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Financial Results Q1 2010


DSM had a very strong start to the year, which resulted in a significant improvement in operating profit, not only in comparison with the weak Q1 of 2009 but also in comparison with Q3 and Q4 of last year. DSM benefited from improved business conditions in most geographic areas and end markets.

The Nutrition cluster showed sustained good performance and the Materials Sciences businesses continued their recovery. The growth in emerging markets (especially China) continued to be strong and sales are currently higher than before the economic downturn. In Materials Sciences and Base Chemicals and Materials there are indications that in some businesses the strong demand is not fully aligned with the developments in the end markets, which would imply downstream re-stocking.

The operating profit of the core activities (continuing activities, excluding Base Chemicals and Materials) of € 178 million is back at the level of Q1 2008 (€ 176 million), which was one of the strongest first quarters in DSM’s history.

The Nutrition cluster continued to show healthy volume growth at price levels that were comparable to the last quarters of 2009. The Pharma cluster faced lower volumes compared to Q4 2009.

The Materials Sciences businesses continued to recover, driven by strong growth in emerging economies and also supported by further improvement in demand in the automotive, electronics and textile markets.

The Base Chemicals and Materials cluster was significantly reduced in size reflecting the announced divestment of DSM Agro and DSM Melamine. At the end of Q1 these businesses were reclassified to assets held for sale and discontinued operations. The cluster currently contains DSM Elastomers (as the main activity), DSM Citric Acid, DSM Special Products, and the Maleic Anhydride (and derivatives) activity. These businesses benefited from the recovery of the markets with higher volumes at more or less stable price levels.

DSM's focus on cash continued. Working capital increased by € 153 million mainly driven by receivables. Adjusted for the effects of the sale of DSM Agro and DSM Melamine and considerable changes in currency exchange rates, the level of working capital as a % of sales was comparable to the level at the end of 2009. Last year’s level was achieved after a substantial reduction during 2009. The strong financial position was maintained and net debt increased slightly to a level of € 871 million as a balance of a positive free cash flow and an increase because of a weaker euro. The cost saving program already delivered substantial benefits of € 200 million on an annualized basis.

Net Sales

Organic sales growth for continuing operations was +25% compared to Q1 2009. Roughly 35% of this € 400 million increase originated from China. With the exception of Pharma, all businesses delivered an increase. Nutrition is continuing its strong performance and although prices are below the top level of Q1 2009 they are at a similar level compared to recent quarters. In the Materials Sciences businesses and the non-core Base Chemicals and Materials cluster, net sales showed a strong increase in automotive, electronics and textile markets. DSM Dyneema achieved double digit growth and DSM Fibre Intermediates showed strong demand, especially in China, where the economy is growing very fast.

Operating Profit

Operating profit increased substantially, not only against the weak first quarter of last year but also compared to the previous quarter.

Nutrition profitability is at a very good level, which is a reflection of the successful strategy to focus on value via differentiation and innovation. The year-on-year improvement in operating profit was clearly driven by the Materials Sciences businesses, which benefited from a strong demand improvement. Despite strongly increasing raw material prices, margin management was successful in Materials Sciences, reflecting tight market conditions in some markets.

Cost control programs were successfully implemented in all clusters.


The first quarter saw a continued strong performance of the Nutrition cluster with similar underlying dynamics in DSM Nutritional Products and DSM Food Specialties. The food and feed markets experienced a healthy growth compared to last year. Organic sales growth was +6% compared to Q1 2009, with growth in animal and human nutrition. While emerging economies such as China and Brazil are boosting sales growth, all geographies are performing well. Volumes remained stable and prices were robust compared to Q4 2009.

Operating profit remained strong, broadly in line with both Q1 2009 and Q4 2009, reflecting the resilience of this business. The main drivers were a solid volume development, strong pricing, a continued focus on value, a strong production performance and continued strong cost management. Compared with Q1 2009 this improvement was partly offset by negative exchange rate developments.


In Q1 organic sales development in the Pharma cluster was -5%, which was mainly due to a lower sales value within DSM Anti-Infectives. The activity level at DSM Pharmaceutical Products remained low as a result of shifts in industry dynamics. Sales were stable compared to Q1 2009. Lower API sales due to the loss of some important products in 2009 were offset by the completion of the H1N1 vaccine shipments in Q1 2010.

The lower operating profit in the cluster was due to the lower sales level and an unfavorable product mix.

Performance Materials

Organic sales growth compared to Q1 2009 was a strong +41%. The increase was most prominent in DSM Engineering Plastics as market sentiment improved substantially in the automotive and electronics industries with some indications of re-stocking. DSM Dyneema showed healthy sales growth driven by volumes and a favorable product mix. DSM Resins realized strong volume improvements although building and construction related markets remained weak. Compared to Q4 2009, organic sales growth for the cluster was +15%. This improvement was achieved across all businesses within the cluster thanks to higher volumes and generally favorable price developments.

Operating profit for Q1 2010 improved by € 60 million compared to Q1 2009, when the industry was in the midst of the economic downturn. Increased volumes, favorable price developments and active cost and margin management contributed to the result improvement despite increasing raw material prices. Operating profit improved by € 19 million against Q4 2009, spread across all businesses.

Polymer Intermediates

Organic sales growth was +135% compared to Q1 2009, when the downturn for Polymer Intermediates was at its strongest. Compared to Q4 2009, volumes increased by +5% and prices by +17% reflecting increasing raw material prices (which could be passed on) and strong demand especially in China, where the economy is growing very fast.

As a result, compared to Q1 2009 as well as Q4 2009, operating profit showed a significant increase for both the caprolactam and the acrylonitrile businesses.

Base Chemicals and Materials

Organic sales growth amounted to +38% compared to Q1 2009 and +14% compared to Q4 2009. At DSM Elastomers net sales improved due to a pick-up in the automotive industry as well as some re-stocking.

The operating profit of € 18 million was mainly driven by DSM Elastomers as a result of a higher sales value combined with higher margins.

Other activities

The operating profit of Other activities remained at the same level.

Exceptional items

In view of the announced sale of DSM Agro and DSM Melamine these business were reclassified to assets held for sale at the end of Q1 2010. The businesses are valued at fair value less costs to sell upon reclassification, resulting in a loss of € 17 million (€ 14 million after tax) that is reported as exceptional item.

Net profit

Net profit increased from € 13 million in Q1 2009 to € 130 million in Q1 2010.Net earnings per share increased to € 0.78 per ordinary share in Q1 2010 versus € 0.06 in Q1 2009.
Net finance costs amounted to € 21 million in Q1 2010, € 6 million lower than last year mainly as a result of a lower average net debt.
The effective tax rate for the first quarter was 25%, the same as last year.

Cash flow, capital expenditure and financing

Cash flow from operating activities in Q1 amounted to € 137 million.
Cash flow related to capital expenditure in Q1 2010 amounted to € 98 million compared to € 116 million in Q1 2009.
Compared to year-end 2009 net debt increased by € 41 million to € 871 million, representing a gearing level of 14%. This increase was the balance of a decrease due to a positive free cash flow and an increase because of a weaker euro.

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