DSM results vindicate 'strategic vision'

By Shane Starling

- Last updated on GMT

Related tags Dsm Nutrition United states dollar Vitamin

DSM has turned in a strong first quarter, with its Nutrition
cluster registering 18 per cent year-on-year growth despite a weak
US dollar and rising raw materials costs.

Quarterly Nutrition sales rose to €652m from €553 in the corresponding period in 2007, making it DSM's biggest and fastest growing cluster.

Profits rose 25 per cent from €63m to €79m over the same period.

The Dutch giant's next fastest-growing cluster was Base Chemicals and Materials (16%, €404m sales), Polymer Intermediates (9%, €342m), Pharma (5%, €207m) and Performance Materials (%1, €601m).

Across its divisions, and including exceptionals such as the sale of non-core businesses, the company saw its quarterly profits rise 27 per cent to €162m on sales of €2.358bn (up 10%) over the corresponding quarter.

Its annual sales are about €8.8bn.

Strategic Vision 'The company's strong business performance confirms our belief in DSM's Vision 2010 strategy to focus on Life Sciences and Materials Sciences," said Feike Sijbesma, chairman of the DSM managing board.

"This has been a very strong quarter for DSM with excellent performances across the company, benefiting from the strength of DSM's positions in its various markets and favourable market conditions.

We are conscious of the current less favourable macro-economic outlook, but thus far the conditions seen in Q1 have been sustained into the second quarter.

We are now expecting 2008 to be a record year for DSM."

Nutrition cluster

The company attributed the buoyant performance of its Nutrition cluster - made up of Nutritional Products (human and animal nutrition) and Food Specialties (functional food-focused) - to increased market share and prices which rose 11 and 13 per cent respectively in 12 months.

"Prices were increased due to a more balanced supply-demand situation, especially in vitamin E and vitamin C," the company said.

Higher volumes and margins had been achieved despite a 13 per cent depreciation of the US dollar against the euro, substantial increases in costs such as energy and raw materials and the phasing out some Roche contracts.

DSM acquired Roche Vitamins and Minerals in 2003.

Emphasis on quality In regard to letter vitamins, DSM senior external communications manager Herman Betten said DSM's differentiation strategy was paying dividends in a market increasingly dominated by Chinese suppliers.

"We have put the emphasis on quality rather than price," Betten told NutraIngredients.com.

"We are the only remaining non-Chinese supplier of vitamin C which we branded in March last year as QualiC to demonstrate our commitment to quality."

He said an ongoing shortage in vitamin E and C supply would ease this year .

It was less certain whether carotenoid prices would continue to decline.

Food Specialties, which had sales of €403m in 2007, performed less well, turning in an undisclosed decrease in sales and profits due to, "lower sales in enzymes and functional foods and the negative impact of the dollar and feedstock costs."

Across the nutrition division, sales volumes would be sustained but growth rates would drop as market share stabilised.

Price strength was expected to be maintained due to its differentiation strategy, price hikes from major competitors and ongoing "tight supply".

Evolve, devolve In February, Food Specialties acquired CMT Srl, an Italian company belonging to the Copan Group that has been developing testing for antibiotic residues in milk for more than a decade.

This move formed part of DSM's strategy to focus on Life and Material Sciences which was expected to be complete by mid-2008. "

As a result of the accelerated shift towards Life Sciences and Materials Sciences a number of businesses which do not fit in with the accelerated strategy will be carved out and divested," DSM stated.

The process begun in 2007 would be completed by mid-2008, " with the divestment process for the major part commencing thereafter."

DSM Special Products would be sold to Arsenal Capital Partners in the coming quarter, the company said.

The company, which employs 23,254 people across the world, forecast profit of €870m in 2008.

Its second quarter results are due on July 29.

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