Royal DSM NV Chief Executive Officer Feike Sijbesma said the company is headed for the low end of its target range for profit for 2013 and he remains cautious about the near-term economic outlook.
Earnings before interest, taxes, depreciation and amortization is forecast to reach about 1.4 billion euros ($1.8 billion), Heerlen, Netherlands-based DSM said today. It dropped the top end of the range, which had extended to as much as 1.6 billion euros, and will also fall short on a target for the return of capital employed of more than 15 percent next year.
“The macro-economic environment is tougher than before,” Chief Financial Officer Rolf-Dieter Schwalb said. “That’s why we have become more cautious about our earnings target for 2013 and we think we will arrive at the lower end of the range.”
Sijbesma will make the case for extending DSM’s reach into higher-growth markets such as nutritional supplements as he presents the company’s strategy to investors in Basel today. Acquisitions have built a nutritional division with 4.4 billion euros in annual sales.
Shares of DSM rose 1.2 percent to 39.42 euros as of 10.10 a.m. in Amsterdam trading, giving the company a market value of 7.15 billion euros.
“While the downgrade to 2013 guidance is disappointing, this is not a major surprise,” said analyst Martin Dunwoodie from Deutsche Bank in a note. Deutsche Bank already forecast a revision, penciling in Ebitda of 1.3 billion euros next year. The stock is “still not cheap enough” to review Deutsche Bank’s hold recommendation on the stock, he said.
DSM last month announced plans to cut 1,000 jobs across its European operations making plastics and other products that are suffering from higher raw-material prices and subdued demand, as well as competition from new entrants in Asia.
Sijbesma has steered DSM away from commodities into enzymes, nutritional ingredients and specialty plastics. The company has spent 2.2 billion euros on acquisitions since it started the transformation two years ago, the majority of that in the nutrition business. Takeover targets varied from babyfood ingredients and animal nutrition to biomedical equipment makers and yeast technology.
Last week, the company said it is in talks to buy Cargill’s cultures and enzymes business, after announcing the takeover of Brazilian animal nutrition supplier Tortuga in August.