DSM Confident After Strong Quarter

02/05/08 DSM said it expects a record year following very strong first quarter. Organic sales growth of 14% was recorded due to strong business positions and favorable market conditions. Net sales from continuing operations in Q1 2008 increased by 10% compared with Q1 2007. Organic growth was very strong at 14%, which was evenly spread over volumes and prices. Volume growth was particularly strong in the nutrition and caprolactam markets because of firm demand, expanding market shares and an excellent manufacturing performance. Solid price increases were possible in the nutrition and fertilizer markets because of a favorable shift in the demand-supply balance and the differentiation strategy in Nutrition. In the anti-infectives markets there was an improvement from the low prices at the end of last year. A substantial part of the organic growth was offset by much lower exchange rates versus the Euro (e.g. US dollar -13%).

The operating profit from continuing operations amounted to EUR 236 million in the first quarter, which is 22% higher than in the first quarter of 2007. This is in spite of feedstock and energy costs being some EUR 50 million higher, while much lower average currency exchange rates versus the Euro had an effect of some EUR 20 million (after hedging). In addition, the phasing-out of some contracts relating to the acquisition of Roche Vitamins had an effect of around EUR 10 million. On top of this innovation expenditure increased further, as planned. All of this was amply compensated for by substantially higher sales volumes and margins across the portfolio.

Feike Sijbesma, chairman of the DSM Managing Board, made the following comment on the results: ‘This has been a very strong quarter for DSM with excellent performances across the company, benefiting from the strength of DSM's positions in its various markets and favorable market conditions. We are conscious of the current less favorable macro-economic outlook, but thus far the conditions seen in Q1 have been sustained into the second quarter. We are now expecting 2008 to be a record year for DSM.’

‘The company's strong business performance confirms our belief in DSM's Vision 2010 strategy to focus on Life Sciences and Materials Sciences. The roll-out of the strategy remains firmly on track, as illustrated by the recent acquisition of the leading US biomedical materials company, PTG, and the major capital expenditure plans for DSM Dyneema. We are confident that DSM is well-placed to exploit the opportunities the markets are offering us.’

Sales in the Nutrition cluster increased by 18%. Higher sales volumes and selling prices were partly offset by the lower exchange rate for the US dollar.

DSM Nutritional Products saw its sales volumes strongly increase compared to Q1 2007 due to market growth and the market-share increase during 2007. Prices were increased due to a more balanced supply-demand situation, especially in vitamin E and vitamin C. Carotenoid prices were somewhat lower than last year. DSM Nutritional Products’ operating profit strongly increased as a result of higher volumes and margins despite the negative impact of the US dollar and the phasing-out of the Roche contracts. DSM Food Specialties showed a decrease in net sales and operating profit compared to the high results in Q1 2007, mainly due to lower sales in enzymes and functional foods and the negative impact of the dollar and feedstock costs.