Persistent volatility in vitamin E prices forecast: analyst says plant shutdowns at DSM strategic
The Heerlen-based vitamin maker reported second quarter 2014 earnings before interest, taxes, depreciation and amortization (EBITDA) of €293 million compared to €332m in Q2 2013.
Animal nutrition and health net sales for the group were reported at €519m in the quarter. But vitamin E volumes and prices were lower versus the same period last year, said DSM.
“Volumes in the animal feed segment have been consistently high over the past year on the back of diseases in various livestock and farmed fish sectors but prices have been bottoming out,” said Mutlu Gundogan, an analyst with ABN AMRO.
He said higher spot prices for the vitamin were helped by the temporary closure in March of the BASF production plant in Germany but prices have since reverted to the level they were at prior to that incident.
CEO of DSM, Feike Sijbesma, in a conference call with analysts this morning, said he was somewhat cautious about the prospects for the vitamin E segment over the next two quarters, but he noted no real development yet in terms of the new Chinese entrant to the vitamin E game.
“The Chinese producer has started but not completed construction on its manufacturing facility, which leaves a certain amount of uncertainty in the market,” said Gundogan.
Plant shut-downs said to be part of vitamin E strategy at DSM
Earlier this month, DSM said it would suspend the production of vitamin E at its Sisseln site in Switzerland during August to enable plant maintenance.
Gundogan reckons such stoppages are actually more about volume control than confirming the smooth running of plant operations.
He told this publication: “Taking vitamin E production offline temporarily is a way of protecting the overall margins of that business. Unlike the Chinese producers and BASF, which are upstream businesses and all about volume, DSM is vertically integrated, down-streaming its products into premixes and other formulations, and so it is concerned with maintaining value in its vitamin E output."
DSM said it expects the positive momentum in global animal protein markets to persist, in tandem with good premix demand: “There are local disturbances from animal diseases in various species, but these effects are expected to be off-set in other species and regions."
It posted sales of $487m (€364m) in China in the quarter, as opposed to $395m in the same period in 2013.
May saw the group open its first animal nutrition research facility in China, just south of Beijing. The center was set up to address the needs of Chinese livestock operations while also supporting the roll-out of new feed additives in Europe and the US.
