Nutrition helps DSM to strong third-quarter results

By Mike Stones

- Last updated on GMT

Related tags Dsm nutritional products Generally accepted accounting principles Dsm

Strong performance in DSM’s nutrition segment helped the company achieve third-quarter operating profit of €185m; up 28 per cent on the €144m reported in the same quarter of last year.

DSM Nutritional Products and DSM Food reported operating profit up 15 per cent on the third-quarter of 2009 reflecting what a company statement described as “good market conditions​.”

Herman Betten, DSM’s senior external communications manager, told “Business conditions continue to be favorable and the continued strategic focus on value over volume is successful​.”

But operating profit in this segment was below the strong results reported in the second- quarter of this year due to the resumption of planned maintenance and less favorable exchange rates – particularly for the Swiss Franc. This adversely affects DSM Nutritional Products because of its Swiss base.

Exchange rates

Sales in the nutrition segment rose by seven per cent driven by currency exchange

rates. Although Nutrition experienced some volume growth in most of its businesses, prices were lower than last year, according to the company.

Volume in Human Nutrition and Health, Personal Care and DSM Food Specialties were lower in the third-quarter due to seasonal effects.

Feike Sijbesma, chairperson of DSM’s Managing Board, said: “Nutrition delivered a continued excellent performance, whilst Materials Sciences also posted very good results. Our strong market focus, disciplined cost and cash management and a broadly improving business environment helped drive these results. Based on the continued positive business environment we expect 2010 to be a strong year for DSM.”

Overall, net profit before exceptional items reached €128m compared with €100m in the same period of last year.

Total net profit was € 79m compared with €374m in the third-quarter of last year. Last year’s result included a €274m net profit from exceptional items following the disposal of DSM Energy.

Cash flow from operating activities in the third-quarter was €330m. That included a €66m contribution from reduced working capital.

Operating working capital as a percentage of sales decreased from 21.0 per cent to 19.7 per cent during the quarter.

Year-to-date cash flow from operating activities reached €690m – enough to cover capital expenditure and dividends, according to a company statement. The operating cash flow together with the proceeds from divestments has led to a big reduction in net debt during the year, it added.

Meanwhile, Sijbesma said that the company’s new corporate strategy, launched in September, DSM in motion: driving focused growth, marked a move from a period of intensive portfolio management to an era of maximizing sustainable, profitable growth.

Unique opportunities

We are committed to fully leverage the unique opportunities in Life Sciences and Materials Sciences​,” he said. “With our focus on high growth economies, innovation and sustainability and with our strong capital structure and leadership in biotechnology we are in an excellent position to deliver on our ambitious sales and profit targets​.”

The latest financial results also reflect the reclassification of Citric Acid from the Base Chemicals and Materials cluster to discontinued operations. DSM’s nutrition and food ingredients businesses serve the food, feed, cosmetic and pharmaceutical industries.

DSM hopes to achieve this by focusing on high growth economies, innovation, sustainability and acquisitions and partnerships, said Betten.

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