Nutrition division stars as DSM H1 profits plunge

By Shane Starling

- Last updated on GMT

Dutch life sciences giant, DSM, is feeling the effects of the recession with profits sliding 76 per cent, but its Nutrition division has bucked the trend to be the only section of the company to record improved sales over the second quarter.

Across its Nutrition, Pharma, Performance Materials, Polymer Intermediates and Base Chemicals and Materials divisions, operating sales for the half year to June 30, slid a billion euros from €4.7bn to €3.7bn.

The company’s earnings before interest and tax (EBIT) fell 80 per cent from €448m to €90m, but nutrition increased profits 41 per cent from €188m to €265m.

Q2 was significantly better than Q1.

“Nutrition continued to show resilience reflecting very strong positions in markets which have seen only a limited impact of the downturn,” ​the company said in a statement, noting it “remains robust”.

DSM was not available for comment before the time of publication.

Sales in the division, which includes vitamins and minerals and specialty ingredients such as Tensguard and Fabuless, rose two per cent over H1 from €689m to €699m, while its other divisions turned in sales slides of between of 25 and 34 per cent.

While recognising difficult and uncertain economic times ahead, the company noted some regions remained strong particularly China, where DSM has had operations for many years.

“DSM's strategic focus on China is paying off. China's industrial production is strongly improving after a relatively short dip. Almost all businesses … are experiencing a strong recovery in Chinese demand, sometimes even back to pre-crisis levels,”​ it said, noting China sales jumped 44 per cent over Q1.

The company said that despite the drop-off in performance across-the-board, it had taken actions to meet the situation head-on such as cost costing measures.

"Early and aggressive action to reduce costs, a focus on cash, stringent management of working capital and the ongoing resilience of our Life Sciences businesses, have all ensured that DSM is in good shape at the end of the first half of 2009,” ​ said chairman of the DSM managing Board, Feike Sijbesma.

Nutrition performance

DSM said its two nutrition groups – Nutritional Products and Food Specialties – recorded weaker volumes of six per cent for Q2 but they were, “compensated for by strong pricing and a favourable currency exchange rate effect.”

The economic downturn is having a limited effect on trading conditions in nutrition, the company noted, with prices for fat soluble vitamins remaining strong.

“The relatively favourable business conditions in Nutrition are expected to continue with prices remaining firm in both Animal and Human markets and further demand recovery,”​ it said. “The Nutrition cluster is expected to achieve full year results somewhat above the 2008 level.”

​The company said DSM Nutritional Products had reduced production output in Q2 to improve its overall working capital and DSM Food Specialties' operating profit was similar to last year with enzymes ARA (arachidonic acid) performing most strongly.

In the period, DSM Nutritional Products signed a €3.5m investment contract with the Changchun Economic & Technology Development Zone to set up DSM's fourth feed premix plant in China, to be located in Changchun City.

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