. Is that 27?
27, yeah.
Yes. In the middle column, that will start to be introduced in the market from 2019 to 2021. That middle column will not boost our 2019 results, and that will start in 2020, 2021. Turning from a negative EBITDA, as I said, towards a positive EBITDA. There are many other innovation projects which you don't see here, not the bigger ones, the smaller ones which are contributing every single day. You are right. Those big ones, we need to start especially to talk about 2020, and further. Your other question.
EBAs.
EBAs. Yeah. Dimitri mentioned a few things on the EBAs, and I mentioned one thing. The three EBAs collectively hit an EBITDA line of about EUR 30 million this year. We have also about EUR 20 million, roughly, cost on our total innovation with venturing and all the other stuff, which is administrated in the same innovation center that Rob van Leen is responsible for. Therefore, you don't see the real results. It's a composed figure. Dimitri mentioned a few things, and maybe as the last, Rob can give a very short update on the three EBAs and how you are progressing, but keep it very condensed.
Okay, very condensed then. Biomedical, you know we had a setback with one of our larger customers, we're recovering from that. If you look at all the other business we have now, over the last two years, had double-digit growth, also this year we will reach that. Solar, far more than that. That is, of course, a very rapidly growing market where we have as predominant product at the moment, coatings with very high margins. We stepped into backsheets last year. That is a far bigger market where we are now expanding with 2 types of new backsheets, which we are introducing currently. At the moment at smaller customers, but probably as of the second half of this year, also at large customers. Also still good prospects for solar.
Finally, bio-based products and services where everybody's keeping asking me, "Where is Emmetsburg?" The POET saying, "Well, it is progressing." It is actually progressing to the point that we think we will have continuous production by the end of the year. As an interesting spinoff, some of the technology we created for the second generation biofuels, we have now also introduced into the first generation market. That is improving the output of the first generation plants by about 6%, which is highly valued by that market. There are about 200 plants already in the world. We have now amazing, I can even call it, interest for these developments.
I think actually, contrary to our expectations, the first big product that we will have and the first big income in bio-based products and services will be for yeast from the first generation ethanol market. I think I'll leave it at that.
Don't be too modest because your recent information is that you are much better in your yields than several of other players, right?
You are fully correct.
Okay. Good. With that, I would like to close. Appreciate it. We go for lunch. Once again, I highly appreciate your time and effort to come here. Also, the people on the webcast, to spend so many hours together with us. We hope to share some more insight, what we achieved so far and what can you expect from us in the years to come. Not only Geraldine and myself, but also with the different people leading the business, like Chris, with Jeremy and David, like Dimitri, Rob, Philip, et cetera, Judith, members of the executive committee of DSM. I think we are very excited about the future of DSM. I think, once again, the short summary is we're exactly, I think in the right spot where a lot of things happening and where our innovations can contribute.
I think we have found the mode to show a continuous growth of the company in top line, in bottom line. We need now to add to that, and we realize it's complicated, acquisitions without jeopardize that growth mode. That is the challenge I had for us. We set ambitious targets, like Geraldine said, on a much higher basis today. We are confident, otherwise we would have not announced today to increase our dividend with 25%, already counting in August, for our interim dividend. I think I cannot imagine about a better expression of our confidence, otherwise we would have not done this. We feel very confident our top line grows, our bottom line grows, our cash grows. We are hungry to deliver more.
We had a great ride, but, I don't know how this was your hunger just before lunch, but our hunger is quite a bit still there. Thank you very much.