Solid Q3 animal nutrition performance for DSM, progress in its sustainability programs
The Dutch specialty chemicals company reported a good first nine months, with a solid performance in Q3.
It said its nutrition division delivered in the quarter, with 4% organic growth and adjusted EBITDA up 12%, despite some softness in human nutrition. Its animal nutrition results for the quarter were “solid”.
There was lower demand for plastics and other materials in the automotive and construction industries, particularly in markets like China.
Q3 revenue, overall, grew by 1% to €2.29bn, it reported.
The company maintained its full-year outlook, saying it expects to deliver a full year 2019 high single digit increase in adjusted EBITDA compared to prior year underlying adjusted EBITDA (pre-temporary vitamin effect).
Chief executive, Feike Sijbesma, commented: “We are on track to deliver 2019 in line with our targets, and therefore maintain our full year outlook. DSM continues to be well positioned to deliver its ambitious Strategy 2021, with its growth platforms together with increased customer centricity and its large innovation projects, while at the same time remaining focused on cost control and operational excellence.”
Animal nutrition division’s financial results
For the first nine-months of 2019, the Dutch group said its animal nutrition division reported 4% organic growth, against a strong 12% in the same period last year. Volumes were up 2% and prices increased similarly. It said total sales were 6% higher compared to first nine months of 2018 including a 2% positive exchange rate effect.
For Q3, that business delivered an organic growth of 5%, with sales volumes up 1% and prices up 4%. The company said volumes were impacted by the continued spread of African Swine Fever (ASF) in China and South East Asia, with the region representing more than 50% of global pork production.
“The rapid spread of this condition has disrupted the global equilibrium of animal protein in the short term, and, as a result, DSM is currently unable to fully offset the decline in pork production in the region from increases in production from other regions and species. Business conditions in all other species and regions remained strong.”
Prices were up due to positive sales mix effects, as well as price hikes initiated for some ingredients earlier in the year to compensate for higher costs.
Sustainability programs
DSM noted progress in relation to its large feed related innovation programs:
In terms of Veramaris, its JV with Evonik, DSM said that business started commercial production of its algae-based omega-3 fatty acids for aquaculture, supplying three of the largest salmon feed producers and used by the two largest salmon farmers.
“Sales volumes are expected to develop in line with the ramp-up of the plant, with targeted production capacity to be reached in about 18 months.”
In July, DSM reached a key milestone, filing for European registration to commercialize its Clean Cow product, Bovaer, which it sees as occurring around late 2020/early 2021.
“This feed additive reduces methane emissions from ruminants by about 30%. The agricultural sector and legislators alike are increasingly discussing the necessity of introducing a pricing of methane emissions.”
