“The Chinese [vitamin E producers] are clearly losing money at this level,” said Feike Sijbesma, chairman and CEO of DSM, in an analysts call on the results this morning.
He said DSM does not expect prices for the vitamin to go lower but the policy change the company implemented a few months back means it remains “competitive at this price level.”
In February, the Dutch group said it would “actively” protect its vitamin E market share by further reducing costs, and by distilling research supporting the use of higher inclusion levels to encourage market expansion.
Assuming current low spot prices in vitamin E persist, DSM said the negative price impact on its 2015 earnings before interest, taxes, depreciation and amortization (EBITDA) will be around €80 to 90m.
Animal nutrition sales
The company recorded net sales of €571m in its animal nutrition and health side, which was a jump of 10% on the same quarter last year.
Organic sales growth in Q2 was 3%, with 4% higher volumes and 1% lower prices and the premix side continued to do well, reported the firm.
DSM said animal nutrition volume growth in Q2 2015 was impacted by a key raw material supply disruption at its Brazilian operation, Tortuga, due to a fire in the port of Santos that led to lost sales of €15m.
It said, excluding this supply chain interruption, organic growth in the quarter would have been 5% for animal nutrition, while volume growth in the segment would have hit 6%.
And Sijbesma dismissed analyst queries as to whether there was any downturn in the animal nutrition sector globally: “I would not call this a weak quarter for animal health with 6% volume growth and 1% down in prices. Of course, I don’t have a crystal ball of the coming quarters but we have a strong business in animal nutrition globally.”
Across all its divisions the company turned over €1.965bn for the quarter, up 12% from Q2 2014 when sales came in it at €1.754bn.
Macro-economic uncertainty has increased, said the nutrition giant, with continued low growth in Europe, somewhat weaker growth in North America and a prolonged slowdown in key emerging economies.
DSM said the volatility in currencies, including the strengthening of the Swiss franc and the US Dollar against the Euro, will have a mixed effect on its 2015 results compared to last year.
But it maintains its full year outlook and is looking to deliver an EBITDA in 2015 ahead of 2014, the increase mainly driven by positive foreign exchange effects.