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Financial Results Q1 2009


The downturn in the real economy, which started at the beginning of Q4 2008 following the financial crisis, continued into Q1. Almost half of DSM’s business is heavily affected by this downturn, in particular those businesses which are exposed to the automotive, electrical and electronics, and building and construction industries. DSM Engineering Plastics, DSM Resins, DSM Fibre Intermediates, DSM Elastomers and DSM Melamine all posted a loss in Q1 2009, as they had done in Q4 2008. All of these businesses, but especially DSM Fibre Intermediates, experienced continuing price pressure. In Performance Materials sales volumes decreased further compared to Q4, which is a reflection of very weak end-market demand and continued downstream de-stocking.

Unlike last quarter, the negative impact of inventory revaluations was limited (approximately EUR 15 million). This, in combination with the first effects of the swift cost control actions, allowed the operating results of most of the affected businesses to clearly improve compared to Q4.

DSM Agro’s business came under pressure, because of the late start of the fertilizer season and customers’ cautious purchasing behavior, which was also reflected in lower prices.

The Nutrition and Pharma clusters and DSM Dyneema showed resilience because their end-markets are less affected by the downturn.

DSM’s overall focus remained on cash in order to maintain a strong financial position. High priority is given to working capital management, credit control, responsible reductions in capital expenditure and cost control. The structural cost savings program which was announced on 15 December is well underway and is delivering its first results. It is now expected that the initially announced savings of EUR 100 million will be clearly exceeded.

The focus on cash was again successful, as witnessed by strong cash from operations in Q1 (EUR 166 million). Net debt decreased by EUR 40 million.

Net Sales

Sales dropped by 22% compared to Q1 2008, which is unprecedented. Virtually all businesses experienced a drop in demand, in particular in Materials Sciences and Base Chemicals and Materials. Nutrition too is experiencing some weakness in demand, especially in Animal Nutrition and Health. Prices in Nutrition remained at the Q4 level, but on a year-on-year basis they reflect the increase during 2008. Prices at DSM Fibre Intermediates are very weak as a result of intense competition.

Compared to Q4 2008 sales dropped by 12%, as a result of 4% lower volumes (mainly in Performance Materials) and 8% lower prices (mainly in Polymer Intermediates).

Operating Profit

Operating profit in Q1 dropped substantially compared to last year, due to the sharp reduction in economic activity. The results of Performance Materials, Polymer Intermediates and Base Chemicals and Materials experienced strong pressure from sharply lower volumes, lower margins and some additional inventory write-offs. The fixed cost reduction was already noticeable, but clearly insufficient to compensate for the decrease in activity.

Nutrition maintained its strong performance, profiting from price increases implemented during 2008. The Pharma result was stable, although at too low a level.
As announced earlier, IFRS pension costs (non cash) have increased by some EUR 18 million per quarter, due to the lower funding level of the DSM defined benefit plans. This is the main reason for the lower result in Other activities.
Compared to Q4 2008, operating profit was 54% lower. This was the balance of better results in Performance Materials and Polymer Intermediates (limited impact of inventory write-downs) and worse results in the other clusters (mainly DSM Agro) and Other activities (pensions).


The first quarter saw a continued strong performance of the Nutrition cluster, especially considering the economic downturn. Organic sales growth was 1% compared to Q1 2008 and sales were stable compared to Q4 2008.

Volume developments in Q1 were negatively affected by continued inventory reduction in the value chain and reduced animal nutrition demand due to a moderate decline and shift in meat consumption. DSM has decided to reduce its production output for some feed ingredients to manage its operating working capital.

The increase in operating profit at DSM Nutritional Products compared to last year was to a large extent based on favorable margins for most products, a relatively strong dollar and ongoing improvements resulting from the Aspire to Win program. The latter has already achieved the targets initially set for 2010.

DSM Food Specialties’ operating profit was above last year’s, mainly as a result of the contribution of innovative products and favorable conditions in ARA (an ingredient for infant nutrition).


Q1 sales in the Pharma cluster declined because of the DSM Deretil disposal in Q4. Organic sales growth was 2%, which was the balance of higher sales at DSM Pharmaceutical Products and lower sales at DSM Anti-Infectives.
The operating profit in the cluster was slightly above last year, mainly due to the disposal of DSM Deretil.

Performance Materials

Both DSM Engineering Plastics and DSM Resins experienced very substantial sales declines in Q1. DSM Dyneema showed resilience, but experienced some weakness in commercial marine and high-performance textiles.

The operating profit in the cluster was substantially below Q1 of last year, but clearly better than Q4, which was due to much lower inventory write-offs. Both DSM Engineering Plastics and DSM Resins were still posting a loss, which is a reflection of weak end-market demand and downstream de-stocking, which has not come to an end yet. DSM Engineering Plastics is experiencing the combined effect of substantially lower volumes and lower margins, whereas at DSM Resins margins are not under pressure, with DSM Desotech (coatings for glass fiber optics) being relatively resilient. Both DSM Resins and DSM Engineering Plastics have taken measures to reduce costs on a structural basis and production capacity on a temporary basis. DSM Dyneema performed well.

Polymer Intermediates

Sales in the cluster strongly decreased compared to Q1 last year: volumes -20% and prices- 43%. The volume decrease, although substantial, is less pronounced than in other affected businesses. In acrylonitrile the impact of the downturn came later and was less strong while caprolactam China sales recovered after the Chinese New Year. The cluster posted an 8% volume increase compared to Q4. Prices, however, were under severe pressure.

As a result, operating profit was still very negative but clearly improved compared to Q4 of last year. This improvement was limited by necessary inventory write-downs for ammonium sulfate. Measures have been taken to reduce costs and capacity.

Base Chemicals and Materials

Sales volumes were lower at all units. The main contributors to the lower volumes were DSM Elastomers, which is DSM’s business most exposed to the automotive industry, and DSM Agro, which experienced a weather-related late start of the season in combination with cautious buying on the part of customers.
The cluster showed a negative operating profit. This was mainly caused by DSM Elastomers and DSM Melamine, which both experienced a further weakening of business compared to Q4. Compared to Q1 last year DSM Agro had a much lower but positive result due to lower volumes and prices. The expected decline in the profit contribution of DSM Energy was accelerated, due to lower oil prices.

Other activities

The main difference in the result of Other activities compared to last year is the (non cash) increase in IFRS pension costs for defined benefit plans.

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