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Financial Results Q2 2009


The general global economic downturn, which is having a very adverse effect on almost half of DSM’s businesses (DSM Engineering Plastics, DSM Resins, DSM Fibre Intermediates, DSM Elastomers and DSM Melamine), continued into Q2. However, in contrast to the previous two quarters there are strong indications that downstream de-stocking has largely come to an end in most markets. This is reflected in an improved demand compared to Q1, bringing the year-on-year drop in demand in these businesses more in line with the development of end-markets.

Nutrition continued to show resilience reflecting very strong positions in markets which have seen only a limited impact of the downturn. The Pharma result was low due to weak volumes.

The Materials Sciences clusters (Performance Materials and Polymer Intermediates) were lifted back into a profitable position again, driven by improved demand, a continued focus on efficiency and some increase in margins. DSM Dyneema, however, experienced weakening demand, mainly in industrial applications.

DSM’s strategic focus on China is paying off. China’s industrial production is strongly improving after a relatively short dip. Almost all businesses, especially DSM Fibre Intermediates, are experiencing a strong recovery in Chinese demand, sometimes even back to pre-crisis levels. Compared to Q1 sales in China increased by 44%.

The pressure on the business of DSM Agro continued. Although Q2 saw a pick-up in volumes, lower prices resulted in a loss for the period.

DSM’s cash performance was very strong for the third quarter in a row, in spite of the depressed external environment. The focus on working capital management, credit control, cost efficiency and responsible priority setting for capital expenditures was effective. Net debt decreased again, even though the final dividend for 2008 was paid in this quarter. DSM’s financial strength is reflected in the credit rating. Standard and Poor’s has affirmed the A- rating and maintained the stable outlook on 3 August, 2009.

As from the end of this quarter DSM Energy and the urea-licensing business are reported as assets held for sale and discontinued operations, because agreements have been reached to divest these activities as part of DSM’s accelerated Vision 2010 strategy. Previous period figures have been adjusted accordingly. More details can be found in the press releases issued on 29 July.

Net Sales

Sales dropped by 20% compared to Q2 2008, but improved by 7% compared to Q1 (volume +13%, prices -5%, exchange rates -1%). All business groups, except the two Nutrition business groups, showed a sales level clearly below last year’s. In Nutrition weaker volumes were more than compensated for by strong pricing and a favorable currency exchange rate effect.

Despite of the weakness compared to last year, there was a clear recovery compared to Q1, as industrial demand got more in line with end-market demand (slowing down of de-stocking) and China regained momentum.

Operating Profit

Although operating profit showed a sharp drop compared to previous year’s record level, it clearly improved against Q1 due to the improvement in Materials Sciences.

Nutrition maintained its very strong performance, based on its marketing strategy and the change in industry dynamics. The economic downturn is having a limited effect on trading conditions.

The Pharma result was low, due to the lower business activities in the custom manufacturing business at DSM Pharmaceutical Products and the demand/supply situation at DSM Anti-Infectives.

In Materials Sciences, the inventory write-downs caused by the drastic drop in oil prices and rigorous downstream de-stocking in most markets, appears to be coming to an end. DSM Resins and DSM Fibre Intermediates are both back at profitable levels. DSM Dyneema saw a drop in profit. Improved cost efficiency contributed as expected.

In Base Chemicals and Materials the improvement in DSM Elastomers and DSM Melamine was much less pronounced than in Performance Materials. Both business groups still posted substantial losses. The same was true now for DSM Agro, because of very weak prices. Cost efficiency improved in all units.

The operating profit of DSM’s core business as a Life Sciences and Materials Sciences company (i.e. excluding Base Chemicals and Materials and discontinued operations) improved from EUR 58 million in Q1 to EUR 94 million in Q2 (+62%).


Second quarter results for the Nutrition cluster continued to be strong despite the organic sales development of -6% compared to Q2 2008. Last year’s H1 sales volumes benefited to a certain extent from inventory build-up in the trade channels in anticipation of higher prices and the impact of the Beijing Olympics. This was followed by inventory reduction at the end of 2008 and the beginning of 2009. Current sales are a reflection of underlying end-use demand. In Q2 2009 demand improved compared to Q1 mainly in animal nutrition, while dietary supplements saw some weakness. Prices, especially for fat soluble vitamins, remained relatively strong and were above Q2 2008. Compared to Q1 2009, there have been price declines with some reversals towards the end of Q2.

Operating profit of DSM Nutritional Products increased compared to Q2 2008 mainly based on pricing and a relatively strong dollar. DSM Nutritional Products started reducing production output in Q2 to improve its overall working capital. DSM Food Specialties’ operating profit was similar to last year with strong performance in enzymes, such as Brewers Clarex® and ARA (an infant nutrition ingredient).


Sales of the Pharma cluster continued to be under pressure due to a low activity level in the custom manufacturing business of DSM Pharmaceutical Products related to destocking, delay in approvals and the loss of some larger contracts. DSM Anti-Infectives faced weak market conditions.

These developments resulted in a lower operating profit compared to the previous year. Compared to last quarter the USD exchange rate had an additional negative impact.

Performance Materials

Compared to same period last year organic sales development was -31% as trading conditions were worse for all business groups. In contrast, sales showed improvement against the previous quarter at DSM Resins and DSM Engineering Plastics. Construction and automotive related businesses remained slow. Substantial effects of de-stocking in the market as experienced in Q1 were less apparent in Q2. DSM Dyneema experienced weakening demand especially in commercial marine, sports and high performance textiles.

The cluster reported an operating profit after two quarters of losses. Results of both DSM Resins and DSM Engineering Plastics improved from Q1 as demand improved. The operating profit for the quarter decreased substantially against the same period last year due to the economic downturn, partially offset by lower raw-material costs as well as structural cost reduction programs. The quarterly result of DSM Dyneema dropped compared to the same period last year as weaker demand has an impact on this business as well.

Polymer Intermediates

Organic sales growth in the cluster was 58% compared to Q1, but still negative (-40%) compared to the same quarter of last year. The improvement was mainly due to volume recovery, somewhat higher caprolactam prices in China and higher exports of acrylonitrile.

The Polymer Intermediates cluster delivered a small operating profit after losses in the preceding two quarters, partly based on cost savings. The gap compared to Q2 last year was still significant as European and US volumes remained weak.

Base Chemicals and Materials

Sales volumes were lower compared to last year, with the exception of DSM Agro, which reported very high volumes towards the end of Q2, largely compensating for the late season start in Q1. Although the other businesses were still suffering from the lower demand in the automotive industry (DSM Elastomers) and in the building industry (DSM Melamine), volumes increased gradually compared to the first quarter.

The operating profit of the cluster was negative for all main business groups. The volume increase in Q2 compared to Q1 was not sufficient to compensate for the substantially lower prices in fertilizers. Costs saving programs for the cluster are in place and have started contributing to the result.

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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