SOURCE: DSM N.V.

November 03, 2009 02:08 ET

DSM delivers strong result improvement in Q3

HEERLEN, NETHERLANDS--(Marketwire - November 3, 2009) -


* Q3 operating profit from continuing operations EUR 139 million, more than double Q2 2009 (EUR 58 million)

* Strong Life Sciences performance due to robust Nutrition business

* Materials Sciences continued strong recovery

* Cost savings and efficiency improvements on track to achieve EUR 150 - 200 million on yearly basis by 2010

* Cash flow from operating activities again very strong (Q3 EUR 517 million)

* Outlook for the rest of the year remains uncertain; Q4 operating profit currently expected to be lower than Q3, but above Q4 last year


Commenting on the results, Feike Sijbesma, chairman of the DSM Managing Board, said:

"DSM delivered strongly improved results for Q3 2009, with ongoing resilience in Nutrition and a further improvement in Materials Sciences compared to the previous quarters. Our early action to reduce costs, our focus on cash and our commitment to innovation and China are paying off.

"We are alert that the economic climate remains uncertain and that the path of recovery is likely to prove uneven. However, it seems that the first half of 2009 represented the low point for this recession and we are showing that we are well placed to capitalize as markets improve, which is also reflected in a strong sales volume development.

"Throughout these challenging times, DSM is staying the course. We completed the disposal of two non-core businesses and remain committed to exiting the remaining non-core operations. Our strategic commitment to create a Life Sciences and Materials Sciences company addressing important global trends via a focus on customers, innovation and sustainability is undiminished. Our robust financial strength allows us to capture market opportunities as they arise."


 third quarter   in EUR million                   January - September
 2009  2008  +/-                                    2009   2008   +/-
                 Continuing operations:
2,020 2,336 -14% Net sales                         5,727  7,045  -19%

  257   361 -29% Operating profit before             562  1,011  -44%
                 depreciation and amortization
                 (EBITDA)

  139   237 -41% Operating profit (EBIT)             229    685  -67%
  119   104  14% - Nutrition                         384    292   32%
    2    22 -91% - Pharma                             16     59  -73%
   45    62 -27% - Performance Materials              45    212  -79%
   21    19  11% - Polymer Intermediates              -5     85
    2    85 -98% - Base Chemicals and Materials      -60    158
  -50   -55      - Other activities                 -151   -121

                 Discontinued operations
   39    56 -30% Net sales                           123    161  -24%
   26    34 -24% Operating profit before              80    105  -24%
                 depreciation and amortization
                 (EBITDA)
   26    30 -13% Operating profit (EBIT)              72     95  -24%

                 Total DSM:
2,059 2,392 -14% Net sales                         5,850  7,206  -19%

  165   267 -38% Operating profit (EBIT)             301    780  -61%

  100   181 -45% Net profit before exceptional       155    535  -71%
                 items

  274     -      Net result from exceptional         242      -
                 items

  374   181 107% Net profit                          397    535  -26%

                 Net earnings per ordinary share
                 in EUR:
 0.51  0.97 -47% - before exceptional items,        0.62   2.78  -78%
                 continuing operations
 2.29  1.10 108% - including exceptional items,     2.40   3.20  -25%
                 total DSM

In this report:

* 'operating profit' (before depreciation and amortization) is understood to be operating profit (before depreciation and amortization) before exceptional items.

* 'net profit' is the net profit attributable to equity holders of Royal DSM N.V.

* 'continuing operations' refers to the DSM operations excluding DSM Energie Holding B.V. and Stamicarbon B.V.

Overview

Most of DSM's businesses experienced a further improvement in demand during Q3, including a strong September. The underlying trend can be described as a mixture of a clear recovery in some end markets (especially China, where sales were 16% higher than Q3 last year) and some downstream re-stocking in other areas which, however, are still lower, such as automotive. The year-on-year percentage drop in sales volumes in the businesses affected by the economic downturn has returned to single digit.

DSM's Nutrition cluster continued to show resilience and steady growth, capitalizing on its strong market position in areas which were hardly affected by the downturn. The Pharma results remained low as expected, due to weak sales.

In the Materials Sciences clusters, the results of DSM Engineering Plastics, DSM Resins and DSM Fibre Intermediates were close to last year's level. The combined effects of lower sales volumes and the reduction of inventories were compensated for by lower raw material prices and the sustained focus on efficiency. Also DSM Dyneema experienced a weaker demand than in the same period last year.

The operating profit of DSM's core business, Life Sciences and Materials Sciences, in Q3 2009 (EUR 137 million) was only 10% lower than last year's level, during which period DSM was not yet affected by the downturn.

All businesses in Base Chemicals and Materials showed a clear recovery compared to the previous quarter, which resulted in a small operating profit for the cluster as a whole, but a much weaker result than in the very good period last year. The main contributors to this improvement versus Q2 were DSM Elastomers and DSM Agro.

