July 2, 2007

DSM targets 100 million euros profitability in 2007/08
 

Royal DSM NV has commenced on a comprehensive profit improvement program for DSM Nutritional Products through a mix of cost savings and increased profits from higher revenues to deliver an annual minimum of 100 million euros (US$135.42 million) of improved profitability.

The program will begin in the second half of 2007 and will continue for the next two years, enabling the Nutrition business to achieve the targeted gross profit (EBITDA) margin level of at least 18 percent set out in Vision 2010.

The first full year of the program expects benefits to offset the negative impact of the expiration of the contracts made in conjunction with the acquisition of Roche Vitamins.

One time costs of the program are estimated at some 40 million euros after tax, the majority of which are expected to be accounted for in 2008.

In addition, DSM Nutritional Products will also invest in further optimizing its business processes, including the replacement of numerous legacy systems with an integrated SAP ERP system.

The profit improvement plan called Aspire to Win is based on three main pillars:

• Cost reductions - The major elements of the cost savings program are related to Sales, General and Administrative expenses, further streamlining of business processes and administrative overhead reductions. Additional cost improvements will be targeted in manufacturing, both at the main production sites and premix plants, including the sourcing of raw materials and services. Further options will be evaluated to optimize R&D expenditure and the operational footprint.
   
• Enhancement of differentiation activities - The business will further enhance its differentiation activities and develop customer solutions in close cooperation with leading players in the food and feed industry.
   
• Accelerated innovation - A further boost to capturing the innovation potential in health enhancing ingredients for Animal Nutrition, Human Nutrition and Personal Care will be achieved through accelerated market penetration and new applications of young products like Hy.D© (advance source of Vitamin D3 for poultry), and the introduction of new products. Additional growth will be stimulated by an intensified acquisition program to in-source early stage products and technologies and acquire start-up companies and innovation leaders.