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DSM Has Baby-Food Enhanced Growth Spurt as Profit Beats Goal

Nov. 1 (Bloomberg) -- Royal DSM NA, the enzyme-based manufacturer that added a $1 billion baby-food ingredient maker a year ago, reported better-than-expected profit in the third quarter, driven by demand for nutritional supplements.

Earnings before interest, taxes, depreciation and amortization increased to 339 million euros ($467 million) from 268 million euros a year earlier, the Heerlen, Netherlands-based company said today in a statement. Analysts in a Bloomberg survey predicted 315 million euros.

Feike Sijbesma, now in his fifth year at the helm, has remodeled DSM into a maker of chemicals, additives and materials using yeast as a manufacturing base, dropping the commodity-chemical products that were once the mainstay of the almost 100-year-old company. The purchase of Martek for almost $1 billion helped offset gains in the Swiss franc and higher charges for energy and raw materials, DSM said today.

“We’ve changed the portfolio and made it much more resilient,” said Chief Financial Officer Rolf-Dieter Schwalb on a conference call. “We see some softening in demand but DSM is in a much better position today than years ago.”

DSM, rated a “buy” by 23 analysts, has fallen 13 percent this year for a market value of 6.71 billion euros. The stock was down 0.7 percent at 36.97 euros at 11:03 a.m. in Amsterdam

Manufacturing Methods

The Dutch company uses a cocktail of enzymes to manufacture chemicals and biofuels from corn stalks and wood chips, replacing traditional methods based on oil-based petrochemicals. It has partnered with Lestrem, France-based Roquette Freres to build a commercial-scale plant for so-called bio-based succinic acid, used in packaging and footwear.

DSM faces a slowdown at its polymer-intermediates division amid a faltering construction industry and weaker orders from electronics manufacturers. The company plans to close “a few” smaller sites making resins, booking a charge of about 26 million euros, it said. Annualized cost savings as a result of the move will be about 25 million euros to 30 million euros.

In contrast, the nutrition division is expected to maintain its “resilient performance” through “firm pricing” and continued volume growth, the company said. Overall, DSM is budgeting for no major changes in markets in the remainder of the year, though customers are managing inventory levels strictly, Schwalb said.

Acquisition Hunt

Martek was the “perfect deal” for DSM, and the hunt is on for other acquisition targets as the Dutch manufacturer has more than 2 billion euros available, according to the CFO. DSM, which earlier this year lost out to Cargill Inc. in the pursuit of animal-feed additives maker Provimi, has some targets in mind and is working on them, he said.

DSM, the world’s largest maker of vitamins, reiterated its Sept. 29 prediction that 2011 will be a strong year, saying it’s on course to meet a 2013 target for Ebitda of 1.4 billion euros to 1.6 billion euros. Based on current analyst estimates collated by Bloomberg, DSM’s earnings could touch about 1.3 billion euros this year.

To contact the reporter on this story: Andrew Noel in London at

To contact the editor responsible for this story: Benedikt Kammel at

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