The broad improvement in trading conditions was no reason to compromise the focus on cash. DSM's net debt of EUR 1,069 million is now EUR 818 million (43%) lower than a year ago at the start of the economic downturn.

The disposals of DSM Energy and the urea-licensing activities, as part of DSM's accelerated Vision 2010 strategy, were completed on 30 September and 6 October respectively. The disposal of DSM Energy resulted in a net book profit of EUR 268 million in Q3 and the disposal of the urea-licensing activities will result in a net book profit of around EUR 30 million which will be recognized in Q4.

Net sales

in EUR million    third quarter
                   2009  2008 differ-ence vol-umes prices exch. other
                                                          rates

Nutrition           702   666          5%       4%    -2%    3%    0%
Pharma              152   203        -25%      -3%   -11%   -2%   -9%
Performance         496   580        -15%      -8%    -9%    1%    1%
Materials
Polymer             246   335        -27%      -4%   -26%    3%     -
Intermediates
Base Chemicals
and                 328   444        -26%       3%   -30%    1%     -
  Materials
Other activities     96   108

Total, continuing 2,020 2,336        -14%      -2%   -13%    1%    0%
operations
Discontinued         39    56
operations

Total             2,059 2,392

Net sales dropped by 14% compared to Q3 2008 but improved by 5% compared to Q2 2009 (volumes +5%, prices +2%, exchange rates -2%). Sales volumes were on average still lower compared to last year's level, but the decline was much less than in previous quarters. This is a reflection of improvements in end-markets as well as some re-stocking. Nutrition, DSM Anti-Infectives, DSM Agro and DSM Melamine are even showing better sales volumes than Q3 last year.

Although prices were clearly below last year's level (partly due to lower raw material prices in the Materials Sciences and Base Chemicals and Materials businesses), pricing power was generally strong. Prices were, on average, increasing during the quarter and margins were mostly better than last year's (DSM Agro being the important exception due to much lower prices).

Operating profit At EUR 139 million, operating profit from continuing operations was substantially better than in the last three quarters, but clearly below last year's Q3. The decline year-on-year was mainly attributable to the Base Chemicals and Materials and Pharma clusters.

Nutrition sustained its solid performance and remained hardly affected by the recession. Volumes were growing again and were above last year while prices remained strong. Operating profit was negatively affected by underutilization of assets due to inventory reduction.

Pharma was affected by the weak demand at DSM Pharmaceutical Products and the continued weak pricing at DSM Anti-Infectives.

In Performance Materials both DSM Engineering Plastics and DSM Resins profited from a recovery in volumes, strong margins and improved efficiency. DSM Dyneema experienced pressure because of a weaker demand than last year.

Polymer Intermediates recovered sharply from the dramatic drop in demand and margins seen at the end of last year and the beginning of this year.

In Base Chemicals and Materials, the operating profit of DSM Elastomers showed a substantial improvement in this quarter and was positive again. The improvement in DSM Agro and DSM Melamine was less pronounced. Both business groups still posted a loss.

A number of structural cost-saving actions to address the effects of the economic downturn and to strengthen DSM's competitive position helped to improve the operating profit in Q3 compared to Q2. DSM is on track to achieve cost savings as a result of these actions of EUR 150-200 million on a yearly basis, to be fully achieved by 2010.

Business review by cluster

Nutrition


+-------------------------------------------------------------------+
| third quarter |   | in EUR million          | January - September |
|---------------+---+-------------------------+---------------------|
|  2009 |  2008 |   |                         |    |   2009 |  2008 |
|-------+-------+---+-------------------------+----+--------+-------|
|       |       |   |                         |    |        |       |
|-------+-------+---+-------------------------+----+--------+-------|
|   702 |   666 |   | Net sales               |    |  2,108 | 2,007 |
|-------+-------+---+-------------------------+----+--------+-------|
|       |       |   | Operating profit before |    |        |       |
|       |       |   | depreciation and        |    |        |       |
|-------+-------+---+-------------------------+----+--------+-------|
|   151 |   144 |   |   amortization          |    |    481 |   396 |
|-------+-------+---+-------------------------+----+--------+-------|
|   119 |   104 |   | Operating profit        |    |    384 |   292 |
+-------------------------------------------------------------------+


Organic sales growth in the cluster was 2% compared to Q3 2008 driven by DSM Nutritional Products. The improvement came from an increase in volume, especially in the animal feed segment where demand slackened in Q3 2008. Demand for food ingredients in Q3 2009 was still impacted by de-stocking effects in the pipeline. However, in the second part of the quarter demand improved. Following the value-over-volume strategy, prices in both food and feed ingredients remained robust although at slightly lower levels which was compensated for by the stronger dollar. Compared to the second quarter of this year, volume improvements continued, but were offset by a weaker dollar. DSM Food Specialties' sales were similar to Q3 last year.

Operating profit of DSM Nutritional Products continued to be strong in Q3 2009 and increased compared to last year. This was due to favorable sales developments, production efficiency and good cost management and despite underutilization of assets due to inventory reduction. DSM Food Specialties' operating profit continued to be above last year due to strong performance in enzymes and ARA and favorable exchange rates.

