DSM accelerates its new image

By Katrina Megget

- Last updated on GMT

Related tags: Dsm, Investment

DSM has announced the conclusions for the company's complete overhaul as it accelerates the shift to a life sciences and materials sciences company.

The Netherlands-based company announced earlier it was planning to restructure the company based on its strategic programme 'Vision 2010 - Building on Strengths' but released late last week the conclusions of the mid-term evaluation of the strategy.

"Following a fundamental review undertaken across the whole of the group's business portfolio, DSM has taken the decision to focus on its specialty life sciences (nutrition and pharma) and material sciences (performance materials) businesses," a DSM statement said. "Those businesses which do not fit with the strategic thrust will be carved out and divested, during the course of the Vision 2010 period, to new owners for whom there is a stronger strategic fit and under whose ownership they can prosper." The move follows recent changes to the company, including last month's investment in Danish purification technology company Upfront Chromatography to boost DSM's protein separation business, and the selling of its Michigan facility, which produces generic active pharmaceutical ingredients (APIs), to Albemarle Corporation, also last month. Back in June, DSM also announced plans to carve out its struggling anti-infectives business with the possibility of a potential sale of the unit. "DSM's marketing leading positions and combined technological expertise in life sciences and materials sciences create a unique portfolio for growth and innovation," DSM chairman of the managing board Feike Sijbesma said in a statement. "This accelerated Vision 2010 strategy gives us the ambition and urgency to capture its potential. By increasing our focus on these specialty areas of our business and freeing up resources for innovation and acquisitions, we believe this programme will generate significant future value for our stakeholders." The shift in direction reflects DSM's expertise in the areas of chemistry, process technology, biotechnology and materials science. "DSM's specialty life sciences and materials sciences businesses are serving rapidly growing societal needs, particularly in areas such as improving nutrition, health and the environment and enhancing people's quality of life," the DSM statement said. DSM hoped this would put the company at the "forefront in the creation of novel, bio-based products from renewable resources" with the four Emerging Business Areas (white biotech, personalised nutrition, biomedical and specialty packaging) fitting in the mindset well. Businesses grouped in the new Base Chemicals and Materials cluster will be the ones designated for carve-out and divestiture. These include: industrial chemicals melamine, urea, fertilisers and energy; performance materials elastomers; special products within nutrition; and maleic anhydride including derivatives. "These divestments will result in a reduced presence at the Chemelot site, Geleen, Netherlands. DSM will review its options how it can best support the further development of that site into a successful industrial park. In addition DSM will continue to invest in its R&D campus infrastructure on this site," the statement said. A partnering strategy will be pursued for DSM's citric acid interests and DSM Fibre Intermediates activities will be reported in a new cluster Polymer Intermediates. As a result DSM will create five reporting clusters: nutrition (life sciences), pharma (life sciences), performance materials (materials sciences), polymer intermediates (materials sciences), and Base Chemicals and Materials. DSM's goal would be to derive 60 per cent of total revenues from specialty businesses. The company is also looking at growth through acquisitions in the areas of the company's newly developed core business areas. The company has earmarked up to €200m for venturing investments until 2012. DSM will continue to focus on emerging economies, such as China, which currently achieves annual sales growth of about 20 per cent for DSM. The company has now developed a new target with revenues from China expected to be $1.5bn by 2010. A number of ambitious new growth objectives have also been set, including raising the company's annual organic sales growth target from 3-5 per cent to more than five per cent. Additional shareholder value is expected to be created through a proposed uplift in the dividend per share and a new €750m share buy-back programme. The company expects its operating profit for 2007 to be €820m with an uncertainty of plus or minus three per cent.

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