DSM soothes shareholder fears with restructuring plan

DSM, the world’s largest vitamins maker, on Thursday unveiled a restructuring plan to boost profit at its hard-pressed nutrition unit and said it was also weighing sizeable acquisitions and a new share buy-back.

The developments may reassure shareholders concerned that the Dutch company could be a target for activist investors or private equity after a run of disappointing results caused by its failure to offset rising raw material prices.

In February, DSM rocked investors with a profit warning, and rumours of a possible buy-out have lifted its stock in recent weeks.

Its shares rose 2.2 per cent to €36.80 in Amsterdam on Thursday.

It plans to increase profits by at least €100m ($134m) a year from 2010 by cutting costs and boosting sales. “Some hundreds” of jobs would go, the company said. It employs 6,000 people in its nutrition division out of 22,000 worldwide.

Rolf-Dieter Schwalb, DSM chief financial officer, said it had a list of potential acquisitions and was willing to spend €500m or more to secure “technology” leaders. He also said DSM would consider a new share repurchase programme when the current €750m scheme launched last year closes, probably in September.

Restructuring will start later this year with the bulk of savings realised in 2008 and 2009.

It will mean one-off costs of about €40m after tax, mostly taken in 2008 and mainly related to the cost of redundancies. It aims to deliver an 18 per cent margin in terms of earnings before interest, tax, depreciation and amortisation, for its nutrition division.

That would be 4 percentage points above the level expected had it not launched the profit drive, DSM said.

The company hopes to boost sales by increasing innovation and by raising the profile of products.

Profit gains are expected to offset the loss of attractive contracts inherited from Roche, the Swiss company whose vitamins unit DSM bought more than four years ago for €1.95bn, but which are expiring.

In addition, the nutrition unit, which generated €2.46bn of annual group sales of €8.35bn in 2006, has been hamstrung by a weak dollar, rising raw material costs and price competition.

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