DSM took over the Roche vitamins and fine chemicals unit in October and promptly launched a programme to reduce overcapacity and alter production volumes. Around 290 jobs at the group's site in Grenzach will be shed and at least another 300 are expected in coming months.
The Dutch company also announced that it would introduce new initiatives such as a reduced working week, a number of part-time positions and voluntary redundancy packages following negotiations with trade unions over recent weeks. These will be implemented in stages in 2004 and 2005.
DSM has put up €43 million net for severance payments, and reorganisation and closure of some of its plants, resulting in impairments of around €59 million net. It is hoping that the measures will contribute at least €75 million to the operating profit for 2005.
However the acquisition has come at a difficult time for the chemicals sector, with unfavourable exchange rates influenced by a weak dollar and severe competition from emerging economies, in particular China, Korea and India, leading to job cuts at a number of other European firms.
In October the life sciences group reported a 75 per cent drop in operating profit for the third quarter, plummeting from €104 million to just €26 million for 2003. The company blamed lower sales volumes, higher operational fixed costs due to new plant start-ups, lower margins that have hit all of its units and the dollar exchange rate.
The group's balance sheet is now showing losses of €78 million, not helped by an explosion at its plant in Linz, Austria early on in the quarter, which brought charges of €15 million, but it will also take a one-off charge of €102 million for the newly launched restructuring measures.
The newly named DSM Nutritional Products is expected to make earnings (before interest and tax) of at least €150 million in 2004 and a €25 million operating profit in this year's fourth quarter. A further decline in the US dollar exchange rate against the euro and the Swiss franc will however dampen the result.