DSM has delivered a Q3 increase in EBITDA earnings of 27% across all its divisions despite “headwinds” like the ongoing economic flatline in Europe and elsewhere, challenging currency movements and rising ingredient costs.
While profits were up across the board, organic sales slid 5% in food and beverage due to, “soft demand faced by Food & Beverage customers in developed markets.”
The previously buoyant omega-3 sector – a sector DSM has invested about €1.2bn in by buying Martek Biosciences and Ocean Nutrition Canada in recent years – came in for special mention as rising costs have dampened demand.
CFO Rolf-Dieter Schwalb told investors of "sluggishness in nutrition" - especially in developing markets - with low catches in the Peruvian anchovy fishery that is the mainstay of marine omega-3 supply driving prices up and affecting demand in mature markets.
New omega-3 players coming out of China were also impacting supply dynamics, he said.
"We passed the raw material price rises through to our customers and the customers did the same but at the end of the day the consumers of dietary supplements did not like it so much that the prices on the shelf went up too much..."
Schwalb said the anchovy catch was looking more abundant this season, adding that fundamental consumption patterns in omega-3 and other sectors remained in place, despite the current price-driven blip.
Price rises also occurred in the vitamin portfolio, and more may follow.
"We have some good and bad experiences but it's very difficult to forecast," Schwalb said.
The company added in its statement that, “recovery in animal protein markets remains fragile, currently leading to some pricing pressure especially in vitamin E.”
Fortitech – the US multi-nutrient blend specialist DSM paid about €500m for at the back end of 2012 – contributed €12m EBITDA on €47m revenue for the quarter.
The Dutch giant’s EBITDA (earnings before interest, tax, depreciation and amortization) came in at €342m, compared to €270m in Q3 2012 across its main nutrition, pharma, performance materials and polymer intermediates businesses.
Revenues for the quarter rose 5% from €2.304bn to €2.397bn.
The nutrition cluster contributed €242m of the €342m EBITDA figure – up 20% from €202m in 2012.
For the nine months to the end of Q3, overall EBITDA was up 15% from €866m to €998m, with nutrition accounting for €706m this year, up from €589m in equivalent 9-month period in 2012.
Feike Sijbesma, CEO/Chairman of the DSM managing board, said: "Nutrition continued its good performance notwithstanding some headwinds that emerged towards the end of Q3.”
Looking forward the Dutch ingredients titan said: “Overall, DSM expects a significant increase in EBITDA during 2013 from the €1.1 billion realized in 2012. This is a result of stronger organic growth, supported by DSM's Profit Improvement Program, as the benefits of acquisitions and a more resilient portfolio are having an increased impact.”
“Foreign exchange rates and the recently announced Dutch 'crisis tax' renewal are likely to have a negative impact on EBITDA. Overall, based on current economic assumptions, DSM continues to expect to move towards its 2013 EBITDA target of €1.4 billion. The combination of the above factors could however result in an EBITDA for 2013 slightly below €1.35 billion.”