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High prices help DSM get over flat sales

By Gregory Roumeliotis, 03-Mar-2006

Related topics: Regulatory & Safety

Rising prices globally have helped Dutch chemicals manufacturer DSM go back to profit in Q4, up to €112m (€134m) from €3m in the red a year ago, with operating profits in its Life Science division almost doubling to €39m, albeit thanks to savings not sales.

Back in 2004 a restructuring of DSM's antibiotics-making operations, the world's largest, wiped off €99 million from its profits.

But in Q4 of 2005 exceptional items cost the company less, only €26 million, largely accounted by the shutting of plants in Montreal and Michigan.

For the year the company posted net earnings of €527m, up from €293m in 2004, with a 5 per cent sales growth which was fully due to higher selling prices, as sales volumes were on average flat and the effects of currency fluctuations on sales as well as the net effects of acquisitions and divestments were both close to zero, DSM said.

In Life Sciences, unlike other divisions like nutritional products and performance materials, sales in 2005 were 3 per cent lower than in 2004, mainly because selling prices at its Anti-Infectives were on average lower and its Fine Chemicals and Anti-Infectives recorded lower sales volumes.

Nevertheless, operating profit rose from €79m to €126m thanks to lower fixed costs achieved by restructuring operations at Anti-Infectives and higher sales volumes at Food Specialties.

What is more, sales rose 5 per cent in Q4 to €426m, with Anti-Infectives leading the recovery.

Sales in Pharmaceutical Products in 2005 exceeded the 2004 level due to increased revenues of DSM Pharmaceuticals and the addition of the Exclusive Synthesis business, the firm said.

Long term the company sees a growing and aging world population, increasing purchasing power, the increasing importance attached to a healthy lifestyle and the growing emphasis placed on personal care as the main drivers of growth in Life Sciences.

In a statement DSM said further profit improvement actions from DSMwill be necessary in order to attain the desired profitability levels and will involve completion of the ongoing restructuring projects at Anti-Infectives and at the Linz site in Austria, and further reduction of the asset base of DSM Pharmaceutical Products.

"For 2006 I expect the trading environment to remain positive for our businesses," said Peter Elverding, chairman of the DSM Managing Board.

"Therefore, we expect that the operating profit from continuing operations for the first quarter of 2006 will be at or above the level of the first quarter of 2005."

DSM's Life Science Products cluster comprises the following business groups: DSM Fine Chemicals, DSM Pharmaceutical Products, DSM Anti-Infectives, DSM Food Specialties and DSM Bakery Ingredients which the company divested last July and its bakery enzymes activities were transferred to DSM Food Specialties.