28 April 2009 11:11 [Source: ICIS news]
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LONDON (ICIS news)--DSM will cut 250 jobs on top of the previously announced 1,000 positions to be eliminated and is prepared to take further cost-cutting measures if demand does not improve in the coming months, the specialty chemicals producer’s CEO said on Tuesday.
Feike Sijbesma said the company would now target savings of €125m ($162m) by 2010 as it attempts to ride out the recession by generating more cash.
“We will further work out contingency plans and look in the coming months at whether we need to implement them if [good] business conditions do not return in the second quarter,” Sijbesma said following DSM’s first-quarter earnings announcement.
The Netherlands-based company’s first-quarter net profit slumped 92% year-on-year to €13m as its materials sciences business took a heavy beating from the global economic downturn.
Sales for the period declined a record 22% to €1.84bn, with operating profit down 76% at €57m.
DSM said almost half of the company’s business was heavily affected, particularly those exposed to the automotive, electrical and electronics, and building and construction industries.
“Although no improvement in demand in end-markets seems to be imminent, we are not at this point in time seeing a further deterioration either. Nevertheless, there will be tough times ahead,” Sijbesma said in the results announcement.
The company did not provide a forecast for its financial performance this year given uncertain economic conditions.
DSM plans to reduce capital expenditure this year, aiming at a figure of less than €500m compared with the €590m spent in 2008, CFO Rolf-Dieter Schwalb said.
Schwalb said it was possible DSM would not meet its 2010 operating margin target for its performance materials business segment.
DSM had targeted a margin of 17% for the unit's earnings before interest, tax, depreciation and amortisation (EBITDA), but the margin was less than 2% in the first quarter as EBITDA slumped to €6m from €101m in the year-earlier period.
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Schwalb said that the company had started the process of selling the oil and gas business DSM Energy in a controlled auction. DSM said the business did not fit with the company's increased focus on life science and material science.
Pearl Bantillo contributed to this article
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