Innovation drives sales for DSM nutriton unit

By Laura Crowley

- Last updated on GMT

Related tags: Operating profit, Dsm

DSM's full year nutriton results show investment in
innovation is rewarded with strong market position, but rising
costs, high expenditure and damaging exchange rates compromised
profits.

In the nutrition sector, the fourth quarter's net sales increased 13 per cent, helping pull the year's sales up by 6 per cent, up to €2.5bn from €2.4bn in 2006. Overall net sales for the fourth quarter grew by 8 per cent, resulting in a 5 per cent increase for the full year. However, the operating profit for the fiscal year decreased 1 per cent across the company, and a massive 16 per cent for nutrition, down to €264m from €314m in 2006. Food Specialties ​DSM Food Specialties' sales and operating profit decreased due to the contractual phasing-out of the phytase tolling business in 2006. However, it strengthened its position by launching new products and pursuing organic growth. Its dairy sector introduced the enzyme Accelerzyme COG, aimed at improving maturation speed. The product portfolio for cheese production was reported to show satisfactory growth, though prices in the area of preservation were under pressure. The satiety ingredient Fabuless for fermented milk products experienced growth and is now being used across Europe. As well as applications in yoghurt, it also found used in functional foods. Savoury ingredients recorded strong volume growth, particularly in the specialty yeast extracts segment, which includes the newly launched product Maxarite. This taste potentiator boosts salty flavours enabling the salt content of bread and cheese to be reduced by up to 50 per cent, according to the company. Enzyme sales also showed strong growth, especially in the area of baking, brewing and fruit processing. The company said its enzyme and fermentation technology is part of its backbone CakeZyme and Let's Cake Together were launched for the baking industry to help manufacturers respond to the demands for indulgence, reduced fat and improved costs. Meanwhile, DSM also introduced two new enzymes and a yeast mannoprotein in the fruit processing and wine industry. It also introduced Tensguard, a new non-fat hydrolysate consisting of bioactive peptides targeting the growing global market for blood-pressure management. Nutritional Products ​ DSM Nutitional Products achieved solid growth and the company said the negative price trend in the more mature part of the business (the vitamins section, following its acquisition of Roche Vitamins in 2003) was partly reversed by its differentiation strategy. This strategy seeks to deliver faster growth, higher margins and improved earnings quality by moving away from commodity ingredients towards specialty ingredients only DSM can provide. In 2007, DSM entered into a strategic alliance with Kemin, the creator of the lutein brand eye-health supplement. The long-term partnership focuses on significantly growing lutein usage. Product launches in the year included i-flex, a nutritional supplement for joint health. DSM also reformulated Ropufa 75 EE, a concentrated fish oil, to meet customer requests for a new and lighter coloured product. Nevertheless, operating profit decreased because higher organic growth did not fully counterbalance for the expiration of Roche contracts, higher energy and raw material costs, higher innovation expenditure and negative exchange rates. Higher costs have been experienced across the food industry as a result of poor weather conditions affecting crops, an increasing demand for biofuels and a rising cost of oil. Manufacturers have had to decide whether to swallow the costs themselves, or pass them onto their customers. Special Products ​There was a strong improvement for the company's Special Products unit, which supplies products produced by means of toluene oxidation technology, with a focus on quality, reliability and innovation. Products include benzoic acid, sodium benzoate and benzyl alcohol. The business unit supplies a wide range of markets, including carbonated soft drinks and flavours and fragrances. This sector's improvement was driven by higher sales volumes and margins, accompanied by lower fixed costs. Growth of arachidonic acid continued, but at a slower pace than in previous years due to saturation as a significant number of infant-food manufacturers launched new product lines for infant formula enriched with the acid. Sales of the patented peptide PeptoPro also increased.

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