Sales up for DSM despite tough time

By Alex McNally

- Last updated on GMT

Related tags: Net sales, United states dollar, Generally accepted accounting principles, Dsm

DSM has today reported a rise in sales for its nutrition division
in the second quarter of 2007, however the loss of contracts tied
in with the take-over of Roche vitamins and a poor exchange rate
both took their toll.

Net sales rose to €630m from €612, but operating profits took a tumble from €87m to €65m. This fall was blamed in part on the exchange rate and high innovation costs. Exchange rates had a negative impact of 2 per cent on growth. The €10m loss from expired contracts under Roche vitamins - which it snapped up for €2.25bn in 2003 - was no surprise to DSM. Last month it launched a major improvement program to boost profits by €100m within three years. The plan, dubbed Aspire to Win, was aimed at offsetting cash lost from expired Roche contracts, which was estimated at some €40m between 2006 and 2008. An update on the initial success of this program is expected in September. In this quarter the group launched a range of new products, which itself helped contribute to the increase of nutrition sales. They included the cellulose preparation Bakezyme Whole Gain for bakery, the wine-industry enzyme Rapidase Maxifruit, and a new grade of niacinamide. "Nutrition showed a strong increase in volumes and market share, while price pressure eased somewhat,"​ the company said. ​ DSM remains confidant it will hit operating profit for full year 2007 as €790m, €30m more than previously predicted. Chairman of DSM managing board Feike Sijbesma said: "This has been a good second quarter for DSM, benefiting from higher volumes and increased prices. Looking ahead to the remainder of the year, our expectations are that these trading conditions will continue, enabling us to raise our full-year guidance for 2007 today." ​ Compared to last year's results, the nutrition side of the business grew in net sales by three percent, despite the loss of contracts and the low value of the US dollar. The nutrition sector is the second highest net sales category, coming behind DSM's line of performance materials. In the pharmaceutical side of business sales were up year on year by 7 per cent, from €233 to €250m, and operating profit from €14m to €30m. Performance materials up by 6 per cent from €698m to €738m, and operating profits down slightly from €88m to €84m year on year. This was blamed partly on a "production outage" at one of DSM's plants. Industrial chemicals sale grew by 1 per cent, from €480m to €484m, with operating profits of €53m to €66m. ​The full results, announced in Amsterdam, also showed a cash flow of €292m for the first half of this year and capital expenditure of €99m. Overall DSM recorded €2,198m net sales, an operating profit of €227m and a net profit of €47m. Overall volumes and prices had increased on average by 2 per cent and 3 per cent respectively.

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