DSM turns record profit ahead of ‘uncertain’ year

By Shane Starling

- Last updated on GMT

“A year of stark contrasts” as DSM board chairman, Feike Sijbesma called it, has seen DSM turn a near €1bn profit but left the Dutch ingredients giant unable to make a forecast for this year as the economic crisis sets in.

It said “the general economic outlook is poor”​ so poor in fact it was unable to construct a “quantitative outlook … for 2009 in view of the uncertain economic conditions”.

A spokesperson said it was the first time in recent history that DSM had been unable to make a forecast, as the financial crisis had gathered such momentum, so quickly.

“This is unheralded – there has been nothing like this since the 1920s and maybe it will be more severe,”​ said DSM board member Stephen Tanda, noting some clients had put innovation projects on hold.

“But we are in good shape to deal with a downturn and continue to develop innovative products and markets.”

Numbers

Despite its marquee year, DSM saw profits drop 35 per cent in Q4 so that the quarter only contributed €123m to year’s record tally of €903m – of which almost half (€447m) was contributed by the Nutrition division – by far the company’s star performer.

Profits were up 10 per cent on 2007 (€823m) with sales across the company’s portfolios growing six per cent from €8.757bn in 2007 to €9.297bn last year.

Reacting to the economic uncertainty, DSM announced a €100m cash-saving measure that will include 1000 job losses across its international operations as well as “productivity measures”.

Nutrition remains resilient

While many of its chemical operations recorded sharp sales falls of 30 per cent or more, the Nutrition division increased profits by 62 per cent (€276m in 2007), but there were one-off items that benefited the figure.

However exchange rate movements worked against the company.

“The main contributor was Nutrition, where DSM's focus on innovation and differentiation in combination with structural changes in the vitamin industry has resulted in significantly higher profitability,”​ the company said of the division that includes animal and human nutrition.

Tanda told NutraIngredients.com the division, which includes the Food Specialties sub-division responsible for most of DSM’s healthy food ingredients, was not immune to the downturn, “but continued to perform well”.

He said the health and wellness sector was typically resilient as consumers were willing to pay premiums for foods that delivered real benefits as it provided them with a measure of control at times where they may feel control was slipping in other areas of their life.

“Supplements, personal care, health and wellness foods – so far these are holding up,”​ he said. “Some companies are taking a wait-and-see approach but most are continuing to take risks and innovate.”

He said the Quality of Life programme DSM implemented in 2008 to bundle its quality, traceability and sustainability measures together was enabling it to maintain a point of differentiation over its competitors.

Tanda said China was becoming an increasingly important source of demand for healthy foods and supplements, as well as in the supply of key nutrients.

DSM maintained its dividend of €1.20 per share.

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