UPDATE 1-DSM sticks to profit goal, lifted by nutrition business

Tue Nov 5, 2013 3:17am EST

AMSTERDAM Nov 5 (Reuters) - Dutch food and chemicals group DSM stuck to its 2013 operating profit target of close to 1.4 billion euros ($1.9 billion), up 27 percent from last year, thanks to acquisitions and the strength of its human and animal nutrition business.

The company said on Tuesday it was still exploring ways to reduce its exposure to the low-margin market for caprolactam, the raw material for a type of nylon with a wide range of uses from food packaging and fish nets to carpets and car parts.

The caprolactam business has hit results this year, and DSM said it was still looking at options ranging from partnerships to divestment, as well as searching for a partner with which to expand its pharmaceuticals business in Asia.

DSM shares rose more than 2 percent in early trading to stand at 57.00 euros.

DSM shifted strategy in 2010 and has spent more than 2.2 billion euros on acquisitions as it moved away from lower-margin bulk chemicals to focus on less cyclical businesses including food ingredients and high-end plastics.

The firm is now the world's leading vitamin maker, following the acquisitions of U.S. food ingredients companies Martek and Fortitech.

It also bought U.S. medical device-maker Kensey Nash Corp, Ocean Nutrition Canada, the world's biggest producer of a fish oil extract believed to boost brain power, and Brazilian animal nutrition firm Tortuga, which sells nutritional supplements for chickens, swine and cattle.

Those acquisitions have mostly paid off, although the global nature of its portfolio has exposed the company to the effects of the recent currency volatility.

DSM had flagged as recently as Sept. 26 that earnings before interest, tax, depreciation and amortisation (EBITDA) this year could fall short of its target and come in below 1.35 billion euros because of adverse currency moves.

"Current trading conditions are similar to those experienced at the end of Q3, while foreign exchange rates deteriorated. Nevertheless, we are firmly on track to deliver a significant increase in EBITDA for the full year," said Feike Sijbesma, chief executive of DSM, in a statement, adding that the 2013 outlook remained unchanged.

Chief Financial Officer Rolf-Dieter Schwalb told reporters the group was hedging about half its currency exposure for the main currencies.

He cited the euro/dollar, Swiss franc/dollar, sterling/Swiss franc, yen/Swiss franc and yen/euro exchange rates as the main concerns for the group, as well as the Brazilian Real, given the acquisition of Tortuga in Brazil.

DSM reported third-quarter EBITDA of 342 million euros, up 27 percent from a year ago, on revenue of 2.4 billion euros, up 4 percent. Analysts in a poll commissioned by Reuters had forecast EBITDA of 340 million, and revenue of 2.49 billion.

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