DSM unveils 100m profit plan for nutritional products

By Alex McNally

- Last updated on GMT

Related tags: Dsm nutritional products, Nutrition, Vitamin, Dsm

DSM has today announced a major improvement package to boost profit
margins of its nutritional products division by €100m, which is
aimed at offsetting costs tied-up with acquiring Roche vitamins in
2003.

The company bought Roche vitamins, now DSM Nutritional Products,​ in 2003 from the Swiss firm for €2.25 bn. Returns in 2008 as a result of the new package are planned to offset the cash lost from the 'negative impact' of expired contracts under Roche vitamins. The Dutch firm said the loss of Roche vitamin contracts for 2006 was €10m, and up to another €30m could be lost by the end of 2008. The plan, dubbed Aspire to Win, involves a mix of cutting back on administration costs and increasing sales. This latest development comes after the Dual Track Strategy was outlined by DSM at the beginning of the year, where the company pledged to enhance profit by reducing costs and concentrate on selling a specific range of products. DSM was unable to give details on the relationship between the two strategies as NutraIngredients.com was published. Work on Aspire to Win is expected to start in the second half of this year, and it will run through 2008 and 2009. DSM Nutritional Products along with DSM Food Specialties and DSM Special Products, reported net sales (including intra-group supplies) of €2.463 bn in full year 2006, compared with €2.458bn in 2005. Operating profit dipped slightly to €314m from €329m. Commenting on the plan, Stephan Tanda, DSM board member responsible for the nutrition business, said: "DSM Nutritional Products is well positioned to benefit from the major nutrition, health and wellness trends of our times. The comprehensive profit improvement plan is focused on margin improvement through better management of our cost​." The €40m restructure program is planned to achieve the targeted growth set out in the company's 2005 five-year plan, Vision 2010. A profit of €100m is the minimum the company is aiming to gain. The major elements of the cost savings program are related to sales and administrative expenses, with the rest coming from a strategic improvement in sales of some of the group's health products, including a new line of supplements. Chief finance officer Rolf-Dieter Schwalb warned jobs could also be at risk across the group, adding losses could total "some hundreds" over the next few years. On the other hand the firm hopes to optimize market penetration with health products such as Teavigo a green tea extract, and health supplement i-flex. Further growth for DSM will be through an intense acquisition program to in-source early stage products and technologies and acquire start-up companies. At a press conference this morning DSM said it would target small companies, but firms with an asking price of €500m would not be ruled out. Mr Schwalb added: "We are not limited in the amount we can spend. There is a fixed amount but it is so large it is not relevant​," adding that smaller "innovative" firms would also be sought after. Just yesterday DSM together with Buhler announced the opening of a production facility for their Chinese joint venture Wuxi NutriRice Co. This move marks the imminent start of the first commercial production of nutritionally-enriched rice kernels for mixing with natural rice. The DSM group reports annual sales of over €8bn and employs some 22,000 people worldwide.

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