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DSM Lowers Full-Year Forecast, Reaffirms Targets for 2015

Royal DSM NV, the world’s largest vitamin maker, reaffirmed targets for next year as profitability rose at its nutrition unit, even as the Dutch company cut its 2014 forecast on a strong euro and low prices for caprolactam used in plastics.

There is “continued positive momentum in a number of end-markets, with Europe showing early signs of improvement,” Chief Financial Officer Rolf-Dieter Schwalb said during a call with analysts. Heerlen-based DSM cut 2014 predictions “a little bit,” he said.

Chief Executive Officer Feike Sijbesma has trimmed costs and jobs to offset currency swings and expanded more profitable food ingredients and high-performance materials to move away from bulk chemicals such as caprolactam. The company has spent about $3.2 billion on nutrition deals in the past few years. DSM reconfirmed 2015 targets for an Ebitda margin of 14 percent to 15 percent and organic sales growth of as much as 7 percent.

“We continue to focus on efficiencies to protect profitability and improve cash flow,” Sijbesma said in a statement. “Despite the weakness in caprolactam, we continue to anticipate to deliver improving financial results in the coming quarters.”

DSM shares rose 0.9 percent to 50.89 euros at 12:28 p.m. in Amsterdam after the company addressed 2015 targets in an investor presentation, rebounding from a decline of as much as 1.3 percent after DSM reported second-quarter earnings that missed estimates. The stock has fallen about 11 percent this year.

Full-year earnings for 2014 before interest, taxes, depreciation and amortization from continuing operations may decline about 3.3 percent to 1.22 billion euros ($1.63 billion), according to figures on DSM’s website.

Nutrition Advance

The nutrition division, including dietary supplements for vitamins and fish-oil-based Omega-3, is the biggest contributor to sales and Ebitda, and showed further signs of improvement in the second quarter. The unit’s Ebitda margin rose to 20.7 percent, despite the adverse effect of currencies, from 19.4 percent in the first quarter, within the company’s 2015 target range of 20 to 23 percent.

The dietary supplements market in the U.S. is recovering more slowly than expected, DSM said in a statement. The company will undertake promotional initiatives and industrywide campaigns to support vitamins and Omega-3 supplements.

Plant Fire

Ebitda from continuing operations fell about 12 percent to 293 million euros in the second quarter, DSM said. Analysts surveyed by Bloomberg predicted 301 million euros on average.

The decline in second-quarter earnings “and the implied modest cut to previous guidance proves there is still work to be done to improve the direction of the share price,” Martin Evans, an analyst at JPMorgan, said in a note to clients today.

Currency effects reduced Ebitda by 29 million euros in the quarter, while a fire at a nutrition plant led to 16 million euros in costs, the company said. DSM was affected by a maintenance halt at caprolactam plants in Europe and had lower margins for the chemical due to price declines.

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