August 7, 2012 / 7:06 AM / 5 years ago

DSM cuts jobs as second quarter profit falls

AMSTERDAM (Reuters) - Dutch food and chemicals group DSM (DSMN.AS) said it would cut 5 percent of its headcount, mainly in the Netherlands and rest of Europe, citing a tough market and weak demand for a raw material used in products ranging from lingerie to food packaging.

The world’s leading vitamin maker, which joins a long list of companies to announce layoffs because of the euro zone debt crisis, said the new round of cost cuts would improve earnings before interest, tax, depreciation and amortization (EBITDA) by about 150 million euros by 2014.

Earlier on Tuesday, DSM reported second-quarter operating profit at the low end of the expected range citing weak demand for caprolactam, a raw material used to make a type of nylon for clothes, engineering plastics and packaging.

It said it expected weak demand to continue to impact results for the rest of the year.

“Caprolactam is our most cyclical business,” said Feike Sijbesma, chief executive of DSM, adding that the weak demand was “across the board” as customers in the clothing and car sectors used up their stocks and held off buying as they waited for prices to fall further.

Quarterly operating profit fell 29 percent to 168 million euros on flat sales of 2.268 billion euros. Analysts in a Reuters poll had forecast earnings before interest and tax (EBIT) of 183 million euros, and sales of 2.251 billion euros.

DSM shares fell 2 percent at the start of trading.

DSM has sold off its lower-margin bulk chemicals businesses to focus on less cyclical areas including food ingredients and high-end plastics.

The strategy has provided some protection against big swings in earnings, and Sijbesma reiterated that DSM is still looking for acquisitions.

The company still has about 1.4 billion euros ($1.74 billion) in cash available for M&A after pulling off three substantial deals this year.

It bought Ocean Nutrition Canada (ONC), the world’s biggest producer of a fish oil extract believed to boost brain power, in May for about 420 million euros in an all-cash deal.

The acquisition complements Martek, the U.S. food ingredients company which DSM bought in February 2011 for $1.1 billion.

Halifax, Nova Scotia-based ONC produces Omega-3 fatty acids derived from fish oil that are used in dietary supplements and in the food and drink sectors, and are believed to help improve memory performance and relieve depression.

Earlier in May, DSM bought U.S. medical device-maker Kensey Nash Corp KNSY.O for $360 million to strengthen its biomedical business. ($1 = 0.8056 euros)

Reporting by Sara Webb; editing by Gilbert Kreijger

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