Edited from: “Message from the chairman”, “Objectives Vision 2010 – Building on Strengths” and “company strategy”, DSM website.
DSM states that it will continue to focus on its strategy “Vision 2010 Building on Strengths”. The strategy focuses on accelerated growth and expansion of the specialty content of its portfolio, accelerated innovation, and expansion in emerging economies. The overall objective of the strategy is “strong value creation” to be accomplished via three main levers:
Market-driven growth and innovation
Based on existing leadership positions, DSM intends to grow its sales in four business areas: personalised nutrition, specialty packaging, biomedical materials and white/industrial biotechnology. This growth will be accelerated by innovation in the markets targeted.
DSM also intends to further grow the specialty content of its portfolio. In this connection the definition of specialties has been made more specific. Specialties will be businesses that have product, application or custom manufacturing leadership. It is believed that under this sharper definition, the current specialty leadership portfolio will represent 40% of DSM's total sales.
By 2010, DSM aims to have grown its specialties portfolio to 50-60% of sales, coming from 40% under the new specialty leadership definition. Profitable growth via specialty leadership business, innovation and geographic growth should lead to an underlying sales growth rate of 3-5%/year (including small acquisitions).
Organic growth will be complemented with selective acquisitions in the field of nutrition and performance materials. To boost innovation, resources will be made available.
Increased presence in emerging economies
DSM plans to continue the trend of improving its globally balanced presence by accelerating the internationalisation of its asset base and workforce. Identified opportunities such as demand growth in selected emerging economies have led DSM to decide to significantly step up its growth efforts in promising regions.
A stronger presence in selected emerging economies will also help to create a better balance between sales by origin and sales by destination. DSM has been focussing on China and India and it has also started investigating future possibilities in Russia. In China, where DSM has been active over the past few years, the company expects to double its sales to more than $1bn/year by 2010.
DSM will continue to build on its operational excellence capabilities to sustain and enhance the cost competitiveness of its businesses. So far, the focus has been mainly on standardisation of business processes in manufacturing, order fulfilment, finance and costing and infrastructure. These programmes will be further extended to include more parts of DSM's business portfolio.
New initiatives are envisaged in areas such as purchasing and pricing processes. It will also continue to consistently look at productivity improvement in its businesses.
DSM states that the general economic outlook appears to be worsening, the financial markets continue to be volatile, feedstock and energy prices continue to rise, inflation is gaining momentum and the US dollar remains weak. Despite this backdrop, DSM remains “very positive” about the company’s outlook.
The changes that have driven improved profitability in vitamins are expected to benefit the Nutrition business for the rest of 2008 and beyond. Elsewhere businesses such as DSM Agro continue to enjoy strong demand and high prices. Performance Materials and Polymer Intermediates are expected to show resilience against the deteriorating economic conditions.
As a result, based on the currently available information and barring unforeseen circumstances, DSM is raising its guidance on operating profit from continuing operations for the year to around Euro970m, with potential upside. Any upside beyond the indicated Euro970m may come from continuing strength at DSM Agro and a more positive development of the business conditions in Performance Materials and Polymer Intermediates than is currently expected.
In December 2008, DSM announced a number of actions to strengthen its competitive position. These actions are expected to deliver structural cost savings of up to Euro100m per year by 2010 and will result in around 1,000 jobs being eliminated (around 5% of its workforce).
In addition, DSM also states that it is taking a number of measures to address the “current more difficult market conditions”. These market conditions together with the decision to currently prioritise cash over short term profitability are resulting in a revised full year guidance for 2008 operating profit of above Euro900m, around 10% higher compared to 2007.
Please also see DSM aims to complete divestments before making big acquisitions and INSIGHT: DSM grasps opportunities in downturn or go to ICIS news
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DSM is active in nutritional and pharma ingredients, performance materials and industrial chemicals. DSM’s products are used in a wide range of end-markets and applications, such as human and animal nutrition and health, personal care, pharmaceuticals, automotive and transport, coatings and paints, housing and electrics and electronics.
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