DSM Reports Q2 2001 Profit
HEERLEN, The Netherlands--July 26, 2001--DSM Reports Q2 2001 Profit On Ordinary Activities After Taxation Unchanged From Q1 at EUR 106 million:| - | Q2 2001 operating profit of EUR 150 million virtually at Q1 level (EUR 159 million) despite sharply deteriorating economic climate. |
| - | Sales up 5% on Q2 2000. |
| - | Interim dividend EUR 0.58 (2000: EUR 0.51) per ordinary share. |
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second quarter in EUR million first half
2001 2000 +/- 2001 2000 +/-
-------------- ------- -------------------------------------------------
2,087 1,988 +5% Net sales 4,212 3,958 +6%
279 374 -25% Operating profit
plus depreciation and 568 685 -17%
amortization (EBITDA)
157 239 -34% Operating profit before
amortization of 323 438 -26%
goodwill (EBITA)
55 49 +12% - Life Science Products 113 97 +16%
35 40 -12% - Performance Materials 71 75 -5%
37 127 -71% - Polymers &
Industrial Chemicals 82 224 -63%
30 23 +30% - Other activities 57 42 +36%
150 239 -37% Operating profit (EBIT) 309 438 -29%
106 170 -38% Profit on ordinary
activities after taxation 212 307 -31%
- - Extraordinary profit
after taxation 70 -
106 169 -37% Net profit 283 307 -8%
-------------- ------- -------------------------------------------------
Per ordinary share in EUR(a):
1.04 1.70 -39% - profit on ordinary
activities after taxation 2.09 3.07 -32%
1.12 1.70 -34% - same as above, before
amortization of goodwill 2.24 3.07 -27%
1.05 1.70 -38% - net profit 2.84 3.07 -7%
96.1 96.0 Average number of
ordinary shares (x million) 96.0 96.5
-------------- ------- -------------------------------------------------
(a) After deduction of dividend on cumulative preference shares
The financial information set out in this quarterly report has not been audited.
Q2 2001 profit on ordinary activities after taxation unchanged from Q1 at EUR 106 million
General
In the second quarter of 2001 DSM recorded a profit on ordinary activities after taxation of EUR 106 million, the same as in Q1 2001. Net earnings per share amounted to EUR 1.05.
Commenting on the Q2 results, Peter Elverding, chairman of the DSM Managing Board of Directors, said: "Given the sharply deteriorating economic conditions, I am not dissatisfied with a quarterly profit that is at the same level as the first quarter profit. Admittedly, the profit is substantially lower than our record profit for the second quarter of 2000, but without the portfolio shift towards Life Science Products and Performance Materials that we initiated several years ago and without our ongoing effort to improve our cost position, our profits would have been much lower. To me, this is a strong sign that we are heading in the right direction with our Vision 2005: Focus & Value strategy, one of the aims of which is to make our profits less cyclical.
"I expect the Q1-to-Q2 downward trend in our operating profit to persist in the third quarter."
Net sales
--------------------- --- --------------------------------------------
second quarter in EUR million first half
2001 2000 2001 2000
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565 472 Life Science Products 1,120 951
494 553 Performance Materials 989 1,076
928 926 Polymers & Industrial
Chemicals 1,885 1,854
100 37 Other activities 218 77
----------------- ------------------------
2,087 1,988 Total 4,212 3,958
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Net sales in the second quarter of 2001 amounted to EUR 2.1 billion, an increase of 5% compared with the second quarter of 2000. Despite the rapidly deteriorating economic climate DSM managed to achieve 3% autonomous volume growth. Acquisitions and divestments on balance resulted in a sales increase of 1%, and currency translation also accounted for an effect of +1%. Selling prices were on average 3% lower than in Q2 2000, while there was a 3% increase in net sales due to a change in DSM's consolidation principles with effect from the financial year 2001.
Operating profit
DSM's Q2 operating profit (after amortization of goodwill to an amount of EUR 7 million) amounted to EUR 150 million, which is 37% lower than the record profit in Q2 2000. The decrease was due to lower margins (selling prices less variable costs), especially in the Polymers & Industrial Chemicals cluster, with the exception of melamine. The operating profit for Life Science Products and Performance Materials combined was higher than in Q2 2000, especially if the divestment of DSM Engineering Plastic Products with effect from 1 January 2001 is taken into account.
Review by cluster
Life Science Products
--------------------- -------------------------------------------
second quarter in EUR million first half
2001 2000 2001 2000
-------- ---------- -------------------------------- ------------
589 490 Net sales including
intra-Group supplies 1,165 992
92 80 Operating profit plus
depreciation and 186 157
amortization
55 49 Operating profit 113 97
-------- ---------- -------------------------------- ------------
The cluster's Q2 sales were up 20% from Q2 2000 and its operating profit rose 12%. DSM Fine Chemicals saw its sales increase substantially, but its operating profit was slightly lower; both developments were the net effect of a positive contribution from DSM Catalytica Pharmaceuticals and lower sales volumes for some custom pharmaceutical intermediates which could not immediately be compensated for by the introduction of new products. DSM Bakery Ingredients posted lower profits than in Q2 2000 due to a margin squeeze resulting from price increases for the raw material molasses. DSM Anti-Infectives and DSM Food Specialties posted higher profits as sales volumes and margins were up.
