DSM Says Nutrition Market Showing Signs of ImprovementElco van Groningen and Andrew Noel
Royal DSM NV, the world’s largest vitamin maker, said the market for nutritional supplements showed signs of improvement at the end of the first quarter, helping bolster the payback on some $3.2 billion in takeovers.
Food manufacturers began restocking supplies, helping lift first-quarter volumes almost 14 percent compared with the prior quarter, the Heerlen, Netherlands-based company said in a statement. Group earnings before interest, taxes, depreciation and amortization fell 12 percent to 270 million euros ($374 million), in line with analysts’ estimates.
Reports questioning the health benefits of supplements such as Omega3 and vitamins has dented appetite for DSM’s range of additives and ingredients in the U.S. Chief Executive Officer Feike Sijbesma has placed nutrition center stage in the company’s growth plans. He’s also been cutting costs and jobs to bolster earnings.
“Markets are stable again, specifically on Omega3,” Chief Financial Officer Rolf-Dieter Schwalb said on a conference call. “The market will come back to normal levels. The headwinds seem to have peaked.”
Spot prices for vitamin E and vitamin A are showing a significant boost and DSM is seeking to push through a couple of price increases to customers. It also suffered as bad weather in parts of the U.S. impacted the delivery and logistics of its nutrition business.
Shares of the company climbed 3.5 percent to 52.56 euros as of 9:25 a.m. local time. DSM reiterated its outlook for 2014, with improving earnings over the coming quarters.
Schwalb said managers are working on a marketing campaign to reignite consumer interest in Omega3 and highlight other studies that reinforce its health benefits, Schwalbe said.
BASF SE, the world’s largest chemical company, plans to cut 260 jobs globally at its nutrition and health division and accelerate the introduction of new products to lift results. A plant producing low-grade omega-3 in Norway will be sold as greater emphasis is placed on supplying higher-purity fatty acids suitable for the pharmaceutical industry and top-end supplements.
DSM, which supplies lower-grade Omega3 than BASF, announced restructuring at its nutrition division in January, with cutbacks in administration and the merging of laboratories that came with acquired businesses. Group-wide, there are projects to improve computer systems, human resources and accounting, Schwalbe said.
“We want to reinvest some of the benefits” back into R&D, Schwalbe said. There are no plans to move toward the pharma grade-end of the Omega3 market.