Pharma


+-------------------------------------------------------------------+
| third quarter |   | in EUR million          | January - September |
|---------------+---+-------------------------+---------------------|
|  2009 |  2008 |   |                         |     |  2009 |  2008 |
|-------+-------+---+-------------------------+-----+-------+-------|
|       |       |   |                         |     |       |       |
|-------+-------+---+-------------------------+-----+-------+-------|
|   152 |   203 |   | Net sales               |     |   526 |   647 |
|-------+-------+---+-------------------------+-----+-------+-------|
|       |       |   | Operating profit before |     |       |       |
|       |       |   | depreciation and        |     |       |       |
|-------+-------+---+-------------------------+-----+-------+-------|
|    14 |    37 |   |   amortization          |     |    57 |   105 |
|-------+-------+---+-------------------------+-----+-------+-------|
|     2 |    22 |   | Operating profit        |     |    16 |    59 |
+-------------------------------------------------------------------+


Organic sales development of the Pharma cluster continued to be under pressure. DSM Pharmaceutical Products' activity level remained low as a result of low demand from pharmaceutical companies, delay in approvals and the loss of some large contracts. DSM Anti-Infectives was facing low prices. Last year's sales still included the activities of DSM Deretil, which was disposed of at the end of Q3 2008.

The operating profit continued to decrease. The lower prices for penicillin derivatives and low demand at DSM Pharmaceutical Products led to a lower result compared to last year.

Performance Materials


+-------------------------------------------------------------------+
| third quarter |   | in EUR million         |  January - September |
|---------------+---+------------------------+----------------------|
|  2009 |  2008 |   |                        |    |   2009 |   2008 |
|-------+-------+---+------------------------+----+--------+--------|
|       |       |   |                        |    |        |        |
|-------+-------+---+------------------------+----+--------+--------|
|   496 |   580 |   | Net sales              |    |  1,347 |  1,805 |
|-------+-------+---+------------------------+----+--------+--------|
|       |       |   | Operating profit       |    |        |        |
|       |       |   | before depreciation    |    |        |        |
|       |       |   | and                    |    |        |        |
|-------+-------+---+------------------------+----+--------+--------|
|    72 |    84 |   |   amortization         |    |    122 |    275 |
|-------+-------+---+------------------------+----+--------+--------|
|    45 |    62 |   | Operating profit       |    |     45 |    212 |
+-------------------------------------------------------------------+


Organic sales development was -17% compared to last year as market sentiment was lower for all business groups and most regions. The Asia Pacific region was an exception for most businesses as year-on-year growth continued. Compared to Q2 of this year, the organic sales growth was a healthy 10%. Higher volumes, partly due to re-stocking, as well as favorable price developments were observed in all businesses.

The operating profit gap narrowed significantly against Q3 of last year especially for DSM Engineering Plastics and DSM Resins, with a result that was more than double Q2 2009. Also DSM Engineering Plastics moved into positive territory for the quarter. These encouraging developments were driven by volume increase, well structured cost control programs, price leadership and higher margins. The quarterly result of DSM Dyneema dropped compared to the same period last year as weaker demand had an impact on this business as well.



Polymer Intermediates


+-------------------------------------------------------------------+
| third quarter |   | in EUR million          | January - September |
|---------------+---+-------------------------+---------------------|
|  2009 |  2008 |   |                         |    |  2009 |   2008 |
|-------+-------+---+-------------------------+----+-------+--------|
|       |       |   |                         |    |       |        |
|-------+-------+---+-------------------------+----+-------+--------|
|   246 |   335 |   | Net sales               |    |   600 |  1,003 |
|-------+-------+---+-------------------------+----+-------+--------|
|       |       |   | Operating profit before |    |       |        |
|       |       |   | depreciation and        |    |       |        |
|-------+-------+---+-------------------------+----+-------+--------|
|    29 |    27 |   |   amortization          |    |    18 |    105 |
|-------+-------+---+-------------------------+----+-------+--------|
|    21 |    19 |   | Operating profit        |    |    -5 |     85 |
+-------------------------------------------------------------------+


Organic sales development was -30% compared to the same period of last year driven by lower market prices. With respect to volume, the continuing weak market demand in North America has been, to a large extent, compensated for by sales volume in Europe and Asia (especially China). Compared to the previous quarter, organic sales growth was 18% due to much better pricing.

The cluster delivered a slightly higher operating profit compared to the same quarter of last year. Due to the low benzene price in the first two months of the quarter, the margins in caprolactam have improved. Compared to the previous quarter, the operating profit has improved by EUR 17 million.

