HEERLEN, Netherlands, April 27, 2005 (PRIMEZONE) -- DSM:
-- Sales up 4% from Q1 2004.
-- Operating profit(a) 44% higher than in Q1 2004.
-- Net profit from ordinary activities up 35% from Q1 2004.
-- NeoResins acquisition completed; integration started.
-- Q2 operating profit expected to be higher than in Q1 2005 and
substantially above Q2 2004 level (EUR 152 million).
in EUR million first quarter
2005 2004 +/-
Net sales 1,984 1,902 4%
Operating profit from ordinary
activities plus depreciation
and amortization (EBITDA) 310 250 24%
Operating profit from ordinary
activities (EBIT) 188 131 44%
-- Life Science Products 24 22 9%
DSM Nutritional Products 63 46 37%
-- Performance Materials 67 42 60%
-- Industrial Chemicals 43 24 79%
-- Other activities -10 -5
-- divested activities of DSM Bakery 1 2
Ingredients
Net profit from ordinary activities 131 97 35%
excluding exceptional items
Net result from exceptional items -- -33
Net profit 131 64 105%
Per ordinary share in EUR:
-- net earnings from ordinary activities 1.33 0.95
-- net earnings 1.33 0.61
Average number of ordinary shares 95.8 95.8
(x million)
(a) In this report, 'operating profit' is understood to be operating
profit from ordinary activities excluding exceptional items.
Q1 2005 operating profit EUR 188 million, up 44% from Q1 2004
General
DSM posted an Operating profit of EUR 188 million in the first quarter of 2005, up EUR 57 million from the first quarter of 2004. Net profit from ordinary activities was EUR 131 million, an increase of 35% compared with Q1 2004. Net profit doubled compared with the first quarter of the previous year, when the net profit was negatively influenced by an exceptional item.
Commenting on the results, Peter Elverding, Chairman of the DSM Managing Board, said: "We are satisfied with the development of our results for the first quarter. Our profitability has clearly improved. We will continue to work hard on innovation and productivity enhancement to further improve our profitability level.
"We managed to consolidate last year's good volume growth and were able to raise prices. What I find particularly favourable is the positive development at Performance Materials, while Industrial Chemicals and DSM Nutritional Products also posted fine results.
"The development of the dollar and the prices of raw materials continue to be uncertain factors in our markets. If market conditions remain at the first-quarter level, the perspectives for DSM's results in 2005 remain positive."
Net sales
in EUR million first quarter
2005 2004
Life Science Products 337 374
DSM Nutritional Products 463 471
Performance Materials 564 472
Industrial Chemicals 409 364
Other activities 133 131
Divested activities of DSM Bakery
Ingredients 78 90
Total 1,984 1,902
Q1 2005 sales increased by more than 4% compared with the first quarter of 2004. Having increased strongly in 2004, sales volumes remained virtually unchanged while prices were clearly higher, leading to a 3% sales increase on balance. DSM NeoResins' contribution to sales (from 2 February onwards) was more than 2%. Exchange rate developments had an effect of -1%.
Operating profit
The operating profit for the first quarter was EUR 188 million, up 44% compared with the first quarter of 2004. DSM Nutritional Products and the Performance Materials and Industrial Chemicals clusters performed clearly better than in the first quarter of 2004.
Business review
Life Science Products cluster
in EUR million first quarter(b)
2005 2004
Net sales including intra-group supplies 351 402
Operating profit plus depreciation and
amortization 55 59
Operating profit 24 22
(b) Excluding divested activities of DSM Bakery Ingredients
Sales of this cluster (excluding divested activities) were down 13% from the first quarter of 2004 as sales volumes were lower on balance (due mainly to the closure of the phenol activities in Rotterdam (the Netherlands) and the chemical synthesis activities in Greenville (USA) and to lower volumes at DSM Anti-Infectives) and prices were also lower on balance. DSM Food Specialties saw its sales and operating profit improve considerably, due among other things to higher sales volumes. In the other business groups, the effect of lower sales was to a large extent compensated for by structural cost reductions that had been achieved.
On 13 April, DSM and Gilde Investment Management announced that they had concluded an agreement on DSM's sale of the greater part of the activities of DSM Bakery Ingredients to Gilde. The agreed transaction price is EUR 197.5 million. In this and subsequent quarterly reports, these activities will be presented separately in the results and in the balance sheet. Net sales of these activities in the first quarter of 2005, including intra-group supplies, amounted to EUR 78 million (2004: EUR 92 million), and operating profit plus depreciation and amortization amounted to EUR 5 million (2004: EUR 6 million).
DSM Nutritional Products
in EUR million first quarter
2005 2004
Net sales including intra-group supplies 468 471
Operating profit plus depreciation and
amortization 92 75
Operating profit 63 46
Sales were stable; the effect of the lower dollar exchange rate and price declines for some products was virtually compensated for by an increase in sales volumes.
