August 3, 2010
DSM expects strong year as profit exceeds expectations
Dutch life and materials sciences group Royal DSM NV has reported a big jump in net profit due to an easy year-earlier comparison, re-stocking and cost cutting measures and the company expects 2010 to be a strong year.
"DSM remains vigilant about the broader macro economic developments, but based on the current positive business environment, we expect 2010 to be a strong year for DSM," Chief Executive Feike Sijbesma said.
Net profit at the Dutch company, which makes products ranging from food ingredients to plastics and ingredients for medicines, rose to EUR149 million (US$195 million), from EUR10 million (US$13 million) in the second quarter last year, driven by improved demand, particularly in China which now makes up 13% of total sales. A Factset survey of nine analysts had predicted net profit of EUR122 million (US$159 million).
DSM's closely watched earnings before interest and tax (EBIT), rose to EUR252 million (US$329 million), from EUR79 million (US$103 million) last year, boosted by a strong performance of its performance materials and polymer intermediates divisions.
This echoes comments from peers BASF of Germany, which last week reported a 27% volume rise in its plastics division, and France's Rhodia, which said volumes in its polyamide division grew 15% in the second quarter.
DSM's pharma division however, posted an operational result of EUR0 million, from an EBIT of EUR3 million (US$3.9 million) last year, due to costs related to the closure of the DSM Anti-Infectives site in Egypt.
The company had previously forecast lower earnings this year for its pharmaceuticals division and a better performance from its performance materials unit.
DSM at the end of March announced the sale of its non-core agro and melamine activities to Egypt's Orascom Construction Industries SAE for EUR310 million (US$405 million), after which the chief financial officer said the company is willing and ready to do acquisitions. The company has a war chest of over EUR1.4 billion (US$1.8 billion) for acquisitions.
