DSM earnings improve in Q1

The group said on Wednesday that its Food Specialties unit, that supplies a broad range of food ingredients for the dairy, meat, savoury and functional food markets among others, had benefited from higher sales volumes.

Overall, the group, which has made an effort to reduce costs to improve profitability, said net profits during the quarter reached €131m ($169m), up from €57m a year ago.

Net sales grew by 4 per cent to €1.98bn. Sales volumes were virtually unchanged from last year, but DSM claims it was successful in passing on the higher cost of raw materials to customers.

Identified as a key strategy for growth, the largest fermentation company in the world (in volume terms) has clear ambitions to concentrate on products with health boosting functionalities (health enhancing, adding nutritional value).

As such last month the chemicals firm announced a €197.5 million deal to shed its low growth bakery ingredients operations to private equity firm Gilde, freeing up the Dutch firm to increase its focus, and opportunities, on high margin, health promoting ingredients.

DSM's low growth, low profitability bakery unit brought about 4.5 per cent of sales (€350 million) to the group's overall €7.75 billion turnover last year. But the unit is still the number three world player in bakery ingredients, supplying yeasts and bread improvers.

Reporting on 2004 figures earlier this year, DSM said sales at its food speciality unit - that sells dairy, savoury, beverage and nutritional ingredients - had risen by about 10 per cent.

At a wisp of 2.8 per cent growth, bakery ingredients fell below the global ingredients market, currently growing at about 4 per cent.

Overall, food ingredients at DSM brought about 17 per cent of sales to the group's €7.75 billion turnover last year, that includes pharma and antibiotic products, a rise of five cent per cent on the 12 per cent contribution in 2003.

The sell-off, expected to close in the third quarter of 2005, follows DSM's divestment month of its hydrolysed vegetable protein operations to industry conglomerate Oterap Holding.

Divestment and movement in food units are likely to be completed for the near future. When asked by FoodNavigator.com if the lastest divestments were 'pretty much over for the year', a spokesperson said 'yes'.

"Although difficult to tell if anymore divestments are likely, we don't normally surprise the market,"​ he added.