DSM: Acquisitions Help Boost Q2 Profits
Dutch food and chemicals group DSM on Tuesday reported a 19% rise in second-quarter core profits, beating expectations, thanks to acquisitions and growth in its higher-margin nutrition business.
DSM reported core profit of €345 million ($456.78 million), on revenue of €2.468 billion, up 9%. Analysts in a poll commissioned by Reuters had forecast earnings before interest, tax, depreciation and amortization (EBITDA) of 331 million, and revenue of €2.526 billion.
The human and animal nutrition business, which now accounts for nearly three-quarters of DSM's operating profit, reported a 28% jump in core earnings in the second quarter, and was the main reason for DSM's better-than-expected results.
The company stuck to its full-year operating profit target of close to €1.4 billion.
Chief Financial Officer Rolf-Dieter Schwalb told reporters there was no reason to lift its 2013 outlook, citing the weak economic environment and low price of caprolactam, a raw material in nylon used in a wide range of products from food packaging and fish nets to carpets and car parts.
Low caprolactam prices have hit DSM's results over recent quarters, and it has said it is looking at ways to reduce exposure, including partnerships and divestment.
DSM shifted strategy in 2010 and has spent more than €2.2 billion on takeovers as it moved away from lower-margin bulk chemicals to focus on less cyclical businesses including food ingredients and high-end plastics.
The firm is now the world's leading vitamin maker, following the acquisitions of U.S. food ingredients companies Martek and Fortitech.
It also bought U.S. medical device-maker Kensey Nash, Ocean Nutrition Canada, the world's biggest producer of a fish oil extract believed to boost brain power, and Brazilian animal nutrition firm Tortuga, which sells nutritional supplements for chickens, swine and cattle.
Chief Executive Feike Sijbesma, told reporters DSM did not rule out doing smaller takeovers, for example in the nutrition business, but is not on the prowl for big deals as it is still digesting several recent acquisitions.
