DSM Boosted by Nutrition Performance

The key driver behind the performance in Nutrition has been DSM’s vitamin business, which is benefiting from a number of changes that are taking place across its markets and the industry.

29/07/08 Dutch chemical company DSM has said that its strongest ever quarterly result in Q2 2008 was driven by an almost 50% uplift in operating profit in the Nutrition cluster and DSM also benefited from continued high fertilizer prices arising from strong agricultural markets. DSM's Performance Materials and Polymer Intermediates clusters are seeing some impact of the generally worsening economic conditions but are well placed to manage through this period, benefiting from the quality of their product portfolios and in particular the strong growth of DSM Dyneema.

The key driver behind the performance in Nutrition has been DSM’s vitamin business, which is benefiting from a number of changes that are taking place across its markets and the industry. Customers around the world have heightened awareness of quality and safety issues in food and feed products. DSM is benefiting from its emphasis on quality, reliability and traceability which has become vitally important to these customers. DSM’s strategy to focus on innovation and differentiation is gaining traction and DSM is being recognized as a driving force for innovation in the industry. DSM is the most integrated industry player, well placed to serve these customers with higher added value premixes and base vitamins, in both of which it has a strong position.

Furthermore, changing dynamics especially in China are driving changes in vitamin markets. Some competitors have been impacted by additional investments and costs for environmental and quality reasons, the increase in energy and raw material prices, inflation, privatizations and local exchange-rate movements. On top of this, market supply currently is tight because of strong market growth in combination with reduced or at best stable capacities. All these various factors have come together in the last 12 months and have resulted in significantly higher pricing across the industry.

It is expected that a large part of these elements are longer lasting structural changes, which gives comfort that the improved profitability in vitamins can be sustained over the medium term, although specific dynamics exist for each individual product and end-market.

DSM said that Nutrition benefited from changing dynamics in the vitamin business. Organic sales growth was 29% and EBITDA margin improved to 20.6% (18.2% in Q2 2007).

Prices for vitamin A, E and C increased further in Q2, and prices for some of the B vitamins also trended upwards. This good pricing strength is a result of DSM’s successful innovation and differentiation activities to focus on quality, the breadth of its product portfolio, higher costs at competitors and a more even balance between supply and demand in a number of key products. Continued good pricing strength is expected to be maintained.

DSM Nutritional Products’ operating profit strongly increased as a result of higher volumes and margins despite the negative impact of the US dollar, higher feedstock and energy costs and the phasing-out of the Roche contracts. The operating profit of DSM Food Specialties was equal to last year’s.