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DSM’s Costs Purge May Boost Profit by 120 Million Euros in 2013

Royal DSM NV said the benefits of an efficiency and savings drive is forecast to top its initial hopes for this year, boosting earnings by a potential 120 million euros ($158 million).

Management, which had originally targeted 100 million euros, is integrating acquisitions to garner savings in areas such as information technology, human resources and accounting, Chief Financial Officer Rolf-Dieter Schwalb said on a conference call today.

DSM is fighting to remain in sight of a target to generate 1.4 billion euros in earnings in 2013 as it seeks payback on $3.1 billion in acquisitions that transformed it into a supplier of nutritional supplements. Chief Executive Officer Feike Sijbesma has set up a central task force to oversee and report back on a myriad of profit-boosting initiatives at struggling caprolactam and plastics businesses as well as newly acquired Omega 3 fatty acid operations.

“It’s a huge number of projects that goes across the whole company,” Schwalb told said on the call.

First-quarter earnings before interest, taxes, depreciation and amortization advanced 1.6 percent from a year earlier to 311 million euros, the Heerlen, Netherlands-based company said in a statement today. Analysts on average predicted 297 million euros, according to estimates collated by Bloomberg.

Sales increased 3.8 percent to 2.38 billion euros.

DSM’s transformation includes reviewing options for a merchant caprolactam business that’s been a drain on results, including a negative effect of 65 million euros in the first quarter. Schwalb said the company is continuing to explore options for the business and it’s not possible to predict when an outcome may be announced.

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