Innovation in targeted areas like nutrition should add sales worth €1 billion in five years time, said vitamin and specialty chemicals maker DSM today.
Unveiling its new strategy at a press conference today, the company said it will boost R&D spending, make acquisitions and focus its resources on new technologies to achieve targets under the five-year plan.
It will also focus on emerging economies, particularly China, to realise sales growth of 3-5 per cent annually up to 2010.
The company will continue its focus on specialty chemicals, begun in 2000 and responsible for greatly improved profits in recent months.
By 2010, it wants to increase the role of specialty products to 50-60 per cent of sales, up from 40 per cent currently, helped by acquisitions in nutrition and performance materials as well as accelerating its innovation programmes in these fields.
Among four new programmes to be launched to respond to 'emerging business areas' is personalized nutrition, a growing consumer trend that is opening up opportunities in the functional food sector.
R&D spend is also to increase. An average €50 million per year (€30 million in 2006 increasing to €70 million in 2010) will be spent on innovation and about 15 per cent of capital expenditures will be allocated to new business development investments.
An innovation centre, headed by a chief innovation officer, will be set up to support innovation across all of the businesses and handle the corporate licensing, venturing and intellectual property activities of DSM.
Other activities are also to be reorganized. The activities of DSM Nutritional Products and DSM Food Specialties will be combined in a new Nutrition cluster and pharma will be grouped under another new cluster.
Nutrition will have a target EBITDA/sales margin of 18 per cent.
The company also updated its guidance for third quarter results today. EBIT is now expected to be around 40 per cent above last year's third quarter (€153 million) and higher than this year's second quarter.
Analysts at SNS Securities said the new strategy contains "solid statements with respect to profitability and focus areas of the company". But the positive surprise was the 3Q trading update and the dividend proposal, which will be raised to €1.00 per ordinary share from €0.87 in 2004.
In the second half of 2006 DSM said it will evaluate the option of a share buyback.