DSM says plans to cut 1,100 jobs prompted by recent pharma moves not shareholder pressure

By Gareth Macdonald contact

- Last updated on GMT

DSM HQ in Heerlen
DSM HQ in Heerlen

Related tags: Pharmaceutical drug

Royal DSM will make up to 1100 staff redundant by the end of 2017 to cut costs following the formation of its Sinochem JV and pharma products deal with Patheon.

The Dutch supplier announced the job cuts today, explaining that the move will save it €125m to €150m ($144m to $173m) over the next two years.  

DSM said around half of the job cuts will be at its operations in the Netherlands and that the aim is to streamline its global support functions.

It said: “The support functions will be globally leveraged across DSM to capture scale-benefits and deliver high-quality professional support at lower costs, among others via further standardization of processes, delayering, and elimination of duplications, resulting in a more efficient pooling of resources with clearer accountability for performance.

This will lead to a reduction in size of the support functions, also in view of the transfer into partnerships of the Pharma, Polymer Intermediates and Composite Resins businesses​.”

A DSM spokesman told us that as a result of changes to the firm's pharma business over the past few years - primarily the formation of its JV with Sinochem​ and the Patheon deal​ - it is seeing less demand for support services.

DSM also said it is developing an “improvement and efficiency programme” for its nutrition business and promised to provide additional details at an upcoming financial conference.

Shareholder pressure?

DSM's position is that the cuts are designed to make it better able to operate globally. 

Others​ suggest the reorganisation is designed to appease investor Third Point LLC, a New York, US hedge fund that has been pressuring DSM to split off its nutrition and materials business since buying its stake in the firm last July​.

This idea was rejected by the spokesman who told us the cutbacks are "not about shareholders" adding that the idea is to streamline the firm to allow it to focus on core business functions like R&D, sourcing, manufacturing and selling.

Earlier this month DSM reported that revenue generated by its remaining business with the pharmaceutical industry - through DSM-Sinochem and DPx - was €122m for the second quarter, up from €115m in the equivalent period last year.

DSM-Sinochem Pharmaceuticals – which sells anti-infective ingredients – made the largest contribution, bringing in sales of €112m. 

DSM's larger nutrition business generated revenue of €1.2bn, up 16% on the second quarter last year.

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