Analysts upgrade DSM forecasts on good Q2

30 July 2008 14:24  [Source: ICIS news]

LONDON (ICIS news)--Analysts raised their forecasts for Dutch specialty chemicals company DSM on Wednesday following better than expected second-quarter results.

Deutsche Bank raised its target share price for the company to €39 from €32, it said, adding it also raised its earnings per share (EPS) forecasts for DSM by 8-10% for 2008-2010.

“Driven by strong pricing and volumes, nutrition remains the key driver of growth supported by further improvement in vitamins,” said the Deutsche Bank analysts.

However, the Deutsche Bank analysts added despite the company’s management’s insistence that a large part of the strength in the vitamins business should be seen as sustainable over the medium term, “we continue to struggle with the lack of visibility on the key reasons for this improvement”.

Citigroup analysts, who raised their target share price for DSM to €40 from €37, said the trends impacting the company were mixed but that the scale of exposure to health and nutrition markets should limit the medium-term risk to earnings from slowing activity.

The equity researchers also increased their EPS forecast for 2008 by 16% on the back of good performances in the nutrition, base chemicals and materials divisions.

“There is some uncertainty regarding the outlook for pharma (depending on antibiotic prices) and industrial demand, but Nutrition could still surprise on the upside,” they added.

The Dutch company on Tuesday posted an increase in second-quarter net profits to €193m ($306.3m), 15% above consensus, from €47m in the same period a year earlier on strong organic sales growth.

The much improved performance from the nutrition segment and solid results from other divisions led DSM's management to raise its operating profit guidance for the year by €100m to €970m with potential upside.

DSM’s share price stood at €39.09 at 13:43 local time (11:43 GMT), up 1.32% from the previous day’s close.

($1 = €0.64)

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By: Hilde Ovrebekk
+44 20 8652 3214

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