DSM bets on vitamins profit for 2004

- Last updated on GMT

Related tags: Dsm nutritional products, Operating profit, United states dollar

After a 75 per cent drop in operating profit for the third quarter,
DSM's final quarter picked up, with better-than-expected turnover
at the Dutch group.

But with no signs of improvement in market conditions for a number of the company's leading products, the new DSM Nutritional Products business will be under pressure to meet forecast profit for 2004.

The former Roche vitamins business acquired in September helped lift group sales in the final quarter to €1.9 billion, an increase of 31 per cent over the previous year. The new unit also recorded a higher than expected operating profit, of €30 million, immediately contributing to earnings per share.

"The fourth quarter produced a better result than we had previously expected, despite the steady weakening of the US dollar throughout the quarter. I am particularly pleased with the fact that the integration of DSM Nutritional Products got off to a good start and that the expected immediate contribution to earnings per share materialised,"​ commented DSM managing board chairman Peter Elverding.

This compared with a strong decline in sales and profit at the Life Sciences cluster, both in the final quarter and full-year results. Weak market conditions for pharmaceutical ingredients and the US dollar were cited as major factors in the result.

Sales remained steadier in other units although profit was hit in many sectors by higher raw material prices.

The lower margins took their toll on the full year operating profit, which fell 23 per cent to €294 million for ongoing activities. Net profit has plummeted to €139 million, against €1,188 million in 2002, although this includes extraordinary items, such as a one-off charge of €94 million, for restructuring measures in Life Sciences, Industrial Chemicals and DSM Industrial Services.

Elverding said the year's results were ' unsatisfactory' but that the group is carrying out 'a large number of actions' to achieve improvements. These include a series of job cuts at vitamin production facilities and others associated with consolidation in China of the Nanjing Chemical company.

"For 2004 the short-term picture is that the weak dollar will be very disadvantageous for us. In addition, some businesses are being confronted with lower margins,"​ he said.

Based on the current exchange rate, operating profit for the first quarter of 2004 is expected to be lower than the fourth quarter of 2003.

"If the global economy truly resumes its long-awaited growth and the average dollar exchange rate is the same as last year, the outlook will be clearly positive,"​ said the chairman but the company remained reluctant about predicting results for the coming year.

It has however maintained its forecast of at least €150 million in operating profit for the vitamins business, despite further weakening of the dollar against the Swiss franc.

Related topics: Suppliers

Related news

Show more

Follow us

Products

View more

Webinars