Vitamin and premix prices aided strong Q3, says DSM

By Jane Byrne contact

- Last updated on GMT

© istock/Stephen Rees
© istock/Stephen Rees
Third quarter earnings before interest, tax, depreciation and amortization (EBITDA) for DSM rose 13% to €323m ($359m), and sales jumped 3% to around €2bn.

The Dutch group reported Q3 2016 sales in animal nutrition delivered 7% organic growth, with 2% volume growth. 

Good growth was realized in premix, carotenoids and feed enzymes, said DSM while reporting that Tortuga volumes were only down slightly, citing that as a good outcome considering the tough market conditions in Latin America. 

tax AndreyPopov istock
Davy analyst remains positive about DSM's prospects © istock/AndreyPopov

The company noted the North American, Asian and European markets are robust.

And prices within the animal nutrition segment were 5% higher than the same period last year, driven by higher vitamin and premixes prices, it added.

“Overall, I think it was a good performance,”​ said Declan Morrissey, equity analyst at Davy.

Though, he noted, it was the first time in quite a while that DSM's human nutrition and health business has outpaced its animal nutrition and health division.

However, continued the analyst, it was worth noting that the 2% volume number in animal nutrition was against a tough like on like quarter, with 10% volume growth seen in Q3 2015, and the segment was also said to be heavily impacted by the plant shutdowns. “So [it shows there is] no fundamental change in underlying market conditions,” ​Morrissey told us.

Vitamin prices

The equity analyst said vitamin E prices have held up reasonably well post G20 with spot prices up around 50% YOY.

“On this basis, there may be a pricing tailwind into H1 2017. The annualized EBITDA benefit of higher vitamin E pricing [for DSM] would be around €50 to €75m.

“We remain positive on DSM’s prospects but I note some other brokers have turned negative recently on the basis that vitamin prices will come down next year. Even if there was a downturn in vitamin pricing, I don’t think this would materially impact [DSM] growth until 2018. I also think there is upside on the [DSM] cost program which can offset this,”​ added Morrissey. 

And DSM said it continues to expect to deliver full year 2016 results ahead of the medium term targets set out in its Strategy 2018, with a mid-teens EBITDA growth.

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