Animal nutrition volumes up 10% for DSM
Total animal nutrition and health net sales were €466 million in Q1.
“Organic sales growth in Q1 was 7% with volumes up 10% compared to the weak Q1 2013 when the animal feed markets were still being impacted by the high commodity prices resulting from the 2012 drought,” said the feed additive supplier.
Volumes for its key vitamins, especially vitamin E, remained flat, said DSM. It said prices for its vitamin portfolio, especially vitamin E, were low as well.
However, prices for that vitamin stabilized in the first quarter of this year with recovery in meat production, said the Dutch firm.
Mutlu Gundogan, an analyst at ABN Ambro, said higher spot prices for vitamin E were helped by the temporary closure in March of the BASF vitamin E production plant in Ludwigshafen, in Germany, due to a fire but that facility is operational again.
“DSM, in the conference call this morning, indicated that the vitamin E market is not as oversupplied as previously thought, and is edging towards tightness. Spot prices are likely to remain at current prices into the next quarter,” he told FeedNavigator.com
And the company dismissed the threat of a potential new Chinese entrant onto the supply side of the vitamin, claiming this producer would “most likely not be in the market for some time.”
The group said as most of its vitamin E business is covered by contracts, with lead times of three to six months, impact on Q2 results is expected to be limited.
Contract prices, it added, are expected to improve gradually over Q2 and Q3.
Tortuga fortunes debated
DSM said Tortuga delivered sales of €64m and an EBITDA of €10m in the quarter.
However, there was some debate about the Brazilian operations' earnings during the conference call, said Gundogan.
DSM said Tortuga's revenue, taking into account the local currency, was absolutely in line with expectations.
But, according to Gundogan, the weakening of the Brazilian Real has been eating into earnings at that division.
"DSM had targeted an EBITA of €60m for the Brazilian trace mineral producer when it announced the acqusition in August 2012 but it failed to achieve that at year end."
The analyst said, though, that DSM remains optimistic it can meet growth forecasts of 7 to 10% in sales for the Brazilian operations through planned cost cutting initiatives.
Overall, DSM reported first quarter earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations of €272m compared to €301m in Q1 2013.
Commenting on the results, Feike Sijbesma, CEO and Chairman of the DSM Managing Board, said:
"DSM delivered results in line with expectations, despite further currency deterioration during the quarter. We are pleased to report that market conditions in nutrition began to show some signs of improvement by the end of the quarter.”
