Bloomberg News

DSM Deepens Savings Drive to Stay Within Reach of Profit Goal

February 20, 2013

Royal DSM NV, the world’s largest maker of vitamins, reported lower-than-estimated quarterly profit and said it would deepen a savings program as it seeks to stay within reach of its 2013 profit goal.

Earnings before before interest, taxes, depreciation and amortization dropped 17 percent to 243 million euros ($326 million), the Heerlen, Netherlands-based company said. Analysts in a Bloomberg survey estimated 264 million euros. DSM fell 2 percent to 46 euros at the open of trading in Amsterdam.

Chief Executive Officer Feike Sijbesma said today he’s exploring ways to reduce DSM’s exposure to the merchant caprolactam market after weaker prices for the material used in nylon weighed on earnings. DSM has spent about 2.8 billion euros on acquisitions, mostly to build a nutrition unit where results fell short of analysts’ estimates in the fourth quarter.

“Numbers should weigh on DSM’s share price today,” said Markus Mayer, an analyst at Kepler Capital Markets who recommends that investors “step in” to take advantage of any share weakness. “The reiteration of the 2013 guidance and the improvement of performance materials already shows that there should be a recovery at DSM’s cyclical parts.”

Sijbesma outlined a target to get 50 million euros to 100 million euros in added improvements by 2015 and reiterated the company will be “moving toward” its 2013 Ebitda target for about 1.4 billion euros. He declined to be more specific on the outlook on a call with journalists.

Switch in Focus

Quarterly sales increased 1.9 percent to 2.27 billion euros. The nutrition division reported 1 percent growth in revenue, stripping out the effect of acquisitions.

The CEO has steered the company away from lower-margin, commodity-based businesses and has made acquisitions to expand in food-ingredients, infant nutrition, dietary supplements and animal nutrition. DSM is among the global leaders in caprolactam, the raw material for polyamide 6, also knows as Nylon-6, used in electronics and automotive products, textiles, carpets and industrial fibers.

The Dutch company already announced plans to cut 1,000 jobs across European operations making plastics and other products that are suffering from higher raw-material prices and subdued demand as well as competition from Asian rivals. No major additional headcount reduction will result from the extension in the savings program.

DSM gained 28 percent in 2012 in Amsterdam trading, while Amsterdam’s benchmark AEX index added 9.7 percent. The company has a market value of 8.8 billion euros.

To contact the reporter on this story: Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net


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