IC: Dutch DSM's Q3 net profit down 61% amid weaker margins
LONDON (ICIS)--DSM’s third-quarter net profit after exceptional items fell 61% year on year to €36m, on the back of poorer margins at its nutrition unit, the Dutch specialty chemicals producer said on Tuesday.
The company’s net sales fell by 9.51% year on year to €2.1bn in the third quarter, while earnings before interest, tax, depreciation and amortisation (EBITDA) was down by 21% at €243m, the company said.
However, sales from continuing operations during the period rose 8% year on year to €1.95bn, while EBITDA from continuing operations was up 2% at €287m.
“We are starting to implement the previously announced €125-150m cost reduction programme for the DSM-wide support functions. Tomorrow at our Capital Markets Day, we will announce our strategy and targets for the coming years, as well as an additional efficiency and cost reduction programme in Nutrition,” said Feike Sijbesma, CEO and chairman of the DSM managing board.
“It is increasingly difficult to predict macroeconomic developments. Assuming no major changes in current market conditions for the remainder of this year, we maintain our full-year outlook to deliver an EBITDA in 2015 ahead of 2014, the increase mainly driven by positive foreign exchange effects,” he added.
The nutrition division’s third-quarter EBITDA fell by 5% year on year to €213m, with the EBITDA margin down to 17.0% from 20.6% in the same period of 2014, it said.
The company said: “Good volume growth and overall positive foreign exchange rates largely offset the negative impact of lower vitamin E prices (of more than €30m).
“Positive foreign exchange rates effects mainly associated with the US dollar were partly offset by the negative impact of the Swiss franc, the Brazilian real and the Chinese renminbi,” it added.
Sales in the division did increase 15% year on year to €1.25bn, driven by strong volume growth in “Animal Nutrition & Health and solid volume developments in Human Nutrition & Health”.
Within its Performance Materials division, sales in the third quarter fell 1% year on year as a result of overall soft volumes, although EBITDA increased 17% as “good margin management and efficiency and cost savings programmes over recent years contributed positively”.
Looking ahead, DSM said a volatility in currencies, including the strengthening of the Swiss franc and the US dollar against euro, and a recent weakening of the Brazilian real would have a mixed effect on its 2015 results.
Investment bank JP Morgan Cazenove said DSM’s results were above expectations and that investors would likely be encouraged by the improved performance of its Human Nutrition segment and confirmation that strong underlying market conditions have remained in the animal feed markets.
“For now, DSM's guidance for EBITDA growth in 2015 has been reiterated and we expect consensus estimates to increase by around 2% for FY15, and closer to 3-4% for 2016. We view today's results as positive and expect the shares to trade up versus the market,” JP Morgan Cazenove said.
It added that DSM's efforts to restructure its Nutrition business will be a likely focus of Wednesday’s investor day.
