DSM outperforms expectations in 1Q

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DSM has said it expects 'clearly higher' net profit from ordinary
operations in 2004, after reporting an unexpected increase in
first-quarter operating earnings.

The company reported earnings before interest and taxes (EBIT) of €110 million, up 21 per cent compared to the first quarter of 2003, despite averaged out forecasts by analysts polled by Reuters that it would post a decline to €87 million.

The results were helped by the sales contribution from Roche's vitamins and fine chemicals division, which was acquired last year. This input helped total group sales improve by 29 per cent to €1.87 billion.

However, the performance of the Life Sciences Productions division, which includes DSM's activities in pharmaceuticals, was less impressive. Sales fell 8 per cent to €464 million as DSM Anti-infectives was hit by lower prices, lower margins and adverse currency factors. Without going into detail, the company said that DSM Pharmaceutical Products itself did well, and that the business 'improved strongly'. However, this did not stop the division reporting a 60 per cent reduction in EBIT to €21 million.

DSM chairman Peter Elverding forecast for the second quarter an operating profit around the level of the first quarter 2004, although he said that for the full year DSM would still feel the effects of high raw materials prices and the weak US dollar - factors which are affecting the entire European chemicals sector. Nevertheless, he expects full-year operating profit to exceed then €150 million forecast earlier.

He noted that DSM still needs to trim costs in order to meet its financial targets, and that an ongoing restructuring operation will continue. The firm shed 578 jobs in the first quarter of the year, out of a total workforce of around 26,000.

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