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DSM (Herleen, Netherlands), which reported a drop in its second-quarter profit, is launching a program to cut costs and reduce its global headcount by about 1,000.
“The global outlook for the second half of the year is more uncertain due in part to Europe’s inability to find an effective and sustainable solution to the financial challenges facing the Eurozone," said Feike Sijbesma, DSM's CEO. "Because of the increased economic uncertainty, we are announcing today a Profit Improvement Program that includes structural cost reduction and other initiatives that will generate €150 million earnings before interest, taxes, depreciation and amortization (EBITDA) benefits by 2014."
The company's profit improving program is mainly focused on cost reductions and efficiency improvements, but also on sales growth and pricing. The strategy will be implemented over the next 18 months and is expected to deliver structural annual EBITDA benefits of €150 million by 2014 (the program is in addition to the already announced restructuring initiatives at DSM Resins expected to deliver annual savings of €25 million to €30 million by 2013).
In reporting its second-quarter results, DSM said the world economy developed less positively than expected, mainly due to the continuing Eurozone challenges, which are prolonging weak consumer sentiment and resulting in a recession in parts of Europe. China experienced an economic slowdown due to weaker exports, although growth is still at a high level.The US continued to grow, although at a moderate level.
For the recent quarter, EBITDA was €290 million, down 14% from the year-ago comparable quarter. The company said the drop in EBITDA was fully attributable to polymer intermediates, which had experienced record results in 2011 which were not expected to continue. The combined effect of the weakness in caprolactam on DSM fiber intermediates and DSM engineering plastics during the quarter amounted to €70 million.
DSM's nutrition unit again delivered a strong performance. With acquisitions in the Nutrition cluster such as Martek in 2011 and Ocean Nutrition Canada in 2012, DSM said it's on track toward achieving €4 billion in nutrition sales.