Sales slipped 6% and net profits 11% in Q2 for DSM’s human and animal nutrition arm as adverse currency movements, a slow US vitamins and omega-3 food supplements market and the Asian botulism infant formula scare affected earnings.
The company said recovery in the US supplements market, “was slower than expected” and that infant formula makers operating in China and south east Asia had reduced orders.
In a press call, Feike Sijbesma , CEO/chairman of the DSM Managing Board, said the Dutch ingredients giant was joining with US supplement partners to deliver education campaigns to combat negative press and highlight micronutrient deficiencies that affect 85% of Americans.
“In dietary supplements in the US already in the fourth quarter last year, due to some publications, a part of the market customers refrained a little bit but the majority of customers remained and continued to take those supplements and nutritional products,” Sijbesma said.
“But a certain part are not and that resulted in a decrease of the market.”
Education of a nation
Sijbesma said DSM along with, “some other industry players are initiating some campaigns to give the right education and the right information to the consumers about the importance of certain nutritional products and dietary supplements.”
“We need to see in what time frame that could have an effect.”
Momentum in other markets was “positive” with the US-focused ‘i-Health’ (formerly Amerifit) consumer brand it gained with the acquisition of Martek BioSciences in 2011 in “robust” shape.
The CEO emphasised that while the Human Nutrition & Health division sales-profits were down year-on-year, the EBITDA profit contribution of €222m was actually up on the previous two quarters. Sales for quarter came in at €1.073bn compared to €1.111bn in Q2 2013.
In the press call, the company said the Chinese focused botulism-infant formula scare provoked a false alarm around a, “New Zealand supplier”.
“Recent changes in Chinese regulatory policy have created additional uncertainty for the industry. As a result infant nutrition suppliers have reduced their inventories.”
But the company remained committed to the Chinese market with recent investments in Vitamin C and B6 cited in the press call as examples.
While retaining a healthy 20.7% EBITDA-earnings margin, chief financial officer (CFO) Rolf Dieter-Schwalb said the overall outlook for the firm had been lowered “a little bit”.
Of the political instability and economic sanctions being imposed on Russia, Sijbesma noted it was, “a small market with DSM so impact is limited.”
Its broader food and beverage markets continued to show, “sluggish growth, while demand for premixes stayed healthy.”
“In order to stimulate growth, ‘A-label’ customers are investing in new product launches, promotional campaigns and acceleration of innovations,” DSM said.
More details about DSM’s Q2 results can be found here .