Nutrition makes major contribution to DSM first half

Related tags Cent Better Profit

DSM's vitamin business continues to buoy the group's earnings,
contributing almost 40 per cent of its operating profit during the
second quarter.

The Nutritional Products division pulled in higher volumes during the three-month period, thanks to a recovery in animal feed markets in Asia and new products in animal health. Human nutrition also posted slightly higher volumes compared with the first quarter - the group declined to reveal the source of increased volume - and margins have remained stable.

This helped the unit lift net sales 4 per cent over the previous quarter to €490 million and operating profit, further improved by the costcutting programme launched last year, was up to €54 million from €47 million in the first quarter.

The former Roche vitamins, carotenoids and fine chemicals business, which started contributing to DSM's earnings in the fourth quarter of 2003, has now generated €101 million in the first half of this year. DSM already indicated in the first quarter that it expected operating profit at the business unit to exceed the previously forecast €150 million for 2004.

Other units also performed well - at Performance Materials, which makes fibres and raw materials for textiles, sales were up 16 per cent and Industrial Chemicals saw better margins significantly improve operating profits.

Despite the ongoing impact of weak prices and demand for pharmaceutical ingredients, which saw Life Science Products sales decline 4 per cent and operating profit down 52 per cent on the previous year's second quarter, the group overall still managed an operating profit of €133 million, up 56 per cent from the second quarter of 2003 and 21 per cent from the first quarter of 2004. Net profit was up 43 per cent to €97 million.

In group sales - up 42 per cent on the previous year's 2Q to €1.94 billion - Nutritional Products contributed 36 per cent of the sales increase.

Peter Elverding, chairman of DSM's​ managing board of directors, said the strong volume growth during the quarter "is an excellent basis for the necessary further improvement of our profitability. Our result was clearly better than last year, mainly because of the strong contributions from DSM Nutritional Products and Performance Materials."

But he added that there was cause for some caution about the outlook for the second half of 2004. "This stems from a temporary margin squeeze due to the strong increase in raw material prices and the usual seasonal pattern occurring during the year. Moreover, I regard the recovery in the European economy as being still fragile."

Profits for the whole of 2004 are still expected to be substantially higher than that for 2003 but the second half will be lower than this year's first six months.

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