Nutrition sector challenges hurt DSM Q3 results; profits down 7%
Overall Q3 net profits fell from €117m to €93m as sales dipped from €2.35bn to €2.32bn, while the nutrition division saw EBITDA profits fall 7% from €241m to €225m compared to Q3 2013.
Destocking by omega-3 retailers especially in the US along with the infant formula sector were cited as further challenges to the result.
“Although Western food and beverage markets remained sluggish, markets in high growth economies continued to develop well. Demand for premixes stayed healthy. The momentum for dietary supplements outside the US was positive and demand for DSM’s consumer business i-Health remained robust,” DSM said.
In a results call, the company said it was leading an industry initiative in the US to educate consumers about omega-3 supplements, "in the context of deficiencies."
But the market remained at a recessed level from previous levels, said CEO and managing board chair Feike Sijbesma.
The company said its food specialties business that contains the likes of enzymes and colours remained, “strong”.
This all occurred even as sales rose 2% in the nutrition division to €1.091m.
The ingredients leader said it wanted to reduce its exposure to cyclical markets and had no immediate M&A plans following years of buy-outs, preferring to focus on operational activity and portfolio management. “We do not embark on any bigger acquisitions at this moment and we focus on harvesting the synergies of the acquisitions we did,” Sijbesma said.
Vitamin E price war
For vitamin E he highlighted regional issues in saying, “We have seen some intensified pricing pressure in the third quarter, that is especially due to Chinese manufacturers. We have deliberately decided to defend strongly our market position and our market share here and of course that will not help the margins but we have a clear strategy.
"We believe with the decreased prices, especially in the last part of the quarter, that the Chinese manufacturers are coming to cash break even or maybe loss making but they will not make a lot of profit. We don’t like this because of course this will also impact the profit of DSM however we believe this is the right strategy to defend our market share, to defend our market position.”
He said the firm remained profitable in vitamin E at current prices but said it was looking to further reduce costs, “to be even more competitive”.
The company said emerging markets remained buoyant and that adverse currency swings had cost it €60m for the quarter.