Performance Materials
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second quarter in EUR million first half
2001 2000 2001 2000
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513 561 Net sales including
intra-Group supplies 1,024 1,094
60 65 Operating profit plus
depreciation and 118 124
amortization
35 40 Operating profit 71 75
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The sales figure adjusted for the divestment of DSM Engineering Plastic Products with effect from 1 January 2001 was at virtually the same level as in the second quarter of 2000. Sales volumes were slightly lower due to the adverse economic climate worldwide, especially in the automotive and electrics & electronics sectors, while selling prices were on average slightly higher. The operating profit adjusted for the above-mentioned divestment increased somewhat. DSM High Performance Fibers and DSM Desotech in particular showed an excellent performance.
Polymers & Industrial Chemicals
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second quarter in EUR million first half
2001 2000 2001 2000
-------- ---------- -- ------------------------------- ------------
1,004 1,009 Net sales including
intra-Group supplies 2,056 2,011
84 192 Operating profit plus
depreciation and 178 335
amortization
37 127 Operating profit 82 224
-------- ---------- -- ------------------------------- ------------
Lower selling prices - except for melamine and fertilizers - resulted in a fractional decrease in Q2 sales compared with the second quarter of 2000. The petrochemicals business posted an increase in sales volumes. However, because of a decrease in margins the operating profit for this business was much lower than in Q2 2000, although it remained at the Q1 2001 level. Sales of industrial chemicals were down on Q2 2000 as both prices and sales volumes were under pressure, in particular in the caprolactam and acrylonitrile businesses. These factors, aggravated by higher raw material costs, caused the operating result for fibre intermediates to dip into the red. DSM Agro's operating profit decreased strongly due to a decrease in margins and sales volumes. The melamine business saw its operating profit improve.
Other activities
--------------------- ------------------------------------------
second quarter in EUR million first half
2001 2000 2001 2000
-------- ---------- ------------------------------- ------------
103 38 Net sales including
intra-Group supplies 223 78
43 37 Operating profit plus
depreciation and 86 69
amortization
30 23 Operating profit 57 42
-------- ---------- ------------------------------- ------------
Sales were up on Q2 2000, mainly because the ABS tolling activities, which previously belonged to the Polymers & Industrial Chemicals cluster, were grouped under Other activities with effect from 1 January 2001, while the Noordgastransport joint venture has become part of DSM Energy as a result of a change in consolidation principles. The operating profit also increased, mainly on account of a higher contribution from DSM Energy.
Net profit
The balance of financial income and expense amounted to an interest expense of EUR 26 million, which is EUR 11 million higher than in Q2 2000. The increase was due to the financing of the acquisition of Catalytica Pharmaceuticals.
At 19%, the effective tax rate in Q2 2001 was lower than in Q2 2000 (27%). The decrease was due to the fact that the profit included a larger proportion of tax-exempt income and income taxed at a relatively low rate.
The profit on ordinary activities after taxation amounted to EUR 106 million, the same as in Q1 2001.
Compared with Q2 2000, DSM's net profit decreased by EUR 63 million and stood at EUR 106 million.
Cash flow, capital expenditure and financing
In Q2 2001 the cash flow (net profit plus depreciation and amortization) amounted to EUR 235 million, which is EUR 69 million less than in Q2 2000. At EUR 171 million, capital expenditure was slightly higher than in Q2 2000 (EUR 161 million). Capital expenditure in the first half of 2001 amounted to EUR 270 million (H1 2000: EUR 300 million).
Balance sheet
The financial data of Catalytica Pharmaceuticals, whose acquisition was completed at the end of 2000, have been consolidated from the financial year 2001 onwards. In the balance sheet as at year-end 2000, the takeover sum was accounted for under Financial fixed assets in its entirety. The consolidation of this company led to major changes in the balance sheet.
Outlook
The economic slowdown that was already making itself felt in the first quarter continued more strongly than expected into the second quarter. In Europe and Asia the slowdown worsened, and the situation in the USA certainly showed no improvement. On the other hand, the prices of raw materials linked to oil and natural gas started to decrease. On balance, market conditions deteriorated in end markets that are important to DSM, such as the automotive industry, the E&E industry, the packaging sector and the textile industry. It is difficult to predict when these markets will start to recover.
Over the next few months DSM expects the profits of the Polymers & Industrial Chemicals cluster to be lower than in the first half of 2001. This will be the net effect of lower profits in petrochemicals and an improvement in results for industrial chemicals.
The Performance Materials cluster, too, will be under somewhat greater pressure from market developments. DSM expects the profit growth in Life Science Products to continue at an increased pace.
All things considered, DSM expects the Q1-to-Q2 downward trend in its operating profit to persist in the third quarter.
