DSM Recovers in 2007, Strong Q4

13/02/08 DSM has reports a good Q4 2007 with the full year according to expectations. Strong Q4 results were based on 10% organic sales growth with operating profit for 2007 of EUR 823 million in line with expectations. Net profit before exceptional items at EUR 558 million, better than last year. Feike Sijbesma, Chairman of the DSM Managing Board, commented: ‘DSM performed well in 2007 with good sales growth, particularly during the fourth quarter, and strong results in light of the challenges faced by the company during the year. In 2008, we also expect to perform well.’

‘DSM is fully on track to meet the objectives set out in the accelerated Vision 2010 strategy. In 2008, we will continue the transition towards a Life Sciences and Materials Sciences company, addressing the needs of tomorrow’s society and capable of delivering sustainable growth.’

For the full year 2007, sales from continuing operations increased by 5%. Organic sales growth amounted to 7% (volumes 3%; selling prices 4%); this is 2% above the strategic target of 5%. Exchange rates on balance had a negative effect of 3%. The volume increase was particularly strong in the Nutrition and Performance Materials clusters. The Industrial Chemicals cluster succeeded in achieving good volume growth while at the same time passing on the increased feedstock and energy costs in selling prices. The strongest price increase was realized by the Pharma cluster due to temporary shortages on the market for anti-infectives.

Net sales in the fourth quarter of 2007 were 8% above Q4 2006. Organic growth was 10% (volumes 3%; selling prices 7%). Exchange-rate developments had a negative effect of 4% on DSM’s net sales.

The operating profit from continuing operations for the full year amounted to EUR 823 million, a decrease of 1% compared to the record of last year. DSM faced serious headwinds in 2007 because of a weak US dollar and high feedstock and energy prices. On top of that the expiration of contracts related to the acquisition of the Roche Vitamins division had to be absorbed and innovation costs increased because of the strategic step up. This was almost fully compensated for by a very strong underlying business trend, reflected in 7% organic growth, and the temporary steep price increase in anti-infectives.

The operating profit for the fourth quarter amounted to EUR 190 million, up 2% from Q4 2006. The increase in sales volumes and margins more than compensated for higher fixed costs (mainly for innovation), the expiration of Roche contracts and negative exchange-rate effects. Margins improved as selling prices increased more than raw-material costs.

Full-year sales in the Nutrition cluster were 6% above last year. Compared to 2006, both Animal Nutrition & Health and Human Nutrition & Health in DSM Nutritional Products achieved solid volume growth and the negative price trend in the more mature part of the business was stopped and partly reversed by DSM’s differentiation strategy. Nevertheless, DSM Nutritional Products’ operating profit decreased because higher organic growth did not fully compensate for the expiration of Roche contracts, higher energy and raw-material costs, higher innovation expenditure and negative exchange-rate effects. DSM Food Specialties’ sales and operating profit decreased due to the contractual phasing-out of the phytase tolling business in 2006. The strong improvement at DSM Special Products was driven by higher sales volumes and margins and lower fixed costs.

Fourth-quarter sales were 13% higher than in Q4 2006 because of higher sales volumes and higher selling prices and despite the negative effects of the USD exchange rate. The operating profit was higher than in Q4 2006 due to DSM Special Products.

Meanwhile DSM Nutritional Products has announced the launch of a new form of oily Vitamin A combining both GMO and allergen-free benefits for the Food, Dietary Supplement and Personal Care industries.

DSM introduces Vitamin A Palmitate/M 1.0 MIU/g (Tocopherol) with medium chain triglycerides (MCT) as carrier instead of peanut oil, thus guaranteeing free of genetically modified organisms and eliminating potential allergic reactions to peanut oil.

“This demonstrates the unique leadership position of DSM in developing state-of-the-art forms that fulfil growing market needs and consumer requirements in the different industries”, says Mauricio Adade, head of Human Nutrition & Health.