New-look DSM reports strong rise in profits

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Related tags: Chemical industry, Dsm

After a year of intensive reshaping at DSM, the Dutch speciality
chemicals group has unveiled a set of results that speaks of a new

Previously the core business, the life sciences unit, holding pharmaceutical and food ingredients, suffered a profound knock-back last year, driven by oversupply in the penicillin market and a slump in antibiotics.

But restructuring across its other divisions and the creation of a new nutrition unit built around its acquisition of Roche's vitamins business, delivered a surge in full-year profits and profitability that more than compensated for the life sciences setback.

The company said today that operating profits rose 66 per cent in 2004, on the back of sales growth of 28 per cent to €7.75 billion. Some two-thirds of the sales growth was a result of the Nutritional Products business.

In the fourth quarter, which was the first to show a point of comparison on the performance of the business under its new owners (it was acquired at the close of the third quarter 2003), DSM reported a 47 per cent rise in operating profits despite a 5.5 per cent dip in sales.

This outcome at the close of DSM's first full year of ownership represented an emerging expertise, reflected in the group's other businesses, in gaining ground in markets suffering from both pricing pressure and oversupply.

The nutrition unit, the world's leading supplier of vitamins and carotenoids, reported volume growth, with price pressure on some of the more mature products, expecially in animal nutrition, eating into sales of €1.9 billion.

However recently launched products showed healthy growth, according to the firm, and now account for about 10 per cent of overall sales.

Similarly, in performance chemicals and industrial chemicals, the company reported strong gains, driven by volume growth and cost-cutting that more than outstripped the impact of falling prices.

The industrial chemical market anyway enjoyed surging demand last year. But DSM's strengthening position in nutrition, and specifically the vitamins market, represents a gain of market share in a sector currently under heavy pressure from Chinese competition.

"Although we definitely did not have the wind fully behind us in 2004, DSM's performance last year was clearly stronger. The company is in excellent financial health,"​ said Peter Elverding, chairman of DSM's managing board.

However he added that the company needed to maintain its focus on profitability: "We are still not where we want to be. We will therefore continue on the chosen path and if trading conditions are similar to those in 2004 we may expect a strengthening of DSM in 2005."

Life Sciences, which saw operating profits plummeting from €164 million in 2003 to €83 million in 2004, or from more than half of the group's overall operating profit to just 16 per cent this year, is expected to show improvements during the second half of 2005 owing to recently announced restructuring plans.

Nutritional Products will also face further restructuring at its remaining plants in the US.

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