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DSM misses Q1 forecasts due to weak volumes and high costs
Global Banking & Finance Review®
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(Corrects company description in 5th paragraph)
(Reuters) – Dutch specialty chemicals maker DSM’s first-quarter profit and sales missed expectations on Tuesday, hit by weak volumes, persistently high inflation and low vitamin prices.
DSM and Firmenich reported quarterly results separately for the last time ahead of the completion of their merger due next Monday.
The merger, agreed in May 2022, creates a major player in the fast-growing food ingredients and health products markets, challenging IFF Inc, Givaudan and Symrise.
KBC analysts said the combined group will be “a global powerhouse with a well-balanced portfolio and solid growth prospects”.
DSM, which makes vitamins and food supplements among others, reported a 24% drop in quarterly adjusted core earnings (EBITDA) to 278 million euros ($305.36 million), below the 280 million euros expected by analysts in a Vara Research poll.
The company expects the tough conditions to persist in the current quarter, before improving in the second half.
“We anticipate a stronger second half of the year across all businesses as inflationary pressure eases, as volumes recover, especially in China, and vitamin prices start to normalize,” DSM’s co-CEOs Geraldine Matchett and Dimitri de Vreeze said.
DSM’s sales fell 6% to 1.89 billion euros, missing analysts’ 2.04 billion euro estimate.
Analysts at J.P.Morgan said the results were affected by weakening volumes due to “customer destocking and the company’s preference of profitability over low-priced volumes”.
Firmenich reported third-quarter sales of 1.23 billion Swiss francs ($1.37 billion), up 5.4% in constant currency, and a 14.4% rise in adjusted EBITDA to 242 million francs.
DSM said it would provide a full-year guidance for the combined DSM-Firmenich group when it publishes half-year results on Aug. 2.
Shares in DSM and DSM-Firmenich fell around 2% in early trading.
(This story has been corrected to fix description of the company in paragraph 5)
($1 = 0.9104 euros)
($1 = 0.8960 Swiss francs)
(Reporting by Augustin Turpin and Lina Golovnya in Gdansk; editing by Milla Nissi and Ed Osmond)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's overall financial performance and profitability.
Vitamins are organic compounds that are essential for normal growth and nutrition, typically required in small quantities in the diet.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
A merger is a combination of two companies to form a new entity, often aimed at increasing market share and efficiency.
Corporate profit is the income that a corporation generates after deducting all expenses, including taxes, from its total revenue.
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