In Human Nutrition and Health, volumes were stable at slightly lower prices. The Animal Nutrition and Health business posted higher volumes than last year, when there was an outbreak of avian flue in Asia, but selling prices were under pressure.
The operating profit was substantially higher due to the lower level of fixed and variable costs resulting from the successful implementation of the VITAL integration and transformation project.
Performance Materials cluster
in EUR million first quarter
2005 2004
Net sales including intra-group supplies 568 477
Operating profit plus depreciation and
amortization 93 62
Operating profit 67 42
Sales were up 19% due to the contribution from DSM NeoResins (+9%, two months) and higher selling prices for all business groups. The operating profit for the cluster improved, mainly due to higher margins. All business groups in the cluster contributed to this performance, with DSM Elastomers and DSM Dyneema in particular showing a strong increase in profits.
DSM NeoResins' sales and EBITDA developed in line with expectations. The integration process got off to an energetic start.
Industrial Chemicals cluster
in EUR million first quarter
2005 2004
Net sales including intra-group supplies 458 404
Operating profit plus depreciation and
amortization 64 43
Operating profit 43 24
Sales of this cluster on balance increased substantially compared with the first quarter of 2004, due mainly to considerably higher selling prices for caprolactam. DSM Fibre Intermediates recorded a very strong increase in its operating profit compared with Q1 2004, continuing the upward trend of previous quarters. DSM Melamine's results improved compared with the end of 2004 and were comparable to the level of the first quarter of 2004. DSM Agro's operating profit was lower, mainly due to lower margins for ammonia and a shift in volumes due to a late start of the fertilizer application season.
Other activities
in EUR million first quarter
2005 2004
Net sales including intra-group supplies 135 131
Operating profit plus depreciation and
amortization 1 5
Operating profit -10 -5
The operating profit of the Other activities cluster was lower than in the first quarter of last year due to the costs of a number of projects.
Net profit
Net profit was up EUR 67 million (105%) from Q1 2004 (when the net profit was influenced by an exceptional item) and stood at EUR 131 million.
Net finance costs in the first quarter of 2005 amounted to EUR 12 million, which is EUR 4 million less than in the first quarter of 2004. The decrease was mainly a result of the decrease in interest charges due to a lower level of borrowings and a lower dollar exchange rate.
At 27%, the Effective tax rate in the first quarter of 2005 was higher than in Q1 2004 (22%). This increase was due to a decrease in the proportion of income elements taxed at a low rate.
Net profit from ordinary activities amounted to EUR 131 million, up EUR 34 million (35%) from the first quarter of 2004.
Net earnings per share from ordinary activities available to holders of ordinary shares increased by 40%. This increase is higher than that of the Net profit from ordinary activities because of the buy-back of cumulative preference shares C at the end of 2004 and the associated decrease in the dividend on the cumulative preference shares in 2005.
Balance sheet
The DSM NeoResins acquisition has temporarily been recognized under Financial assets at the acquisition price of EUR 515 million. In the presentation of the figures for the second quarter, DSM NeoResins will be recognized as a consolidated company.
Cash flow, capital expenditure and financing
The cash flow (net profit plus depreciation) in the first quarter amounted to EUR 253 million, an increase of EUR 70 million compared with the first quarter of 2004. At EUR 56 million, capital expenditure (excluding acquisitions) was substantially lower than the level of depreciation (EUR 122 million) and slightly below the level of Q1 2004 (EUR 66 million).
Net debt increased by EUR 675 million in Q1 2005 and stood at EUR 1,016 million. The increase in net debt was due to the acquisition of NeoResins in early February 2005, the increase in working capital and the repurchase of shares to service option rights.
Workforce
The workforce on balance increased by 185 compared with year-end 2004. As a result of the acquisition of NeoResins, the workforce increased by 631. Restructuring measures and attrition were responsible for a decrease of 446, of which 145 at DSM Nutritional Products and 165 in the Life Science Products cluster.
Outlook
Market conditions remained robust in the first quarter of 2005, enabling DSM to raise the prices of a number of its products.
DSM is confirming the indication it gave in February with regard to the year 2005 as a whole. If the business environment continues to develop in line with 2004 and the first quarter of 2005, the prospects for an increase in DSM's financial results are definitely positive. However, European producers may see themselves confronted with the negative effects of a further weakening of the dollar versus the euro. Moreover, the continuing volatility of raw material prices and possible pressure on economic growth in Europe and the USA are risk factors for the chemical industry.
Based on current insights, DSM foresees continuing good market conditions for the second quarter of 2005. The Q2 2005 operating profit is expected to be higher than that for Q1 2005 and thus substantially higher than the Q2 2004 level (EUR 152 million).
Heerlen, 27 April 2005
The Managing Board of Directors
Important dates:
Publication of second-quarter results: Wednesday, 27 July 2005 Interim dividend 2005: Thursday, 11 August 2005 Publication of third-quarter results: Thursday, 27 October 2005 Annual report 2005: Thursday, 9 February 2006 Annual General Meeting: Wednesday, 29 March 2006