Interim dividend
It has been decided to pay out an interim dividend of EUR 0.58 per ordinary share for 2001 (2000: EUR 0.51); this represents a third of the total dividend of EUR 1.75 paid out for 2000. The interim dividend is no indication of the total dividend for 2001. The interim dividend for 2001 will be paid out in cash.
Heerlen, 26 July 2001 The Managing Board of Directors
Important dates
Ex-dividend date 27 July 2001
Interim dividend made payable 8 August 2001
Publication of third-quarter results 25 October 2001
2001 annual report 14 February 2002(a)
Annual General Meeting 27 March 2002
(a) Yet to be confirmed
Consolidated statement of income
------------------------- -- -----------------------------------------
second quarter in EUR million first half
2001 2000 2001 2000
------ ------- -- ----------------------------------------------------
2,087 1,988 net sales 4,212 3,958
------ ------- -- ----------------------------------------------------
279 374 operating profit plus depreciation
and amortization 568 685
(EBITDA)
157 239 operating profit before
amortization of goodwill 323 438
(EBITA)
-7 - amortization of goodwill -14 -
-------- ------------
150 239 operating profit (EBIT) 309 438
-26 -15 balance of financial
income and expense -54 -34
-------- ------------
124 224 profit on ordinary
activities before taxation 255 404
-23 -60 tax on profit on
ordinary activities -56 -109
5 6 profit of non-consolidated
companies 13 12
-------- ------------
106 170 profit on ordinary activities
after taxation 212 307
- - extraordinary profit
after taxation 70 -
-------- ------------
106 170 group profit after taxation 282 307
0 -1 minority interests'
share in profit 1 0
-------- ------------
106 169 net profit 283 307
106 169 net profit 283 307
-5 -5 dividend on cumulative
preference shares -11 -11
-------- ------------
101 164 net profit available to
holders of ordinary shares 272 296
235 304 cash flow 542 554
129 135 depreciation & amortization 259 247
171 161 capital expenditure 270 300
------ ------- ----------------------------------------------------
per ordinary share in EUR(a):
1.04 1.70 - profit on ordinary
activities after taxation 2.09 3.07
1.12 1.70 - same as above, before
amortization of goodwill 2.24 3.07
1.05 1.70 - net profit 2.84 3.07
2.39 3.11 - cash flow 5.53 5.63
interim dividend 0.58 0.51
96.1 96.0 average number of ordinary
shares (x million) 96.0 96.5
96.1 95.4 number of ordinary shares
at end of period (x million) 96.1 95.4
------ ------- -- ------------------------------------------------------
workforce 22,288 (b)21,758
of which in The Netherlands 10,531 (b)10,662
------ ------- -- ------------------------------------------- ----------
(a) After deduction of dividend on cumulative preference shares
(b) year-end 2000; the year-end 2000 overall workforce figure adjusted
for changes in consolidation principles, the acquisition of
Catalytica Pharmaceuticals and the deconsolidation of DEPP was
22,737.
The financial information set out in this quarterly report has not
been audited.
Consolidated balance sheet
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in EUR million 30 June 2001 31 December 2000
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fixed assets
intangible fixed assets 656 75
tangible fixed assets 3,591 3,130
financial fixed assets 370 1,326
-------- --------
4,617 4,531
current assets
inventories 1,380 1,224
receivables 2,181 1,888
cash 161 204
-------- --------
3,722 3,316
--------- ---------
Total 8,339 7,847
================================= =========== ====================
in EUR million 30 June 2001 31 December 2000
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group equity
shareholders' equity 3,137 3,040
minority interests' share 64 30
--------- --------
3,201 3,070
equalization account 31 27
provisions 966 857
long-term liabilities 1,601 1,482
current liabilities
- interest-bearing 828 870
- non-interest-bearing 1,712 1,541
--------- --------
2,540 2,411
--------- --------
Total 8,339 7,847
------------------------------------- ----------- --------- ----------
capital employed 6,096 4,776
net debt 2,268 2,148
group equity/total assets 0.38 0.39
net debt / group equity 0.71 0.70
The financial information set out in this quarterly report has not
been audited.
Statement of cash flows
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first half
in EUR million 2001 2000
----------------------------------------------------------------------
Cash at beginning of period 204 159
Operating activities:
- cash flow 542 554
- change in working capital -196 -124
- other changes -155 51
----- ---------
Net cash provided by
operating activities 191 481
Investing activities:
- capital expenditure
and capital payments -285 -319
- divestments 206 12
- other changes 42 -3
----- ---------
Net cash used in
investing activities -37 -310
Dividend paid -134 -54
Net cash used in
financing activities -63 -99
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Cash at end of period 161 177
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Statement of changes in Shareholders' equity
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first half
in EUR million 2001 2000
------------------------------------------------------- -------------
Shareholders' equity at beginning of period 3,040 2,620
Changes:
- net profit 283 307
- dividend on ordinary shares -178 -94
- dividend on cumprefs -22 -18
- exchange differences 10 21
- share buy-back - -119
- other 4 1
--------- ---------
Shareholders' equity at end of period 3,137 2,718
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The financial information set out in this quarterly report has not been audited.