dsm-firmenich: Low vitamin prices set to linger
Its animal nutrition and health (ANH) business had a weak performance in the third quarter 2023.
Organic sales declined by 13%, comparing to the same prior year period, driven by weak sales of straight vitamins, partly offset by performance solutions such as enzymes, gut health solutions, and mycotoxin management, which recorded another strong quarter due to farmers prioritizing feed efficiency yield management.
“ANH saw a continuation of the exceptionally challenging conditions of the first half, owing to the unprecedented low level of vitamin prices which slipped further during the quarter due to oversupply in a weak market.”
The trading update noted global animal protein consumption remains resilient, driven by poultry, with demand in China now stabilized, albeit with a slower recovery than expected. However, the vitamin producer does not expect any improvement in trading conditions for the remainder of the year.
The last quarter will begin to see some impact from the implementation of its internal cost-cutting efforts though, it added.
Plant closures
Dimitri de Vreeze, CEO, dsm-firmenich, said the company’s vitamin transformation program was the standout action in respect of that restructuring drive. Targeting €200m (US$212m) in cuts, the initiative includes plant closures, halting vitamin production to drastically reduce inventories, and route-to-market simplification, among other actions.
The program is well under way to deliver a contribution of around €100m adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024, and the full benefit of the program in 2025, said the company.
“In addition, we have pushed harder on cash flow, a key priority for us, and see good improvements this quarter. At the same time, we remain relentlessly focused on the successful integration of the merger and the delivery of our targeted synergies.”
Outlook
The CEO is confident that its “complementary portfolio of ingredients, science, and technologies” will help the firm achieve its mid-term financial targets.
dsm-firmenich estimates an adjusted EBITDA of around €1,8bn for FY2023, on a pro forma basis, which includes an estimated negative vitamin effect of about €500m as well as a negative foreign exchange effect of about €90m.
