LONDON (ICIS)--DSM’s fall in its 2014 first-quarter net profit (32% less to €81m) came as polymers earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 29% to just €20m on the back of a fall in caprolactam (capro) production in the US, the Dutch firm said on Tuesday.
The fall in net profit did not come just from polymers, as all DSM’s divisions registered falls in EBITDA. However, the company’s CEO, Feike Sijbesma, remained optimistic and said DSM maintains its targets for 2014 unchanged from its January outlook.
“Through maintaining our focus on the operational performance of the business, benefiting from the Profit Improvement Program, we continue to execute our near term initiatives of protecting profitability and improving cash flow. Therefore, we confirm our outlook given in January 2014, and anticipate to deliver improving financial results in the coming quarters,” said Sijbesma.
The CEO’s optimistic approach will be challenged by a weak start of the year for DSM. Of its divisions, the largest, Nutrition, registered sales at €1.05bn, an increase of 6%, but this could not help its EBITDA, which fell 6% to €203m.
Nutrition was affected by lower prices in some vitamins, currencies and a “less favourable business mix.” These negative effects could not be offset by the positive impact of acquisitions like that of Tortuga, the company said.
The division’s two sub-segments, Human Nutrition & Health and Animal Nutrition and Health, registered sales of €423m and €466m respectively, while Tortuga delivered sales of €64m.
“We are pleased to report that market conditions in Nutrition began to show some signs of improvement by the end of the quarter. Our performance in Q1 demonstrates DSM’s strength in Nutrition, owing to our highly integrated and global business model, benefiting from the structural megatrends of health and wellness,” said CEO Sijbesma.
Performance Materials, DSM’s division for plastics and resins, registered sales of €670m, flat compared with the €669m registered in the first quarter of 2013, but EBITDA also suffered on the back of currency effects and severe winter in the US with a fall of 3% to €77m.
Polymer Intermediates was the division that took the biggest hit, with sales down 7% to €405m and EBITDA down 29% to just €20m.
DSM said prices had been 8% lower than in the first quarter of 2013, while currencies also took part in the decline. The company said the severe winter in the US had had a negative impact on its capro production in that country which could not be offset by increased production of that material in China, where the company opened a second line in 2013 together with Jiangsu Guoxin and Sinopec.
The company also blamed high benzene prices as another reason for capro production to be negatively affected.
Finally, the company’s Innovation Center could not manage to post profits, with EBITDA at a negative €6m, worsening the negative €2m registered in the first quarter of 2013. Sales declined 8% to €34m for the period. DSM blamed a negative currency impact in DSM Biomedical for the fall, although it said underlying growth in that segment was “well in track.”