Base Chemicals and Materials


+-------------------------------------------------------------------+
| third quarter |   | in EUR million          | January - September |
|---------------+---+-------------------------+---------------------|
|  2009 |  2008 |   |                         |    |  2009 |   2008 |
|-------+-------+---+-------------------------+----+-------+--------|
|       |       |   |                         |    |       |        |
|-------+-------+---+-------------------------+----+-------+--------|
|   328 |   444 |   | Net sales               |    |   854 |  1,262 |
|-------+-------+---+-------------------------+----+-------+--------|
|       |       |   | Operating profit before |    |       |        |
|       |       |   | depreciation and        |    |       |        |
|-------+-------+---+-------------------------+----+-------+--------|
|    21 |   104 |   |   amortization          |    |    -9 |    211 |
|-------+-------+---+-------------------------+----+-------+--------|
|     2 |    85 |   | Operating profit        |    |   -60 |    158 |
+-------------------------------------------------------------------+


Organic sales development was -27% compared to last year, which was mainly caused by lower fertilizer prices, as volumes were comparable to last year. Q3 showed a healthy growth of 16% compared to the second quarter. In all businesses, sales are recovering, from the first half year's trough.

The operating profit of the cluster was much lower than Q3 2008 due to lower prices at DSM Agro. Compared to the previous quarter operating profit recovered and was slightly positive again. Especially DSM Elastomers showed a good recovery to a level which was comparable to last year. The main cause for the overall recovery of the cluster is the fact that the volumes are picking up again. Furthermore the fixed costs saving programs were contributing considerably to the result.

Other activities


+-------------------------------------------------------------------+
| third quarter |   | in EUR million          | January - September |
|---------------+---+-------------------------+---------------------|
|  2009 |  2008 |   |                         |     |  2009 |  2008 |
|-------+-------+---+-------------------------+-----+-------+-------|
|       |       |   |                         |     |       |       |
|-------+-------+---+-------------------------+-----+-------+-------|
|    96 |   108 |   | Net sales               |     |   292 |   321 |
|-------+-------+---+-------------------------+-----+-------+-------|
|       |       |   | Operating profit before |     |       |       |
|       |       |   | depreciation and        |     |       |       |
|-------+-------+---+-------------------------+-----+-------+-------|
|   -30 |   -35 |   |   amortization          |     |  -107 |   -81 |
|-------+-------+---+-------------------------+-----+-------+-------|
|   -50 |   -55 |   | Operating profit        |     |  -151 |  -121 |
|-------+-------+---+-------------------------+-----+-------+-------|
|       |       |   |    of which:            |     |       |       |
|-------+-------+---+-------------------------+-----+-------+-------|
|   -18 |    -2 |   |     - Defined Benefit   |     |   -56 |    -3 |
|       |       |   | Plans                   |     |       |       |
|-------+-------+---+-------------------------+-----+-------+-------|
|   -15 |   -16 |   |     - Innovation Center |     |   -43 |   -42 |
|-------+-------+---+-------------------------+-----+-------+-------|
|   -17 |   -37 |   |     - Other             |     |   -52 |   -76 |
+-------------------------------------------------------------------+



The main difference in the result of Other activities compared to Q3 2008 was the higher result at the captive insurance company which posted a substantial loss last year as a consequence of the ammonia outage. This broadly offset the (non cash) increase in IFRS pension costs for defined benefit plans.


Exceptional items

In total, exceptional items after tax amounted to a profit of EUR 274 million in Q3 2009.

Due to the sale of DSM Energie Holding B.V. to TAQA a net book profit of EUR 268 million was realized.

As a result of a reduction in entitlements under certain defined benefit plans a gain of EUR 11 million (EUR 16 million before tax) was posted.

Net profit

Mainly due to the sale of DSM Energie Holding B.V. the net profit increased by EUR 193 million compared to Q3 2008 to a level of EUR 374 million.

Net earnings per share (continuing operations, before exceptional items) decreased by 47% compared to Q3 last year to EUR 0.51, but was substantially above Q2 (EUR 0.09).

Net finance costs amounted to EUR 30 million which represents an increase of EUR 5 million compared to the previous year. Higher average long term debt and lower interest income as a result of unfavorable interest rate developments were partly offset by a higher average cash balance.

The effective tax rate decreased to 23% for the first three quarters of 2009 versus 25% for the year 2008 due to changes in the geographic distributions of taxable results.

Cash flow, capital expenditure and financing As a result of DSM's continued strong focus on cash, Cash flow from operating activities increased to EUR 950 million current year-to-date compared to EUR 518 million in the first three quarters of 2008. Q3 2009 operating cash flow amounted to EUR 517 million versus EUR 237 million in Q3 2008.

Cash used for capital expenditure in the first three quarters of 2009 amounted to EUR 337 million compared to EUR 387 million in the first three quarters of 2008 (Q3 2009 EUR 102 million versus Q3 2008 EUR 129 million).


Net debt showed a strong decrease during the first three quarters of 2009 to a level of EUR 1,069 million (EUR 1,781 million at year- end 2008) as a result of a strong reduction of operating working capital and the cash proceeds from the sale of DSM Energy.

Workforce

Following the restructuring programs the workforce decreased overall by 1,147 compared to the end of Q3 2008, the beginning of the economic downturn, and stood at 22,905.

