DSM Reports Organic Growth Driving Sales, Maintains Outlook
03 Nov 2015 --- DSM, the global health, nutrition and materials company, has announced a sales increase of 8% in its Q3 2015 results, largely buoyed by its organic growth figures and very strong volume growth in Animal Nutrition.
Commenting on the results, Feike Sijbesma, CEO/Chairman of DSM, said: “DSM continued to make good progress in Q3 in both EBITDA and cash generation. These results demonstrate the benefits of our focus on improving our operational performance. We are starting to implement the previously announced €125-150 million cost reduction program for the DSM-wide support functions. Tomorrow at our Capital Markets Day, we will announce our strategy and targets for the coming years, as well as an additional efficiency and cost reduction program in Nutrition. It is increasingly difficult to predict macro-economic developments. Assuming no major changes in current market conditions for the remainder of this year, we maintain our full year outlook to deliver an EBITDA in 2015 ahead of 2014, the increase mainly driven by positive foreign exchange effects.”
Q3 sales increased 15%, driven by very strong volume growth in Animal Nutrition & Health and solid volume developments in Human Nutrition & Health. As a result of higher prices for some vitamins and other, partly insourced, ingredients, the price/mix-effect was slightly positive despite lower vitamin E prices. Q3 EBITDA was 5% lower at €213 million versus Q3 2014.
Good volume growth and overall positive foreign exchange rates largely offset the negative impact of lower vitamin E prices (of more than €30 million). Positive foreign exchange rates effects mainly associated with the US dollar were partly offset by the negative impact of the Swiss franc, the Brazilian real and the Chinese renminbi. The weakening of the Brazilian real, to which DSM is exposed mainly via its Tortuga business, had a negative EBITDA impact of €5 million.
Animal Nutrition & Health Volume: Q3 showed very strong volume growth driven by the premix activities and specialty products in Europe and Latin America. Although underlying business conditions in the global animal feed markets are expected to remain favorable, going forward DSM will face tougher comparative figures for organic growth as from Q4 2014.
In terms of Human Nutrition & Health Volume, DSM delivered solid volume growth in spite of the continued soft environment in several key market segments. The dietary supplements businesses continued to show good growth in Europe and Asia and an ongoing mixed picture in the US where sales of fish oil and (multi) vitamin based supplements declined in Q3.
I-Health, DSM’s B2C business, continued to deliver double-digit growth. Conditions in the Food & beverage segment are unchanged with good sales development in Europe and Asia and ongoing weak sales in North and South America. Markets for Infant Nutrition are stable, although DSM’s sales were relatively weak in Q3 due to timing of orders.
In terms of the outlook for FY 2015, the volatility in currencies, including the strengthening of the Swiss franc and the US dollar against the Euro, and the recent weakening of the Brazilian real will have a mixed effect on DSM’s 2015 results compared to 2014. Based on current exchange rates and the 2015 hedge effects, an overall annual positive impact on 2015 EBITDA is estimated at approximately €35 million. The negative price impact of vitamin E on DSM’s 2015 EBITDA is estimated to be approximately €100 million compared to 2014. It is increasingly difficult to predict the macro-economic developments. Assuming current market conditions will continue for the remainder of the year, DSM maintains its full year outlook: DSM aims to deliver an EBITDA in 2015 ahead of 2014, the increase mainly driven by positive foreign exchange effects.
