DSM Q2 Net Profit Falls Despite Continued Growth in Nutrition

Net profit was €41 million ($50.8m), down from €392 million ($486m) a year earlier, while sales were flat at €2.27 billion ($2.8bn). Nutrition saw organic growth (2%) in all segments. Growth fundamentals for the business remained strong and unchanged.

7 Aug 2012 --- Royal DSM NV, the largest maker of food supplements by sales, reported second quarter of 2012 sales growth of 7% in Nutrition compared to Q2 2011, supported by healthy organic growth (2%) in all segments. Overall they recorded a sharp fall in second-quarter net profit due to a shortage of a key chemical it produces waned.

Net profit was €41 million ($50.8m), down from €392 million ($486m) a year earlier, while sales were flat at €2.27 billion ($2.8bn).

Nutrition saw organic growth (2%) in all segments. Growth fundamentals for the business remained strong and unchanged. In Q2 2012, DSM announced the acquisition of Ocean Nutrition Canada, which will further contribute to the sustainable growth of the cluster moving towards €4 billion in sales. The acquisition was finalized at the beginning of Q3.

Feed markets continued to experience strong demand for animal protein in all geographic areas. Food markets continued growth in all regions and segments with some softening in Europe. The cross-selling of Martek products through the DSM global sales network resulted in double digit growth of Nutritional Lipids in infant nutrition outside USA.

Sales to High Growth Economies reached a level of 39% of total sales in Q2 2012 versus 37% in Q2 2011 driven by the Nutrition and Performance Materials clusters that showed strong double digit growth numbers in the High Growth Economies.

Net sales to China amounted to $430 million, versus $489 million in Q2 2011 which was fully due to lower sales prices at Polymer Intermediates.

Nutrition continues to demonstrate its resilience with EBITDA now expected to be clearly above 2011. Ocean Nutrition Canada will add about €20 million in EBITDA for the remainder of the year.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said:
"Despite the challenging macro-economic environment, I am pleased that DSM was able to deliver another robust set of results demonstrating the strength of our strategy, as evidenced by the ongoing strong performance of Nutrition. Our Life Sciences clusters accounted for around 70% of Q2 EBITDA. This strength has helped to offset the weakness caused by caprolactam in Materials Sciences. The other Materials Sciences businesses improved despite a challenging macro-economic environment.

“The global outlook for the second half of the year is more uncertain due in part to Europe's inability to find an effective and sustainable solution to the financial challenges facing the Eurozone. Because of the increased economic uncertainty, we are announcing today a Profit Improvement Program that includes structural cost reduction and other initiatives that will generate €150 million EBITDA benefits by 2014.”