Progress update on DSM Strategy Vision 2010 DSM's acceleration of the strategic program Vision 2010 - Building on Strengths, announced in September 2007, focuses on delivering faster growth, higher margins and improved earnings quality from the company's portfolio. The strategy will transform DSM into a Life Sciences and Materials Sciences company capable of sustainable growth fueled by important societal trends.

The key drivers - market-driven growth and innovation, increased presence in emerging economies and operational excellence - remain at the heart of DSM's strategy. In Q3 2009 sales in China amounted to USD 334 million, which represents an increase of 16% relative to the comparable period of last year. Year-to-date sales amounted to USD 813 million being a decrease of 11% compared to year-to-date previous year.

On 30 October 2009 DSM announced that the contracts to establish nutrition and anti-infectives joint ventures in China with North China Pharmaceutical Group Corporation Ltd. (NCPC) are suspended. Both parties are maintaining their ongoing business relationships. At the same time, DSM will look for alternative solutions for the prospective partnerships. DSM will continue to explore other opportunities for further growth in China through strategic cooperation, also in the areas of nutritional products and anti-infectives.

In India, DSM Anti-Infectives inaugurated its new plant at Toansa for the production of Ampicillin, one of the most widely used first lines of therapy for combating bacterial infections. In this new facility, DSM Anti-Infectives implements the newly developed enzymatic process for production of Ampicillin.

In September 2007 DSM announced that, as a result of the accelerated shift towards Life Sciences and Materials Sciences, a number of businesses which do not fit in with the accelerated strategy would be carved out and disposed of.

DSM has made progress with the planned disposals. On 30 September 2009 the sale of DSM Energie Holding B.V. to TAQA Abu Dhabi National Energy Company PJSC was finalized. Included in the scope are the participations which DSM had in oil and gas exploration and the 40% participation in Noordgastransport B.V. DSM reported a book profit of EUR 268 million after tax on the sale as an exceptional item in the income statement in Q3 2009.

On 6 October 2009 the sale of the urea-licensing subsidiary Stamicarbon B.V. to Maire Tecnimont was completed. DSM will report a book profit of about EUR 30 million after tax on the sale as an exceptional item in the income statement for Q4 2009.

The disposal process for DSM Elastomers, DSM Agro and DSM Melamine is underway. As reported earlier, DSM has slowed down the process in view of the current financial and economic environment but still aims to complete the disposals by the end of 2010.

DSM regained its number one position in the chemical industry sector in the Dow Jones Sustainability World Index. This is a recognition of DSM's continuous efforts in sustainability, an important element of the strategy Vision 2010. From 2004 to 2006 DSM was named the worldwide sustainability No. 1 in this sector. In 2007 and 2008 it ranked amongst the top leaders in the sector.

During the quarter, DSM announced and introduced many new innovations. More information can be found in the innovation section at www.dsm.com.

Outlook

During Q3 2009 DSM saw a continuation of the trends that were visible at the end of the second quarter with ongoing robust performance in Nutrition and a further improvement in Materials Sciences. Despite the improved performance in Q3 2009 compared to the previous quarter, demand is still fragile and the economic outlook remains uncertain. The movements in inventories in the value chain as well as the development of end-demand are difficult to separate and predict. DSM will continue to focus on cash and cost, whilst maintaining its strategic commitment to customers, innovation and sustainability.

It is expected that the current business conditions in Nutrition will remain strong with an ongoing increase in demand and sustained price levels in both the food and feed markets. The Nutrition cluster is expected to achieve full year results somewhat above the 2008 level.

Pharma results are expected to be substantially lower than last year although the results of DSM Pharmaceutical Products are expected to be strong in the last quarter of the year due to temporary additional demand related to the H1N1 flu.

In Materials Sciences and Base Chemicals and Materials business conditions have clearly improved in Q3 2009 compared to Q2 2009. At this moment there is still limited clarity on demand for the last quarter of the year, which is traditionally a weaker quarter. In addition there are signs that some re-stocking occurred in Q3 2009. Furthermore, feedstock prices remain volatile which might affect margins - positively or negatively. The operating result of Performance Materials is expected to be lower in Q4 2009 compared to Q3 2009. At Polymer Intermediates operating profit is expected to be around break-even in 2009. The Base Chemicals and Materials cluster is expected to be clearly loss-making in 2009.

The outlook for the rest of the year remains uncertain. However, the Q4 operating profit from continuing operations is currently expected to be lower than in Q3 2009, but above Q4 last year.


