Positive DSM 3Q trading despite low growth
operating profits by 44 per cent to €220 million in the third
quarter, with the performance materials and industrial chemicals
divisions leading the increase.
This is despite the fact that the company, that supplies the pharmaceutical and packaging sectors, has seen little real growth in the period, with sales volumes falling 1 per cent, attributable to DSM Elastomers and DSM Fibre Intermediates.
However, a 6 per cent rise in sales to €1.9 billion was largely accounted for by higher prices, which increased by 4 per cent, and the takeover of NeoResins, which added 3 per cent to sales.
DSM recently unveiled its new strategy to boost R&D spending, make acquisitions and focus on emerging economies, particularly China, to realise sales growth of 3-5 per cent annually up to 2010.
The company will also continue its focus on specialty chemicals, begun in 2000 and responsible for greatly improved profits in recent months.
Analysts at SNS Securities said the new strategy contains "solid statements with respect to profitability and focus areas of the company." But the positive surprise was the 3Q trading update and the dividend proposal, which will be raised to €1.00 per ordinary share from €0.87 in 2004.
As part of their strategy, DSM has cemented its links with China in a new agreement announced last week with large Chinese antibiotic maker North China Pharmaceutical Group Corporation (NCPC).
The move fits with the company's target of doubling sales in China to $1 billion by 2010.
Under the $164 million (€135.6 million) deal, DSM will gain a 49 per cent controlling interest in two joint ventures with NCPC, including one for the production of antibiotics (especially beta lactam antibiotics).
It will also obtain a minority share in NCPC Group, one of China's largest antibiotics and vitamins makers and another in NCPC ListCo, an affiliate of NCPC, listed on the Shanghai stock exchange.
Annual sales from the joint ventures are expected to start at approximately $275 million annually.
On 18 October DSM also acquired Syntech, a Chinese producer of coating resins with annual sales of approximately $30 million.
"In the past few weeks we have been able to make two relevant steps in implementing our new strategy to strengthen our position in the rapidly growing Chinese market," said Peter Elverding, chairman of DSM's managing board.
In a further statement the company said the partnership would lead to "the world's best possible combination of technologies and low cost manufacturing whilst securing high quality and benefiting from the global DSM sales network."
DSM also opened its first research and development center in Shanghai last month.
DSM expects operating profit for 2005 to exceed 800 million euros, which would be "substantially higher" than 567 million euros last year. "All businesses are positioned for further growth and I expect this year's operating profit to be the highest in our history," said Elverding.
Based in The Netherlands, DSM is active worldwide in nutritional and pharma ingredients, performance materials and industrial chemicals. The group has annual sales of approximately €8 billion and employs around 23,000 people worldwide.
NCPC is one of the largest antibiotics and vitamins manufacturers in China, comprising of 24 controlled subsidiaries, 8 associated companies, and an additional 14 indirectly controlled subsidiaries. The NCPC Group employs around 18,000 people and total 2004 group revenues were approximately RMB 7.7 billion (€770 million).
