DSM Reports Improved Operating Profit

NETHERLANDS - DSM reports continued strong cash generation as operating profit improves in the first half-year of 2009.
calendar icon 5 August 2009
clock icon 4 minute read


Second quarter (Q2) operating profit from continuing operations was clearly higher than Q1 2009. However, Q2 total operating profit of €79 million, was substantially down from last year's record.

The Nutrition business remains robust, while Materials Sciences recovers from Q1 losses.

Cash flow from operating activities was once again very strong (€267 million) – 44 per cent higher than Q2 2008.

Interim dividend unchanged at €0.40 per ordinary share.

The outlook remains uncertain, although the initial impact of inventory write-downs and customer de-stocking now looks to be largely over.

Commenting on the results, Feike Sijbesma, chairman of the DSM Managing Board, said: "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.

"Although there is little sign of improving demand across many end-markets, Q2 earnings were up sharply compared with the first quarter driven by Materials Sciences as inventory write-downs and customer de-stocking have largely run their course.

"DSM is staying the course, even in these challenging times. This is illustrated by the announcement of the disposal of two non-core businesses in July, our ongoing strategic commitment to our customers, innovation and sustainability and our focus on China, where we are reaping the benefits of a favourable market. Our strong balance sheet and robust cash flow leave us well placed to take advantage of future opportunities that will arise."

Business review by cluster: Nutrition

Q2 results for the Nutrition cluster continued to be strong despite the organic sales development of minus six per cent compared to Q2 2008. Last year's first half-year (H1) sales volumes benefited to a certain extent from inventory build-up in the trade channels in anticipation of higher prices and the impact of the Beijing Olympics. This was followed by inventory reduction at the end of 2008 and the beginning of 2009. Current sales are a reflection of underlying end-use demand. In Q2 2009, demand improved compared to Q1 mainly in animal nutrition, while dietary supplements saw some weakness. Prices, especially for fat soluble vitamins, remained relatively strong and were above Q2 2008. Compared to Q1 2009, there have been price declines with some reversals towards the end of Q2.

Operating profit of DSM Nutritional Products increased compared to Q2 2008 mainly based on pricing and a relatively strong dollar. DSM Nutritional Products started reducing production output in Q2 to improve its overall working capital. DSM Food Specialties' operating profit was similar to last year with strong performance in enzymes, such as Brewers Clarex® and ARA (an infant nutrition ingredient).

Further Reading

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