DSM Nutrition Group Performs Well

Nutrition maintained its very strong performance, based on its marketing strategy and the change in industry dynamics. The economic downturn is having a limited effect on trading conditions.

4 Aug 2009 DSM has reported in its second quarter that all business groups, except the two Nutrition business groups, showed a sales level clearly below last year’s. In Nutrition weaker volumes were more than compensated for by strong pricing and a favorable currency exchange rate effect.

Nutrition maintained its very strong performance, based on its marketing strategy and the change in industry dynamics. The economic downturn is having a limited effect on trading conditions.

Second quarter results for the Nutrition cluster continued to be strong despite the organic sales development of -6% compared to Q2 2008. Last year’s H1 sales volumes benefited to a certain extent from inventory build-up in the trade channels in anticipation of higher prices and the impact of the Beijing Olympics. This was followed by inventory reduction at the end of 2008 and the beginning of 2009. Current sales are a reflection of underlying end-use demand. In Q2 2009 demand improved compared to Q1 mainly in animal nutrition, while dietary supplements saw some weakness. Prices, especially for fat soluble vitamins, remained relatively strong and were above Q2 2008. Compared to Q1 2009, there have been price declines with some reversals towards the end of Q2.

Operating profit of DSM Nutritional Products increased compared to Q2 2008 mainly based on pricing and a relatively strong dollar. DSM Nutritional Products started reducing production output in Q2 to improve its overall working capital. DSM Food Specialties’ operating profit was similar to last year with strong performance in enzymes, such as Brewers Clarex and ARA (an infant nutrition ingredient).

As a whole DSM said that the general global economic downturn, which is having a very adverse effect on almost half of DSM’s businesses (DSM Engineering Plastics, DSM Resins, DSM Fibre Intermediates, DSM Elastomers and DSM Melamine), continued into Q2. However, in contrast to the previous two quarters there are strong indications that downstream de-stocking has largely come to an end in most markets. This is reflected in an improved demand compared to Q1, bringing the year-on-year drop in demand in these businesses more in line with the development of end-markets.