InterviewDSM raises profits forecast on vitamins

29 July 2008 13:28  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--DSM has moved to a new level of profitability, with the upturn in its vitamins business expected to be sustainable over the medium term, the life sciences and performance materials company said on Tuesday.

The news, coupled with a revised outlook, pushed the shares sharply higher in early trading.

The much improved performance from the nutrition segment and solid results from other divisions led the group to raise its operating profit guidance for the year by €100m to €970m ($1.54bn) with, it said, potential upside.

The company reported an operating profit of €823m for 2007.

Nutrition segment operating profits (earnings before interest and tax – EBIT) for the second quarter of 2008 were up 49% at €109m on 21% higher sales at €689m.

"The changes [in vitamins] are quite structural so, going forward, we are looking at a new profitability level," chief financial officer Rolf-Dieter Schwalb said in a telephone interview with ICIS news.

Schwalb also said that improved performance would be driven in the nutrition and materials area by DSM’s heightened level of innovation activity.

“DSM is continuing to see the benefits of our decision to focus on life sciences and materials sciences,” chairman of the DSM managing board Feike Sijbesma said in the company’s quarterly earnings statement.

The company was seeing less competition from China-based producers of vitamin C and much stronger prices, Schwalb said, with clear changes in the dynamics of the market in China.

DSM’s “enormous push on innovation” was driving organic growth across the company, he added.

Its sales in the quarter were 12% ahead, at €2.43bn, EBIT was up 19% at €276m and the net result before exceptional items up 22% at €193m.

DSM had seen some slowdown in demand for engineering plastics, largely in the US automotive, electronics and paints industries, but had maintained its growth momentum, Schwalb said. Polymer intermediates sales were 9% higher at €326m with segment operating profit up 24% at €26m. 

The fertilizer business, part of the Base Chemicals and materials segment, also performed strongly.

Schwalb said he expected stable or improving raw material prices in the second half.

The negative raw material and energy impact had been €150m in the second quarter and €200m in the first half. The weakness of the US dollar had cost the company €50m in the first half, he added.

DSM's shares were up 7.4% at €38.35 at 12.40 CET.

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By: Nigel Davis
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