DSM

DSM

22 August 2017Reading time: 3 minutes

The second quarter results which chemical company DSM published at the end of July, where better than expected and therefore the expectations are increased for the rest of 2017.

 

In 2015 DSM conducted a strategy change so they could realize a better yield. In recent years, the Dutch chemical company has increasingly focused itself on specialty chemicals with a higher profit margin. DSM has also set the target to realize EUR 250-300 million in structural cost reductions by the end of 2018.

 

On August 1st, DSM presented their second quarter results of 2017. The revenue of the chemical company increased with 8% to EUR 2.16 billion on an annual basis, while the adjusted ebitda ended 15% higher at EUR 376 million. The adjusted net profit increased with 30% to EUR 135 million. In the first half year of 2017, the revenue increased with 11% to EUR 4.3 billion on an annual basis. The adjusted ebitda grew during the same period with 16% to EUR 721 million.

 

The results turned out better than expected and therefore DSM has increased their outlook for the rest of 2017. Where the chemical company at the beginning of this year counted on an increase of the adjusted ebitda of ‘approximately 10%’ this has been increased to ‘more than 10%’. DSM will also pay out an interim dividend of EUR 0.58 per share.

 

Meanwhile DSM works on the sale of its share in pharmaceutical company Patheon. It is to be expected that this will take place later this year in which the chemical company will receive approximately EUR 1.7 billion. Furthermore DSM plans to sell at least two more large participations in the coming years.

 

For now the revenues of these sales will not yet be paid out to shareholders but invested in ongoing activities. For example, the company wants to invest approximately USD 83 million in the expansion if their production capacities and the build of a new research centre in Brazil. The timeframe for these investments is until 2019.

 

Besides that analysts do not exclude that DSM will look for acquisition candidates. During the second quarter the net debt dropped with EUR 300 million. As a result DSM has now enough financial possibilities according to analysts.

 

A merge with Evonik is also not excluded. During 2015 the German chemical company showed interest in a merge or acquisition with DSM but conversations about this eventually led nowhere. The two companies however did set up a joint venture in March this year for the development of omega-3 fatty acids for animal feed and salmon cultivation.

 

In response to the positive second quarter results, the stock price ended the same day (august 1) 5.6% higher at EUR 65.89. By now the stock price is slightly lower at EUR 64. Compared to a year ago the stock price is 4.5% higher. The stock is based on a price-to-earnings ratio of 15.3 and offers a dividend yield of 2.8%.

 

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21/09/2019 03:02:38