Condensed consolidated statement of income for the third quarter

 third quarter 2009  in EUR million              third quarter 2008
before excep-  total                            before excep-   total
excep- tional                                   excep- tional
tional  Items                                   tional  Items
 items                                           items

 2,059      -  2,059 net sales                   2,392      -   2,392

   283    283    566 operating profit before       395      -     395
                     depreciation and
                       amortization (EBITDA)

   165    283    448 operating profit (EBIT)       267      -     267
    26      -     26 operating profit from          30      -      30
                     discontinued operations
   139    283    422 operating profit from         237      -     237
                     continuing operations
   -30      -    -30 net finance costs             -25      -     -25
     0      -      0 share of the profit of          0      -       0
                     associates

   109    283    392 profit before income tax      212      -     212
                     expense
   -24     -9    -33 income tax expense            -54      -     -54

    85    274    359 net profit from continuing    158      -     158
                     operations
    15      -     15 net profit from                22      -      22
                     discontinued operations

   100    274    374 profit for the period         180      -     180
     0      -      0 minority interests              1      -       1

   100    274    374 net profit                    181      -     181

   100    274    374 net profit                    181      -     181
    -2      -     -2 dividend on cumulative         -2      -      -2
                     preference shares
    98    274    372 net profit used for           179      -     179
                     calculating earnings per
                     share

   118      -    118 depreciation and              128      -     128
                     amortization
                  92 capital expenditure                          128
                  -6 acquisitions                                   9
                     net earnings per ordinary
                     share in EUR
  0.60   1.69   2.29 - net earnings, total DSM    1.10      -    1.10
  0.51   1.69   2.20 - net earnings, continuing   0.97      -    0.97
                     operations

               162.3 average number of ordinary shares          162.0
                     (x million)
               162.3 number of ordinary shares, end of          162.2
                     period (x million)

              22,905 workforce at end of period               *23,591
               7,423 of which in the                           *7,452
                     Netherlands

* Year-end 2008.

This report has not been audited.

Condensed consolidated statement of income January - September

January - September 2009 in EUR million      January - September 2008
  before  excep-   total                      before  excep-    total
  excep-  tional                              excep-  tional
  tional   Items                              tional   Items
   items                                       items

   5,850       -   5,850 net sales             7,206       -    7,206

     642     248     890 operating profit      1,116       -    1,116
                         before depreciation
                         and
                           amortization
                         (EBITDA)

     301     233     534 operating profit        780       -      780
                         (EBIT)
      72       -      72 operating profit         95       -       95
                         from discontinued
                         operations
     229     233     462 operating profit        685       -      685
                         from continuing
                         operations
     -90       -     -90 net finance costs       -61       -      -61
      -1       -      -1 share of the profit       0       -        0
                         of associates

     138     233     371 profit before           624       -      624
                         income tax expense
     -32       9     -23 income tax expense     -157       -     -157

     106     242     348 net profit from         467       -      467
                         continuing
                         operations
      47       -      47 net profit from          70       -       70
                         discontinued
                         operations

     153     242     395 profit for the          537       -      537
                         period
       2       -       2 minority interests       -2       -       -2

     155     242     397 net profit              535       -      535

     155     242     397 net profit              535       -      535
      -7       -      -7 dividend on              -7       -       -7
                         cumulative
                         preference shares
     148     242     390 net profit used for     528       -      528
                         calculating
                         earnings per share

     341      15     356 depreciation and        336       -      336
                         amortization
                     322 capital expenditure                      376
                      -2 acquisitions                             154
                         net earnings per
                         ordinary share in
                         EUR
    0.91    1.49    2.40 - net earnings,        3.20       -     3.20
                         total DSM
    0.62    1.49    2.11 - net earnings,        2.78       -     2.78
                         continuing
                         operations

                   162.3 average number of ordinary             164.9
                         shares (x million)
                   162.3 number of ordinary shares,             162.2
                         end of period (x million)

                  22,905 workforce at end of                  *23,591
                         period
                   7,423 of which in the                       *7,452
                         Netherlands

* Year-end 2008.

This report has not been audited.

Consolidated balance sheet

in EUR million                    30 September 2009     year-end
2008

intangible assets                    1,175             1,200
property, plant and equipment        3,478             3,641
deferred tax assets                    372               392
prepaid pension costs                  164               137
associates                              23                19
other financial assets                 201               176
                                  --------          --------
non-current assets                   5,413             5,565

inventories                          1,447             1,765
trade receivables                    1,405             1,525
other receivables                      121               107
financial derivatives                  104                86
current investments                      4                 4
cash and cash equivalents            1,147               601
                                  --------          --------
current assets                       4,228             4,088
assets held for sale                    44                 -
                                  --------          --------
total assets                         9,685             9,653

in EUR million                    30 September 2009     year-end
2008

shareholders' equity                 4,849             4,633
minority interests                      61                62
                                  --------          --------
equity                               4,910             4,695

deferred tax liabilities               110               122
employee benefits liabilities          298               314
provisions                             132               190
borrowings                           2,041             1,559
other non-current liabilities           43                65
                                  --------          --------
non-current liabilities              2,624             2,250

employee benefits liabilities           26                33
provisions                              82                82
borrowings                             188               734
financial derivatives                   95               179
trade payables                       1,171             1,188
other current liabilities              565               492
                                  --------          --------
current liabilities                  2,127             2,708
liabilities held for sale               24                 -
                                  --------          --------
total equity and liabilities         9,685             9,653

capital employed                     5,890             6,558
equity / total assets                   51%               49%
net debt                             1,069             1,781
gearing (net debt / equity plus         18%               28%
net debt)
operating working capital (OWC)      1,681             2,102
OWC / net sales                       21.7%             22.6%

