InterviewDSM focuses on materials, life sciences

27 September 2007 14:40  [Source: ICIS news]

LONDON (ICIS news)--DSM is confident that it can divest the businesses placed today in its new Base Chemicals & Materials cluster of operations as it seeks to become more focused on materials and the life sciences.

“This will be a three year process and it should be possible to work through the businesses,” chief financial officer Rolf-Dieter Schwalb said.

DSM first put its regional fertilizer business up for sale two years ago but has not yet found a buyer for the unit, the primary product of which is calcium ammonium nitrate, CAN.

The company now has plans to divest its melamine, urea, fertilizer, energy, elastomers, special products and maleic anhydride operations and seek a partner in citric acid.

Some of these businesses, such as fertilizers, melamine and elastomers could be part of a divestment package given that their principle operations are located on the Geleen site in the Netherlands, Schwalb said in an interview with ICIS news.

He added however that the level of service agreements that would accompany the proposed divestments at Geleen could be quite complex for a potential buyer.

DSM announced the new divestment plans, which involve businesses with roughly $2bn in annual sales on Thursday as it gave details of the latest review of its Vision 2010 strategy.

The strategy update and review was brought forward a year following a change in senior management at the group.

“We have really stepped up our focus on the life sciences and on materials science,” Schwalb said of the review.

"The specialty business is really the focus of the future,” he added, reiterating the position of the company when Vision 2010 was launched two years ago.

Schwalb said DSM had been satisfied with the level and stability of financial performance over the past two years.

The company has raised its growth targets under the review and given relatively strong performance thus far in 2007 raised its full year 2007 outlook.

The organic sales growth target of more than 5% a year is readily achievable, he suggested.

It is based on forecast global economic growth of 3% and at least 2.5% a year sales growth from innovation. Sales growth over the past two years has averaged between 6% and 7%.

DSM stressed its commitment to deliver an additional €1bn in sales from innovation by 2010. Management proposed an increased 2008 dividend and announced a new €750m share buy-back plan.

To accelerate transformation of the group, which divested its petrochemicals and plastics businesses to SABIC in 2002 for €2.25bn DSM said it would step up its search for acquisitions in the core business areas of nutrition, pharma and performance materials.

The company continually assessed targets, Schwalb stressed but he would not comment on DSM’s potential fire power

He said, however that the company wanted to retain its current credit ratings – DSM’s rating with Standard & Poor’s is “A-/Stable/A-2”.

The ratings agencies had earlier suggested that DSM had acquisition firepower of more than €2bn within its ratings bands, he added.

DSM chairman Feike Sijbesma had earlier suggested, however, that it might pursue a larger target.

By: Nigel Davis
+44 20 8652 3214

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