UpdateDSM shares gain 10% on profits forecast

26 March 2008 16:10  [Source: ICIS news]

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LONDON (ICIS news)--DSM shares climbed more than 10% higher on Wednesday following an upbeat revised first quarter and full-year profits forecast.

By 14:24 GMT the gain was 10.5% to €31 ($49). DSM had earlier said that it expected its full-year 2008 operating profits before exceptional items to exceed 2007's level despite the weakening dollar and increased raw material prices.

For the first quarter of 2008, DSM forecast operating profits before exceptional items to be around 20% higher than the corresponding period in 2007.

"The firm demand and pricing strength seen in most of DSM's markets in the fourth quarter of 2007 has been sustained into 2008," the Netherlands-based life sciences and materials group said.

"The current year has started strongly with firm demand being seen across most of our markets," said chairman Feike Sijbesma.

DSM said its strong market positions had enabled it to increase prices, particularly in the nutrition business. Profitability had also benefited from a very good manufacturing and operational performance, it added.

The improved first-quarter and full-year forecast updated that made on 13 February when the full-year 2007 results were published.

The current forecast is based on January and February data, chief financial office (CFO) Rolf-Dieter Schwalb said in a conference call with financial analysts. Pricing strength had been better than expected, he added, with higher vitamin prices, particularly those of vitamin E.

Price declines in anti-infectives which hit the fourth-quarter 2007 results came to a halt in the first quarter of this year, he said. Intermediates and fertilizer sales were better than expected and engineering plastics benefited from lower fixed costs and higher margins.

Volumes had been quite strong in nutrition in fibre intermediates and fertilizers, Schwalb added.

The CFO said DSM expected to launch the auction of its melamine and agro businesses, largely based at Geleen in the Netherlands, after the European summer holiday period.

DSM’s shares had traded down with the market this year but analysts with Citi Investment research said the statement should provide some short-term respite.

“The chemical industry is not yet seeing any downturn but it does not mean the outlook is robust,” Citi said, warning of the potential for customers to build stocks ahead of possible price rises and the negative impact of the strong euro.

Until there is greater clarity on the mid-term outlook Citi said it saw limited scope for longer-term outperformance of the DSM share.

Nigel Davis contributed to this article

($1 = €0.64)

By: Aaron Rodrigues
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