DSM op profit down 1% on weak dollar, high costs

13 February 2008 09:11  [Source: ICIS news]

MUMBAI (ICIS news)--DSM posted a 1% decline in its operating profit from continuing operations for 2007 to €823m ($1.2bn) due to a weak US dollar and high feedstock and energy costs, the Netherlands-based life and material sciences company said on Wednesday.

The company posted a 5% rise in yearly net sales to nearly €8.8bn due to a 10% growth in organic sales, it said.

"DSM performed well in 2007 with good sales growth, particularly during the fourth quarter, and strong results in light of the challenges faced by the company during the year," chairman Feike Sijbesma said.

"In 2008, we also expect to perform well."

Exchange rates had a negative effect of 3%, DSM said, adding that the strongest price increase was realised by the pharma cluster due to temporary shortages on the market for anti-infectives.

The firm’s operating performance was also impacted by higher innovation costs and the expiration of contracts related to the acquisition of Roche's vitamins division, the firm said.

Margins improved as selling prices increased more than raw material costs, DSM said.

"The volume increase was particularly strong in the nutrition and performance materials clusters," it added.

However, Nutritional Products' operating profit fell 16% to €264m as higher organic growth did not fully compensate the expiration of the Roche contracts, increased energy, raw material and innovation expenditure and negative exchange rate effects, DSM said.

The Industrial Chemicals segment’s operating profit jumped 15% to €225m on the back of good volume growth, while passing on the increased feedstock and energy costs in selling prices, it added.

The operating result of DSM Anti-Infectives surged 43% to €93m due to much higher prices and the effect of restructuring activities, and despite lower volumes due to strong inventory effects in the volatile markets, DSM said.

Operating profit for Performance Materials fell 2% to €321m on the back of the production outage of DSM Fibre Intermediates' caprolactam plant, it added.

DSM’s 2007 net profit, excluding exceptional items, rose 1% to €558m.

In its outlook, the firm said that operating profit before exceptional items in 2008 is expected to approach the level achieved in 2007.

"Looking ahead to 2008, DSM expects continuing good organic growth, particularly from emerging markets and the launch of new products," it said.

DSM is fully on track to meet the objectives set out in the accelerated Vision 2010 strategy, Sijbesma said.

"In 2008, we will continue the transition towards a life sciences and materials sciences company, addressing the needs of tomorrow's society and capable of delivering sustainable growth," he added.

"It remains a core part of DSM's strategy to invest in innovation which will deliver the company's growth in future years and DSM will be gearing up this effort further in 2008," it added.

DSM shares were trading 2.74% down at €27.35 in the Netherlands.

($1 = €0.69)

By: Divya Chowdhury
+65 6780 4359

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