Condensed consolidated cash flow statement

                                        January - September
in EUR million                               2009
2008


Cash and cash equivalents at        601                 369
beginning of period

Operating activities:
- net profit plus                   753                 870
depreciation and amortization
- change in working capital         414                -474
- other changes:
    - book profit DSM Energie      -268                   -
Holding B.V.
    - other                          51                 122
                                -------           ---------
cash flow from operating            950                 518
activities

Investing activities:
- capital expenditure              -337                -387
- acquisitions                      -16                -104
- sale of subsidiaries              237                   7
- disposals                           2                   -
- other                             -28                 -70
                              ---------           ---------
net cash used in investing         -142                -554
activities

dividend                           -205                -220
net cash used in / from             -45                 270
financing activities
changes in consolidation and
exchange differences                -12                  20
                              ---------           ---------
Cash and cash equivalents at      1,147                 403
end of period



Condensed statement of recognized income and expense

                                                 January - September
in EUR million                                        2009       2008


Exchange differences on translation of foreign         -39         50
operations
Changes in actuarial gains and losses and asset          0        -61
ceiling
Other changes                                           71        -22
Income tax expense                                     -21         32
                                                 ---------   --------
Total income and expense directly recognized in         11         -1
equity
Profit for the period                                  395        537
                                                 ---------   --------
Recognized income and expense for the period           406        536
of which minority interests                             -4          7



Condensed statement of changes in equity

                                                January - September
in EUR million                                      2009        2008


Balance at beginning of period                     4,695       5,383

Changes:
- recognized income and expense for the period       406         536
- dividend                                          -206        -222
- repurchase of ordinary shares                        -        -250
- proceeds from reissue of ordinary shares             1          47
- other changes                                       14          15
                                               ---------   ---------
Balance at end of period                           4,910       5,509


Condensed segment report

January -
September
2009
                                      Continuing operations     
             Nutrition Pharma  Perform-  Polymer      Base      
                                   ance Interme- Chemicals 
                              Materials   diates       and
                                                 Materials
Net sales        2,108    526     1,347      600       854      
Supplies to         47     14        17      187       111      
other
clusters
Total            2,155    540     1,364      787       965      
supplies

Operating
profit
before
depreciation
and
                   481     57       122       18        -9      
amortization
Operating          384     16        45       -5       -60      
profit
Total assets     4,011  1,371     2,656      787     1,065      
Workforce        7,237  4,248     4,763    1,322     1,838      
end of
period

                                           Discon-  Total
                  Other Elimina-  Total     tinued
             activities     tion        operations

Net sales          292        -  5,727        123  5,850
Supplies to         24     -400      -          -      -
other
clusters
Total              316     -400  5,727        123  5,850
supplies

Operating
profit
before
depreciation
and
                  -107        -    562         80    642
amortization
Operating         -151        -    229         72    301
profit
Total assets     9,235   -9,484  9,641         44  9,685
Workforce        3,447        - 22,855         50 22,905
end of
period



January -
September
2008
                                      Continuing operations     
             Nutrition Pharma  Perform-  Polymer      Base      
                                   ance Interme- Chemicals 
                              Materials   diates       and
                                                 Materials
Net sales        2,007    647     1,805    1,003     1,262   
Supplies to         29     21        24      312       218   
other
clusters
Total            2,036    668     1,829    1,315     1,480   
supplies

Operating
profit
before
depreciation
and
                   396    105       275      105       211  
amortization
Operating          292     59       212       85       158  
profit
Total assets     3,835  1,445     2,706      710     1,333  
*
Workforce        7,043  4,401     4,978    1,427     2,305  
end of
period *


                                           Discon-  Total
                  Other Elimina-  Total     tinued
             activities     tion        operations

Net sales          321        -  7,045        161  7,206
Supplies to         24     -628      -          -      -
other
clusters
Total              345     -628  7,045        161  7,206
supplies

Operating
profit
before
depreciation
and
                   -81        -  1,011        105  1,116
amortization
Operating         -121        -    685         95    780
profit
Total assets     8,730   -9,106  9,653          -  9,653
*
Workforce        3,385        - 23,539         52 23,591
end of
period *

* Year-end 2008


Notes to the financial statements

* Accounting policies

The consolidated financial statements of DSM for the year ended 31 December 2008 were prepared according to International Financial Reporting Standards (IFRS) as adopted by the European Union and valid as of the balance sheet date. The same accounting policies are applied in the current interim financial statements, as of 30 September 2009. These statements are in compliance with IAS 34 'Interim Financial Reporting' and need to be read in conjunction with the Annual Report 2008 and the discussion by the Managing Board earlier in this interim report. Neither pensions and similar obligations nor plan assets are subject to interim revaluation.


