Royal DSM, the Life Sciences and Materials Sciences company, today reported first quarter EBITDA from continuing operations of €272 million compared to €301 million in Q1 2013. This performance was delivered against significant adverse foreign exchange rates. As expected, Nutrition experienced in Q1 the continued impact of the market headwinds, which also affected Q4 2013. Materials Sciences was impacted by lower results in caprolactam.
Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: “DSM delivered results in line with expectations, despite further currency deterioration during the quarter. We are pleased to report that market conditions in Nutrition began to show some signs of improvement by the end of the quarter. Our performance in Q1 demonstrates DSM’s strength in Nutrition, owing to our highly integrated and global business model, benefiting from the structural megatrends of health and wellness. We also see a more positive momentum in a number of Performance Materials end-markets.”
“Through maintaining our focus on the operational performance of the business, benefiting from the Profit Improvement Program, we continue to execute our near term initiatives of protecting profitability and improving cash flow. Therefore, we confirm our outlook given in January 2014, and anticipate to deliver improving financial results in the coming quarters.”
DSM is currently in negotiations to take over Chinese vitamin producer Aland Nutraceutical Holding, which would better extend DSM’s reach into Asian markets. Aland would be a small acquisition for the company but as well as geographical benefits, it would also further strengthen its position in vitamin C. Aland, which was founded in 1990, had net sales of USD 90m in vitamin C in 2013.
Human Nutrition & Health net sales were €423 million in Q1. Organic sales declined by 1% compared to Q1 2013, with volumes flat and prices/mix down slightly. As expected, the US dietary supplements markets (vitamins and fish oil based Omega 3) were down significantly, while dietary supplements in Europe and Asia performed well. Good growth was also realized in i-Health and in premixes. Western food & beverage markets in general remained soft. Compared to Q4 2013, prices were down 3% mainly due to a less favorable product mix, while volumes were up almost 14%, due to seasonal effects and some restocking.
Animal Nutrition and Health net sales were €466 million in Q1. Organic sales growth in Q1 was 7% with volumes up 10% compared to the weak Q1 2013 when the animal feed markets were still being impacted by the high commodity prices resulting from the 2012 drought. Improving market conditions in animal feed drove volume growth, albeit tempered by ongoing animal diseases in certain regions, with strong performance in premix. Volumes for our key vitamins, especially vitamin E, remained flat. Prices were down 3% from Q1 2013 due to lower vitamin prices, especially vitamin E. Compared to Q4 2013, volumes were down 6% mainly attributable to seasonality. Overall, prices were slightly lower (-1%), with vitamin E prices stabilizing in Q1. Higher vitamin spot prices in March had no significant impact on Q1 pricing, as DSM primarily supplies on a contract basis. In Q1 2014, Tortuga delivered sales of €64 million and an EBITDA of €10 million.
DSM Food Specialties delivered a solid performance in Q1 with good organic growth in enzymes and cultures. The integration of Cargill and DSM’s cultures businesses was concluded according to plan. The combined businesses are generating value for DSM’s customers, resulting in significant growth opportunities.
DSM is firmly committed to its strategy, which has delivered and will continue to deliver sustainable value. DSM in motion: driving focused growth is the strategy that the company embarked on in September 2010. It marks the shift from an era of intensive portfolio transformation to a strategy of maximizing sustainable and profitable growth. DSM’s strategic focus on Life Sciences and Materials Sciences is fueled by three main societal trends: Global Shifts, Climate & Energy and Health & Wellness. DSM aims to meet the unmet needs resulting from these societal trends with innovative and sustainable solutions.
In Nutrition DSM continues to implement further post-integration improvements (affecting some 210 FTE’s) in support of its unique business model, emphasizing increasingly local solutions in addition to its strong global product positions. This will result in a positive impact of €50 million per annum by 2015 which will be partially reinvested into external (open) innovation and local, front-line support. Related one-off costs of €28 million were recognized in this quarter.
For 2014 DSM takes a prudent approach, assuming the unfavorable January 2014 foreign exchange rates are maintained for the year. Furthermore, DSM assumes a continued challenging macro-economic environment, with low growth in Europe, modest growth in the US, and a slowdown in the high growth economies.
Based on the above, DSM targets for 2014 to improve its business performance to at least offset the negative currency impact of €70 million at January 2014 exchange rates.
Comparable EBITDA in 2013 from continuing operations after new accounting rules for joint ventures amounted to €1,261 million.
