DSM op profits up 8% in Q3 but no mkt recovery seen this yr

25 October 2002 12:48  [Source: ICIS news]

LONDON (CNI)--DSM said Friday that it saw no significant short-term improvement in either the economic climate or its markets but maintained its forecast of a substantial improvement in full year operating profits.

Last year, the Dutch chemicals and life sciences group recorded an operating profit of Euro521m.

Despite its pessimism over any immediate recovery, DSM said it expects comparable fourth quarter operating profits to be significantly higher than the Euro82m recorded in the relatively weak final three months of last year.

The forecasts were delivered along with third quarter results showing an 8% rise to Euro104m ($101m) in comparable operating profits on sales virtually unchanged at Euro1.39bn. Operating profits for the first nine months were flat at Euro287m on sales down 4% to Euro4.18bn.

DSM said Q3 operating profits before interest, tax, depreciation and amortisation (EBITDA) were up 2% at Euro200m but down 3% to Euro574m for the first nine months. The Q3 result was slightly ahead of most analysts' forecasts but sales fell a little short of consensus expectations.

The financial shadow cast by DSM's disposal in June of its petrochemical activities was reflected at net income level where third quarter profits totalled Euro88m against Euro101m last time. Results in Q3 last year included both DSM Petrochemicals and Energie Beheer Nederland, the natural gas producer.

All of DSM's ongoing businesses recorded improvements in third quarter operating profits, apart from industrial chemicals where income slumped 14% to Euro24m on sales down 7.6% to Euro341m. At the nine months' stage, industrial chemicals operating profits were 17.9% lower at Euro46m on sales 10.5% down to Euro1.01bn. DSM blamed the slump in earnings and revenues on squeezed margins and lower sales volumes at DSM Agro plus a lower exchange rate for the US dollar. It said these factors were only partly compensated by higher overall volumes for industrial chemicals and lower fixed costs.

Higher profits from pharmaceuticals and anti-infectives helped DSM's life science products business boost Q3 operating profits by 5.3% to Euro60m on sales up 2.6% at Euro541m. Profits at the nine months stage were down 1.7% to Euro172m on revenues 4.6% lower at Euro1.64bn. DSM said its fine chemicals segment posted lower profits and sales due to the quinine divestment and substantially lower prices for aspartame. Earnings from food specialties and bakery ingredients were stable.

Third quarter operating profits from performance materials business rose by 11.5% to Euro29m despite a 5.9% drop to Euro447m in sales. DSM said higher profits from elastomers, high performance fibres and engineering plastics outweighed lower earnings at DSM Desotech which suffered from the continuing slump in the glass fibre and telecom industries. The decline in performance materials sales was also attributed largely to DSM Desotech. In the January-September period, performance materials profits were down 11.8% at Euro90m on sales 7.5% lower at Euro1.39bn.

DSM's other activities, which include intra-group supplies, recorded a Euro3m loss in the third quarter against a Euro7m deficit in the corresponding period last year. Revenues, however, soared by 41% to Euro128m, reflecting the fact that sales to the former DSM Petrochemicals, now part of Sabic, are now accounted for as external sales. Over the first nine months, other activities broke even, compared with a Euro24m deficit last year, on sales up 21.2% at Euro332m.

By: Neil Sinclair
+44 20 8652 3214

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