Dutch chemicals and ingredients manufacturer DSM has posted record end of year results with €809m operating profit, up six per cent on 2005.
Despite working in "a business context that was not unambiguously positive", the firm put their successful year down to solid volume growth (5 per cent) and ongoing optimisation efforts by the company.
DSM's pharma division, which provides contract manufacturing services including production of intermediates, active pharmaceutical ingredients (APIs) and fine chemicals, posted an operating profit of €65m for the year, an increase of 59 per cent compared to 2005.
Net sales for the division, however, dropped 2 per cent over the year coming in at €916m. This drop was attributed to the sale of the company's API production site in South Haven, Michigan, in September last year.
Further restructuring measures also affected sales of the division, all part of DSM's optimisation programme - dubbed Vision 2010 - which focuses on "accelerating profitable and innovative growth of DSM's specialties portfolio."
According to the company, the pharma cluster of businesses still managed to increase operating profit thanks to restructuring efforts and improvement of the product mix offered to customers. The company also highlighted innovation in the division, such as the development of a platform for 'white biotechnology' - using biological systems or living organisms in industrial production.
Net sales for the company as a whole increased by 2 per cent to almost €8.4bn, with pre-tax profits of €733m, up from €650m in 2005.
During the year, the company launched over 25 new products and applications and increased its presence in emerging markets, particularly China. The firm has made several investments and expanded production facilities in the country, which "represents an almost unimaginably large market opportunity, thanks to the country's vast population and increasing standard of living" according to the company.
Despite the healthy financial results for 2006, Peter Elverding, chairman of the DSM managing board is cautious regarding the outlook for 2007:
"In 2007 I expect continued good volume growth, but some attractive contracts related to the acquisition in 2003 of Roche's vitamins division (now DSM Nutritional Products) will come to an end," he explained.
In addition to increased competition in certain areas of the firm's nutritional products business, Elverding cites a weak US dollar exchange rate and high natural gas prices at the beginning of 2007 as possible factors that could impact the outlook for the year.
"I expect that in 2007 we will stay on track in achieving our Vision 2010 targets, although…I expect that the operating profit this year will be lower than in the record year 2006."