The global economic downturn marked 2003 first quarter results for Dutch life science company DSM, but strong autonomous volume growth boosted figures to higher than 2002.
In the first quarter of 2003 DSM posted an operating profit from ongoing activities of €91 million, €10 million higher than in the first quarter of 2002. The net profit on ordinary activities amounted to €72 million, rising €4 million (6 per cent) above first quarter figures for 2002. Total net profit amounted to €73 million due to minority interests.
Commenting on the results, DSM managing board chairman Peter Elverding said: "The first quarter was characterised by a strongly declined dollar exchange rate, high raw-material prices and hesitant economic conditions. In addition, we faced one-off costs relating to a business interruption at DSM Chemicals Rotterdam.
Against this background, the first quarter was satisfactory for DSM. Both our operating profit and our net profit were higher than in the first quarter of 2002." Elverding added that in the first quarter DSM was able to profit immediately from slight improvements in some markets, indicated by the strong autonomous volume growth of 9 per cent.
DSM Food Specialties saw its sales and operating profit decrease as a result of the weaker dollar. In addition, the company reported that the operating profit of DSM Fine Chemicals and DSM Bakery Ingredients was at the same level as the first quarter in 2002.
Despite a 4 per cent increase in sales volumes, sales in the DSM Life Science cluster decreased by 3 per cent compared with Q1 2002 due to the effect (-7 per cent) of lower exchange rates. The operating profit remained at the level of Q1 2002. The EBITDA margin (EBITDA/net sales) was 18 per cent.
DSM Pharmaceutical Products felt the effects of the delay in the introduction of new products in the pharmaceutical industry and the resulting overcapacity. As a consequence, it posted a negative operating result.
The company claims that improvements are expected in the next few quarters but in light of the current market situation, restructuring measures are being prepared.
DSM reported that while the branded pharmaceutical products of DSM Pharmaceutical Products came under pressure in the first quarter, DSM Anti-Infectives' generic products showed a very strong performance. This business group posted a strong increase in sales and operating profit compared with the first quarter of 2002, due in part to strongly increased sales of clavulanic acid and the effect of the restructuring operations that have been implemented successfully since early 2000.
A distinctly cautious approach emanates from DSM for the rest of 2003, with Peter Elverding stating this week: "Market prospects continue to be so uncertain that, despite the encouraging first-quarter result, we are unable to make a statement yet about the whole of 2003. The second-quarter operating profit seems to be developing around the level of the first quarter of 2003."