Vitamin and premix prices aided strong Q3, says DSM

03-Nov-2016 - Last updated on 03-Nov-2016 at 16:13 GMT

Third quarter earnings before interest, tax, depreciation and amortization (EBITDA) for DSM rose 13% to €323m ($359m), and sales jumped 3% to around €2bn.

The Dutch group reported Q3 2016 sales in animal nutrition delivered 7% organic growth, with 2% volume growth.

Good growth was realized in premix, carotenoids and feed enzymes, said DSM while reporting that Tortuga volumes were only down slightly, citing that as a good outcome considering the tough market conditions in Latin America.

tax AndreyPopov istock — Davy analyst remains positive about DSM's prospects © istock/AndreyPopov

The company noted the North American, Asian and European markets are robust.

And prices within the animal nutrition segment were 5% higher than the same period last year, driven by higher vitamin and premixes prices, it added.

“Overall, I think it was a good performance,” said Declan Morrissey, equity analyst at Davy.

Though, he noted, it was the first time in quite a while that DSM's human nutrition and health business has outpaced its animal nutrition and health division.

However, continued the analyst, it was worth noting that the 2% volume number in animal nutrition was against a tough like on like quarter, with 10% volume growth seen in Q3 2015, and the segment was also said to be heavily impacted by the plant shutdowns. “So [it shows there is] no fundamental change in underlying market conditions,” Morrissey told us.

Vitamin prices

The equity analyst said vitamin E prices have held up reasonably well post G20 with spot prices up around 50% YOY.

“On this basis, there may be a pricing tailwind into H1 2017. The annualized EBITDA benefit of higher vitamin E pricing [for DSM] would be around €50 to €75m.

“We remain positive on DSM’s prospects but I note some other brokers have turned negative recently on the basis that vitamin prices will come down next year. Even if there was a downturn in vitamin pricing, I don’t think this would materially impact [DSM] growth until 2018. I also think there is upside on the [DSM] cost program which can offset this,” added Morrissey.

And DSM said it continues to expect to deliver full year 2016 results ahead of the medium term targets set out in its Strategy 2018, with a mid-teens EBITDA growth.