March 1, 2012 5:06 am

Nutrition business boosts DSM

Dutch chemicals company DSM reported that revenues from continuing operations grew 7 per cent in the fourth quarter over the previous year to €2.23bn as its nutrition business grew strongly while its pharmaceuticals division fell back.

The growth came despite high raw materials costs, the shrinking European economy, and the strong Swiss franc, which raised the costs of the company's production facilities in Switzerland. Earnings before interest, taxes, depreciation and amortisation (ebitda) on continuing operations were up 6 per cent to €293m.

Net profit fell 43 per cent to €85m, which the company ascribed to €33m in one-time impairments on the value of two production facilities.

Feike Sijbesma, chief executive, said the company expected profits to improve in 2012, especially in the second half, as economic growth in Europe recovers. He said DSM would continue to pursue a growth-oriented strategy, including acquisitions like its takeover of baby food company Martek at the end of 2010.

"In terms of acquisitions, we are looking to nutrition and also to performance materials. Nutrition is a strong performer in DSM, resilient to the economic climate and not volatile to downturns," Mr Sijbesma told the Financial Times. He noted the company has €2bn in cash on hand to finance such acquisitions.

DSM has strong expectations for growth in its emerging markets operations, and in biological and renewable chemical production. In January it announced a joint initiative with US biofuels company Poet to produce ethanol out of cellulosic waste material from corn.

Mr Sijbesma said the company was on track to meet its 2013 targets of €1.4 to €1.6bn ebitda and a 15 per cent return on capital employed. Both of those figures are slightly above the 2011 full-year results of €1.3bn and 14 per cent.

The company proposed raising its dividend by €0.10 over last year, to €1.45 per share.

Mark van der Geest of ABN Amro noted the results had solidly beaten analysts' consensus expectations in DSM's nutrition and polymer intermediates divisions, though the pharmaceuticals and performance materials divisions had fallen short.

Shares fell 1.18 per cent to 41.86 in trading on the Amsterdam exchange, stepping back from a 16 per cent rise since the start of the year.

Mr van der Geest said Wednesday's drop likely reflected "some profit-taking after a pretty decent run-up over the last couple of months”.

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