Nutritional Products significantly aid DSM performance

18/02/05 DSM NV’s integration of the Roche Vitamins business is working. Overall DSM posted an operating profit of EUR 489 million, an increase of 66% compared with 2003, although this increase was due in particular to organic volume growth and the full-year contribution from DSM Nutritional Products (formerly Roche). Net profit from ordinary activities was EUR 359 million, up 54% from 2003 (EUR 233 million). The net profit amounted to EUR 262 million, compared with EUR 139 million in 2003. The net profit for 2004 included a negative net result from exceptional items of EUR 97 million.

For the fourth quarter of 2004 DSM posted an operating profit of EUR 113 million, which is 23% higher than in the fourth quarter of 2003. The net profit from ordinary activities in Q4 2004 was EUR 82 million, up 21% from Q4 2003. The net result for Q4 2004 includes a net result from exceptional items, in line with earlier announcements. The net result from exceptional items has been established at EUR 99 million negative and relates to impairments and restructuring provisions.

Meanwhile DSM announced that in view of continued increasing customer demand it will invest over USD 50 million to build a new fiber line in Greenville, North Carolina (U.S.), and boost production in Heerlen (The Netherlands) by 10%.

The early integration of Roche (which was acquired in late 2003) has focused primarily on the company’s bottom line activities, with the Vital integration project in place until early 2006. Medard Schoenmakers at DSM told FoodIngredientsFirst that operating results of EUR 200 mln were EUR50 mln above target expectations. “Once the bottom line is solid we will be focusing on growth in the food, feed and vitamins side. So there will be an overall step up on innovation and a large focus on this top-line growth in 2006”, Schoenmakers said.

One of the challenges facing DSM will be coping with the onset of increased competition from the Chinese in the vitamins sector. According to Schoenmakers, the Chinese are very competitive but their products always involve straight vitamins as opposed to formulations, with 50% of DSM’s volumes for vitamin C being formulation based. The company is currently developing a technology that will see them be able to produce vitamin C at a competitive cost level to the Chinese, although it was too early to see it hit the market this year.

DSM Nutritional Product’s new green tea extract product Teavigo has already been applied to sports drinks. Schoenmakers said that we can expect to see a toothpaste containing the ingredient hit a western market later this year. The company is currently conducting research into the ingredients potential as a fat burner, and should the results prove positive we can expect to see a lot more development in new application areas. 

Schoenmakers said that the Food Specialties sector has seen a fairly good 2004 with a number of new products performing well. The company’s ARA product was particularly successful on the US market. Meanwhile the bioactive ingredient for fast muscle refueling and faster energy recovery, Peptopro has already won two major contracts in Europe and Japan. German based Haleko now has production rights for nutritional products that contain the ingredient. Meanwhile a multi-million euro contract with the large Japanese distributor of ingredients San-Eigen will mean that a number of nutritional sports drinks containing the ingredient will hit the market.
Recent reports have linked DSM with a takeover bid for the for sale Chr. Hansen together with other giants like Kerry. But DSM were still not keen to reveal anything about their name being linked with a takeover of Danish based Chr. Hansen. “Our name is often on lists”, Schoenmakers said, “but we will never comment on specifics from media reports”.