Vitamins propel DSM to strongest ever quarter

By Shane Starling

- Last updated on GMT

Related tags: Supply and demand, Nutrition

DSM has upped its full-year profit forecast by €100m to almost €1bn after recording its strongest ever quarter on the back of a robust performance from its Nutrition cluster, and in particular its vitamins portfolio.

The Dutch ingredients giant experienced both volume and price increases in vitamins A, E, C and some B vitamins.

As a result, sales for the Nutrition division grew 29 per cent to €109m for the quarter compared to €73m for Q2 in 2007.

Half yearly profits were equally buoyant - €188m compared with €136m in 2007.

Earnings before interest, tax, depreciation and amortization (EBITDA) came in at 20.6 per cent compared to 18.2 per cent in 2007.

“There have been a lot of changes in the market in the past 18-24 months with demand for most letter vitamins continuing to rise yet supply remaining partially constrained to a certain extent,”​ DSM chief financial officer, Rolf-Dieter Scwhalb told NutraIngredients.com.

“Although we have put in place measures to increase supply, there are limits in some cases on raw materials and building plant capacity is a long-term proposition, but we feel equipped to meet the market’s needs.”

With its other divisions in Pharma, Performance Materials, Polymer Intermediates and Base Chemicals and Materials performing solidly, the company saw revenues increase 12 per cent to €2456m for the quarter (€4814m for the half, an increase of 11 per cent).

Operating profit (EBIT) came in at €277m for the quarter and €514m for the half – growth of 22 and 23 per cent respectively.

China

China came in for special mention as a source of competition that was rapidly becoming more sophisticated as suppliers improved quality control measures, environmentally friendly practices and worker conditions.

“The quality of Chinese supply has improved greatly but we believe we have an edge in delivering quality products,”​ Scwhalb said, noting that in the area of vitamin C, the only non-Chinese sourced product came from DSM’s Scotland facility.

The company said its commitment to quality meant it had been able to maintain price premiums and noted in a statement: This good pricing strength is a result of DSM's successful innovation and differentiation activities to focus on quality, the breadth of its product portfolio, higher costs at competitors and a more even balance between supply and demand in a number of key products. Continued good pricing strength is expected to be maintained.”

Rising domestic demand for nutritional products in China was adding heat to the global demand for vitamins, further pushing up premiums.

Scwhalb said while China was demonstrating the greatest growth potential, India, Brazil and Russia were also becoming major markets for nutritional ingredients and end-products.

“The changes that have driven improved profitability in vitamins are expected to benefit the Nutrition business for the rest of the year and beyond,”​ the company said.

Specialty foods

The specialty foods division performed less spectacularly as adjustments and contract phase-outs kicked in from the purchase of Roche Vitamins in 2003.

But the company said it continued to heavily in new functional foods ingredients in the areas of diabetes (Insulvital), blood pressure (Tensguard) and weight management (Fabuless).

He said the company would continue to throw funds at research and development and the development of new ingredients.

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