Profit drops for DSM

- Last updated on GMT

Related tags: Dsm, United states dollar

By all accounts DSM presented a less than rosy set of second
quarterly figures this week with sales and operating profit figures
both plummeting. The company predicts a further downward trend in
the third quarter but should rebound by the end of the year.

By all accounts DSM​ presented a less than rosy set of second quarterly figures this week with sales and operating profit figures both plummeting. The company predicts a further downward trend in the third quarter but should rebound by the end of the year.

As costs rose in the second quarter, the operating profit dipped to €85million, representing a 17 per cent drop from the same period last year.

Sales also saw a downturn, falling by 5 per cent from figures last year to €1.36 billion.

The absorption of Swiss company Roche Vitamins into the DSM machine is taking its toll but with the deal expected to close by September, the company remains optimistic that by the end of the year the unit will start to pay.

"The vitamins, carotenoids and fine chemicals business will by that time [fourth quarter] be making a positive contribution,"​ said Peter Elverding, chairman of the managing board at DSM.

DSM claimed that the Life Science business area - home to DSM Food Specialities and DSM Bakery Ingredients - was badly hit by a fall in the US dollar.

Sales volumes, prices and margins for the cluster were lower, sending the operating profit to €46m, down from €59m for the same period in 2002 - a 13 per cent fall. Sales for the Life Science area dropped by 12 per cent from €572 in 2002 for the same period to €506m.

The chairman's outlook - upbeat for the fourth quarter - remained gloomy for the next three months, anticipating a further drop in figures.

"The weak signs of improving economic and market conditions that we saw in the first quarter have not materialised,"​ said Elverding. Adding that "the underlying short-term development is unsatisfactory... and there are no clear signs of a positive development of the economy and of our end markets in the next few months."

The company cut its workforce by 171 in the second quarter, from 19,221 to 19,050 as a result of restructuring measures.

The European Commission this week conditionally cleared DSM's acquisition of Roche Vitamins and Fine Chemicals. The deal, likely to be completed in the third quarter 2003, will cost DSM €1.75 billion.

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