DSM expects full year profit to be beat that of 2005

27/07/06 DSM has reported an “excellent” second quarter with 7% volume growth despite a EUR90 million increase in material costs. Net profit was up 18% to EUR 157 million with first half sales up 9% and net profit up 20%. The outlook for the full-year 2006 is that operating profit will be better than in the record year 2005.

At EUR 234 million, the Operating profit from continuing operations for the second quarter of 2006 was up EUR 24 million (11%) from Q2 2005. Net profit amounted to 157 million, up 18% from Q2 2005 (EUR 133 million). The net profit included a positive balance of exceptional items amounting to EUR 5 million.

The Operating profit from continuing operations for the first half of 2006 was EUR 440 million, up EUR 48 million (12%) from the first half of 2005. The first-half Net profit was EUR 318 million, up 20% from the first half of 2005 (EUR 264 million). The net profit included a positive balance of exceptional items amounting to EUR 26 million.

“In the second quarter of 2006 DSM once again posted strong sales growth and a good result; developments in the Performance Materials cluster in particular are really good. I still expect the generally favourable conditions in most of our end markets to continue in the second half of the year. However, given the fact that raw-material prices are increasing strongly from an already very high level, we might experience some delay in passing on these price rises to our customers”, commented Peter Elverding, chairman of the DSM Managing Board.

“As a result of this and some other factors, our Q3 result may turn out to be lower than the high level achieved last year (EUR 215 million). On the other hand, expectations are that the Q4 operating profit will be better again than last year. I expect that DSM’s fullyear operating profit will on balance be better than in the record year 2005, despite the increased efforts we are making in the field of innovation as planned”, he added.

Sales in the nutrition cluster increased by 3% on balance due to higher sales volumes and lower selling prices. All activities in this cluster saw their results come under pressure from higher costs for energy and raw materials. Compared to Q2 2005, DSM Nutritional Products achieved solid volume growth at slightly lower prices, with Animal Nutrition & Health performing slightly better than Human Nutrition & Health. DSM Nutritional Products’ operating profit increased, mainly because of lower fixed costs.

In spite of the phasing-out of the phytase tolling business, DSM Food Specialties’ sales remained virtually stable. Its operating profit increased thanks to good manufacturing output levels and considerable cost savings. A large part of the result improvement in this cluster was offset by the decrease in the result of DSM Special Products (benzoic acid and benzaldehyde derivatives), which was due to higher energy and raw-material amortization.