Nutrition Division Helps Float DSM’s Boat During Third Quarter 2008



The financial news surrounding Dutch chemicals group DSM was both good and bad this week, with the company reporting healthy third-quarter results—driven in large part by its nutrition division—while also announcing that it was cutting its full-year operating profit target because of the global economic downturn. Shares in the company fell 14% on Oct. 27 and have dropped by more than a third over the last three months.

Net sales for DSM’s nutrition division—which makes a wide range of nutritional ingredients—were up 15% to 666 million euros ($831 million) during the third quarter of this year (ended Sept. 30), compared to the same period in 2007, the company reported. The company’s chief financial officer, Rolf-Dieter Schwalb, told Nutraingredients.com that the nutrition division was doing better than most of its other units because “people [have] retained an interest in their health and good ingredients in their foods and supplements.”

Nutrition product prices—which jumped a total of 22% for the quarter—also helped to grow DSM’s nutrition sales. “DSM’s focus on differentiation and innovation in combination with structural changes in the vitamins industry has resulted in significantly higher prices and profitability,” the company reported in an earnings press release.

In comparison, net sales at DSM’s pharma division were down 16%, and its performance materials division saw sales slip 2% for the quarter. The company’s base chemicals and materials division sales grew 31% for the quarter, while its polymer business was up 14%. DSM’s total sales were up 9% to 2.4 billion euros ($2.9 billion) for the quarter.

Citing lower demand driven by the global economic crisis—particularly within the car, construction, coatings and electronics sectors—DSM slashed its overall profit forecast for 2008 to around to 1 billion euros ($1.2 billion). “It is obvious there is some kind of recession,” Schwalb told investors during a company earnings call. He said the company will temporarily shut down factories in the Netherlands and elsewhere to reduce inventories in its performance materials and base chemicals divisions.

DSM continued to report “sustained strong profitability” for its nutrition division, however. “Looking out toward the remainder of the year, it is apparent that the crisis in the financial markets has started to impact the real economy, leading to significantly lower customer demand in some areas,” Feike Sijbesma, chairman of the DSM Managing Board, said in a statement. “Some end markets will be more resilient than others, which is one of the main reasons for DSM’s strategic shift to Life Sciences and Material Sciences [which include its nutrition division].”

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