May 7, 2019 / 5:44 AM / 4 months ago

Dutch firm DSM raises profit outlook despite weak Asian markets

AMSTERDAM (Reuters) - Dutch speciality chemicals company DSM raised its profit outlook for 2019 on Tuesday, as strong sales of food supplements boosted first-quarter earnings despite weakness in some of its Asian markets.

FILE PHOTO: DSM logo is seen at the headquarters in Heerlen, Netherlands August 30, 2018. REUTERS/Piroschka van de Wouw

DSM, whose products range from vitamins and dietary supplements to plastics and fibres, predicted “high single digit” growth in core profits for the year, after earnings beat analysts’ expectations with a 14 percent rise to 424 million euros (362.7 million pounds) in the first three months of 2019.

Sales increased 3 percent to 2.29 billion euros, excluding a temporary spike in vitamin prices which inflated earnings last year, as revenue of the Nutrition division increased 6 percent.

“We had very good momentum in nutrition over the whole range of products, from dietary supplements to animal and baby food,” Chief Financial Officer Geraldine Matchett told reporters.

But sales of DSM’s Materials division dropped 3 percent, as trade tensions between the United States and China dampened demand for its products from Chinese electronics manufacturers, carmakers and construction companies.

“We have not seen an uptick in any of the soft markets, such as automotive and construction in Asia and we are not expecting to see a big uptick in the months ahead,” Matchett said.

DSM’s products are mostly exempt from trade tariffs, but the trade war puts pressure on overall economic growth and particularly hurts sectors such as the automotive industry, Matchett said.

Despite the drop in sales, DSM stabilised earnings from materials as cost savings improved the profit margin.

“Over the full year, we will be able to deliver some results and to retain the division’s resilient profitability,” Matchett said.

DSM shares traded up 5 percent at 103.75 euros at 0930 GMT, leading Amsterdam’s blue-chip AEX index, as ING analyst Reginald Watson singled out the company’s margins for praise.

He cited the Materials division in particular where organic revenue growth fell by 5 percent but margins improved by 60 basis points. “Nutrition, too, delivered a better than expected EBITDA margin,” he added.

DSM previously guided for “mid-to-high single digit” growth in underlying adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA), which analysts polled by the company had expected to be 397 million euros in the first three months of 2019.

Reporting by Bart Meijer; Editing by Shreejay Sinha and Edmund Blair

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