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Carve-out of business group
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Impairment of some EUR 110 million net in Q2 2007
DSM has studied all options and has concluded that the greatest value will
be generated through a partnering strategy (possibly with - partial -
divestments) for the business combined with innovation initiatives and further
restructuring measures to improve profitability. As a result, DSM
Anti-Infectives aims to report a sustainable profit as from 2008.
In order to facilitate this strategy, the business group DSM Anti-Infectives
will be carved out into a separate entity, enabling a swift partnering if a
value creating option for such action is available. The intended partnership
with North China Pharmaceutical Corporation Ltd. (NCPC) to create a joint
venture for the production and marketing of anti-infectives in China continues
to be an important part of this strategy.
Simultaneously, DSM will continue with its actions to structurally improve the
profitability of the DSM Anti-Infectives activities. In addition to
restructuring the business, further strengthening will take place through the
introduction of new products and technologies. The objective of these measures
is to improve profitability in a sustainable way, to take advantage of the
market growth in China and to prepare and strengthen the business for
partnerships.
“We see currently a positive trend in the results of DSM Anti-Infectives,”
says Jan Zuidam, vice-chairman of DSM’s Managing Board of Directors. “This
gives us the confidence that our past actions to improve the profitability of
this business group are beginning to pay off. By preparing the business group
for partnerships we will further create a sustainable and profitable future
for our Anti-Infectives activities.”
The plan opens also possibilities for divestments of separate businesses such
as the clavulanic acid business. The production of side chains will continue
to be shifted from the DSM site in Spain to China and the aim of the plan is
also to combine leading technology with a low cost asset base to improve
margins as well as to create a natural hedge for the sensitivity to currency
fluctuations. The restructuring measures are estimated to result in 2007 and
2008 in around 100 job losses and provisions of some EUR 15 – 20 million after
tax to cover the restructuring expenses will be required in that period.
DSM will also recognize an impairment charge of some EUR 110 million after tax
in Q2 2007, to align book value with net realizable value.