* Audit

These interim financial statements have not been audited.


* Scope of the consolidation

Acquisitions since the end of 2008, both individually and in aggregate, were immaterial with respect to IFRS disclosure requirements. DSM Special Products, which was reported as a discontinued operation in the first nine months of 2008 is now part of the Base Chemicals and Materials cluster. Comparatives have been represented to align with the reclassification.

DSM completed the sale of DSM Energie Holding B.V. (DSM Energy) to TAQA Abu Dhabi National Energy Company PJSC on 30 September 2009. The disposal consists of the participations which DSM has in oil and gas exploration and pipelines, including the 40% participation in Noordgastransport B.V. In view of the disposal the related activities are reported as discontinued operations and comparatives have been represented. The impact of the deconsolidation of these activities on the DSM financial statements is presented in the table below:

  in EUR million


  property, plant and equipment -80
  inventories                    -2
  receivables                   -12
  cash and cash equivalents     -73

  total assets                 -167

  provisions                    -99
  other non-current liabilities  -5
  current liabilities           -24
  total liabilities            -128

  net asset value               -39
  sales price                   309

  book profit                   270
  tax                            -2
  net book profit               268

The impact of the disposal on the cash flow statement is presented in the next table:

in EUR million
                                January-September 2009 Full year
2008
net cash provided by operating            63                 98
activities
net cash used in investing                -5                 -8
activities
net cash used in financing                -2                 -4
activities

net change in cash and cash               56                 86
equivalents

Before disposal DSM Energy was reported in the segment Base Chemicals and Materials segment and DSM's 40% participation in Noordgastransport B.V. was reported in the segment Other activities segment.


* Related party transactions

Transactions with related parties are conducted at arm's length conditions. In the first nine months of 2009 these transactions were not material to DSM as a whole. No loans were granted to members of the Managing Board or to members of the Supervisory Board. In accordance with the remuneration policy stock options and restricted shares were awarded to members of the Managing Board in the first nine months of 2009.


* Risks

DSM has a risk management system in place. A description of the system and an overview of potentially important risks for DSM is provided in the Annual Report 2008 and in the governance section on www.dsm.com. DSM has reviewed the developments and incidents in the first half year of 2009 at the time of issuance of the report for the first half-year. On the basis of that assessment DSM concluded that the most important risks and responses as reported in the Annual Report 2008 were still applicable.


* Seasonality

In cases where businesses are significantly affected by seasonal or cyclical fluctuations in sales this is discussed in the 'Business review by cluster' earlier in this report.


* Dividends paid

On 21 April the final dividend of EUR 0.80 per share for the year 2008 was paid to holders of ordinary shares and a dividend of EUR 0.15 per share was paid to holders of cumulative preference shares A. In addition to the final dividend for 2008 the interim dividend of EUR 0.40 per ordinary share and EUR 0.08 per cumulative preference share was recognized in the second quarter of 2009 and paid on 28 August. The total distribution to shareholders in the first nine months amounted to EUR 205 million and was recorded against retained earnings.


* Borrowings

In Q1 2009 a EUR 500 million 5.75% bond was issued which will be due in 2014. Part of the proceeds from the bond was used to repay the USD 250 million 6.75% loan that matured in the second quarter.


* Material events subsequent to the interim period

On 6 October 2009 DSM completed the agreement with Maire Tecnimont S.p.A. for the sale of DSM's urea-licensing subsidiary Stamicarbon B.V. The business has been reclassified as held-for-sale since the end of the first half and reported as discontinued operations. Prior period figures have been adjusted accordingly. Before reclassification Stamicarbon B.V. was reported in the segment Base Chemicals and Materials segment. From the end of the first half depreciation and amortization have no longer been recognized for these activities in accordance with the applicable accounting standards.

Heerlen, 3 November 2009

The Managing Board

Feike Sijbesma, chairman
Jan Zuidam, deputy chairman
Rolf-Dieter Schwalb, CFO
Nico Gerardu
Stephan Tanda




Important dates

Annual results 2009:
Wednesday,
24 February 2010
Annual General Meeting of Shareholders:      Wednesday, 31 March
2010
Report for the first quarter:
Wednesday,
28 April 2010
Report for the second quarter:                       Tuesday, 3
August 2010
Report for the third quarter:                            Tuesday,
2
November 2010

DSM - the Life Sciences and Materials Sciences Company Royal DSM N.V. creates innovative products and services in Life Sciences and Materials Sciences that contribute to the quality of life. DSM's products and services are used globally in a wide range of markets and applications, supporting a healthier, more sustainable and more enjoyable way of life. End markets include human and animal nutrition and health, personal care, pharmaceuticals, automotive, coatings and paint, electrical and electronics, life protection and housing. DSM has annual net sales of EUR 9.3 billion and employs some 23,500 people worldwide. The company is headquartered in the Netherlands, with locations on five continents. DSM is listed on Euronext Amsterdam. More information: www.dsm.com


This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.



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