Additional 100 Job Losses Announced as Part of DSM Cost Efficiency Program

04 Nov 2015 --- Following yesterday’s Q3 results, in which ingredients manufacturer DSM announced a sales increase of 8%, the company has announced cost reduction and efficiency improvement programs, to result in combined savings of up to €300m by the end of 2018. The cost savings include the announcement of more than 100 job losses in the nutrition business, in addition to the (around) 1,000 job losses announced in August.

After a period of transformation, in which the company has made some strategic decisions based on the sale of non-profitable areas and the purchase of companies that fit with the company’s growth strategy, DSM will focus on improving its financial results through organic growth, reducing costs and strict capital allocation.

Chairman and chief executive Feike Sijbesma confirmed in a company conference call this morning that there would be 100 additional job losses, all outside of the Netherlands, but that they would be in the nutrition division. He also highlighted in the conference call that the current strategic program is to run for three years, rather than the five years that the company is accustomed to. Sijbesma emphasised the need to capture the value in the current business model and confirmed that there will be no further acquisitions in the coming period while the company maximises the potential in the current business.

For example, while the trend for omega 3 products is stagnant and DSM has not seen any growth potential here, Sijbesma confirmed that the company would be looking into higher end markets with higher quality products likely to yield a better return.

As well as strengthening its potential, additional savings will come from the integration of marketing, manufacturing and R&D departments on a global scale, said Sijbesma.

The Nutrition and Performance Materials businesses offer great potential for growth through sustainable innovative solutions capturing opportunities the global megatrends offer.

DSM will execute cost reduction and efficiency improvement programs, which will result in combined savings of €250-300 million (to be fully achieved by the end of 2018) through the earlier announced program for the global support functions and a new program in Nutrition; the costs of these programs will amount to €200-250 million.

DSM has set two targets for this three-year strategic period: EBITDA growth - high single-digit annual percentage increase, and Return On Capital Employed (ROCE) growth - high double-digit annual basis points increase.

DSM is stepping-up its sustainability approach, as a business driver throughout the value chain while reducing its own footprint further. It will adjust its organizational model and way of working to support the delivery of its targets and extract significant value from the Pharma and Bulk Chemicals joint ventures in the coming years, although it was noted that the withdrawal from the joint ventures would not be unlikely.

Feike Sijbesma, CEO and Chairman of the DSM Managing Board, commented: “We have transformed the company successfully into a science-based company in health, nutrition and materials. The global megatrends that drive our business remain highly relevant. Our focus on the growth drivers High Growth Economies, Innovation and Sustainability has created DSM’s current platform for growth. We will extract significant value from the Pharma and Bulk Chemicals joint ventures in the coming years, providing financial headroom. We do not expect to engage in large acquisitions in the near future as we continue to integrate recent acquisitions, which have made a strong contribution to earnings.”