“Nutrition delivered a continued excellent performance, whilst Materials Sciences also posted very good results,” he continued.
“Our strong market focus, disciplined cost and cash management and a broadly improving business environment helped drive these results. Based on the continued positive business environment we expect 2010 to be a strong year for DSM.”
The general economic conditions continued to be good in Q3. Most western economies sustained their growth, although at a low pace. In most high growth economies the growth is very strong.
Most end-markets that are relevant for DSM continued to grow. Those end-markets (especially Materials Sciences related markets) which experienced a downswing in demand have largely closed the gap with the 2008 level, with some exceptions like building and construction, which is still clearly lagging behind.
Re-stocking downstream in the value chain, which was one of the drivers for the excellent result in Q2 2010, did not have much of an impact in Q3, with order patterns appearing to normalize.
The euro was clearly weaker against most other currencies compared to Q3 2009. Compared to Q2 2010, currency exchange rates were on average fairly stable, with the exception of the relatively strong Swiss franc, which negatively affects DSM Nutritional Products because of its Swiss activity base.
Strong performance in nutrition
Nutrition continued its strong financial performance, driven by good business conditions and a very strong market position. The overall business environment normalized compared to the very good situation in Q2.
For Pharma, Q3 2010 saw no change in the challenging business dynamics that the entire pharmaceutical industry is facing. Results were negative, as expected.
Performance Materials is delivering continued strong organic sales growth. Polymer Intermediates continued to perform very well, as expected, somewhat lower margins compared to the very high level in Q2. Base Chemicals and Materials, which is mainly DSM Elastomers now, continued to perform well.
Cash flow from operating activities in Q3 amounted to € 330 million. This includes a € 66 million contribution from a reduction in working capital.
Year-to-date cash flow from operating activities amounted to € 690 million. This is amply sufficient to cover capital expenditure and dividends.
The operating cash flow in combination with the proceeds from divestments has led to a considerable reduction in net debt during the year.
Organic sales growth from continuing operations was a healthy 13% compared to Q3 2009, a period when economic recovery already was underway.
The organic growth consisted of 8% autonomous volume growth and 5% higher prices. All business groups benefited from the weaker euro, which was on average 10% lower against the US dollar compared to Q3 2009.
In Nutrition somewhat lower prices were compensated for by higher volumes. Pharma growth was moderate, mainly driven by DSM Anti-Infectives. Organic growth was very strong in the Materials Sciences clusters, driven by prices as well as volumes.
Operating profit was almost 30% higher than in Q3 2009, which is a reflection of the continuing improvement in business conditions.
Nutrition and Polymer Intermediates continued to deliver very strong results. Pharma posted a small loss, as expected. Performance Materials posted an improved result compared to Q3 2009, although the current level is not satisfactory yet.
Compared to Q3 2009 sales growth was 7%, driven by currency exchange rates. Nutrition experienced some volume growth in most of its businesses but prices were somewhat lower than last year.
Compared to the previous quarter, volumes in Animal Nutrition & Health increased, whereas volumes in Human Nutrition & Health, Personal Care and DSM Food Specialties were somewhat lower due to seasonal effects.
Higher operating profit
Operating profit in Q3 2010 was 15% higher than last year due to continued good market conditions resulting in strong performance in DSM Nutritional Products and DSM Food Specialties. As expected, operating profit was below the very strong Q2 2010 results due to the planned maintenance activities and less favourable exchange rates (especially for the Swiss franc). The strategic focus on value over volume continues to be successful and sustainable.