DSM Strong Q3 Results Boosted by Martek Performance

Sales in Nutrition in Q3 2011 increased by 16% over the same period last year due to a steady organic sales growth of 8%, reflecting the strong volumes in Animal Nutrition & Health, and the Martek acquisition.

Nov 1 2011 --- DSM has reported that Q3 EBITDA from continuing operations was €339 million, 26% ahead of Q3 2010, with organic sales growth of 14%. There was a robust performance in Life Sciences despite significant impact of Swiss franc, while an excellent performance was reported for Martek, the integration of which is now complete.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: “We are pleased to have delivered continued profitable growth compared to last year across all business clusters. This performance has been achieved despite the significant impact of a very strong Swiss franc and a weak US dollar.

“Our outlook remains unchanged: 2011 is expected to be a strong year with further progress towards achieving our 2013 targets. However, DSM remains vigilant to possible negative developments in the global economy. Through Q3 we have experienced weakening in the electronics and electrical markets and in the depressed building and construction markets. DSM would not be immune to a deterioration in the economic environment, however, we have transformed DSM into a much more balanced and stronger company with a relatively resilient portfolio in health, nutrition and materials, a broad geographic spread with a strong presence in high growth economies and a solid balance sheet.”

Q3 was the seventh consecutive quarter with double digit organic sales growth (14%), of which 6% from volumes and 8% from prices. Prices increased mainly in Materials Sciences, which resulted in a further improvement of margins. The volume trend in most businesses remained very sound. As in Q2, DSM Dyneema was affected by lower sales to the tender driven vehicle protection business.

Net sales in China (continuing operations in USD) increased by 52% from USD 364 million in Q3 2010 to USD 554 million in Q3 2011. Total sales in high growth economies increased to 40% of overall DSM sales in Q3 2011.
Total EBITDA in Q3 was € 339 million, which is 26% higher than last year and equal to Q2 2011. All business clusters posted a better result than in Q3 2010.

Nutrition continued to deliver year-on-year profit growth despite the strength of the Swiss franc. Martek once again delivered an excellent performance that clearly exceeded expectations.

Sales in Nutrition in Q3 2011 increased by 16% over the same period last year due to a steady organic sales growth of 8%, reflecting the strong volumes in Animal Nutrition & Health, and the Martek acquisition. Overall prices were in line with Q3 last year. The currency impact on sales of -2% was mainly caused by the weak US dollar. Compared to the second quarter of this year, organic sales growth was 1%, as a result of improving prices.

The performance of the cluster continued to be robust with EBITDA margins above 20%. EBITDA in Q3 improved compared to last year despite the negative impact of currencies (of around € 25 million net of hedging results, mainly Swiss franc related) and higher raw material and energy costs. These negative effects were compensated for by volume growth, the effect of the Martek acquisition and the ongoing efforts to optimize costs.

Martek delivered an excellent performance with sales of € 84 million and EBITDA of € 26 million. The integration of Martek has been successfully completed.

The Pharma results continued to improve, mainly due to DSM Pharmaceutical Products. In Performance Materials DSM Engineering Plastics more than compensated for the drop in results at DSM Dyneema. Polymer Intermediates posted its best quarter ever, driven by extremely good margins and an excellent manufacturing performance.

DSM noted that the monetary and financial instability continued to increase during Q3 with substantial currency volatility. The Swiss franc in particular appreciated very strongly, reaching an all time high and almost parity against the euro in Q3 before stabilizing at a lower, but still very high level. On average, the Swiss franc was 13% stronger against the euro compared to Q3 last year. The US dollar was 10% weaker compared to Q3 2010.

The governmental austerity programs combined with the financial turmoil and a drop in consumer and producer confidence caused a slowdown in economic growth in the developed world. The building and construction sector continues to be weak, and demand has also weakened in the electronics and electrical markets. In the high growth economies, economic growth slowed marginally, partly due to interventions to address inflationary pressure.

DSM believes that it is well positioned to face the challenges caused by this difficult macro-economic environment. The Life Sciences clusters are relatively resilient to the economic turmoil and DSM overall is benefiting from its strong presence in high growth economies, especially China.