• Q2 2001 operating profit of EUR 150 million virtually at Q1 level (EUR 159 million) despite sharply deteriorating economic climate.
  • Sales up 5% on Q2 2000.
  • Interim dividend EUR 0.58 (2000: EUR 0.51) per ordinary share.

Second quarter (in EUR million)

2001 2000 +/-
Net sales 2 087 1 988 +5 %
Operating profit plus depreciation and amortization (EBITDA) 279 374 -25 %
Operating profit before amortization of goodwill (EBITA) 157 239 -34 %
- Life Science Products 55 49 +12 %
- Performance Materials 35 40 -12 %
- Polymers & Industrial Chemicals 37 127 -71 %
- Other activities 30 23 +30 %
Operating profit (EBIT) 150 239 -37 %
Profit on ordinary activities after taxation 106 170 -38 %
Extraordinary profit after taxation - - -
Net profit 106 169 -37 %




Per ordinary share in EUR*:      
- Profit on ordinary activities after taxation 1.04 1.70 -39 %
- Same as above, before amortization of goodwill 1.12 1.70 -34 %
- Net profit 1.05 1.70 -38 %
Average number of ordinary shares (x million) 96.1 96.0

 

First half (in EUR million)

2001 2000 +/-
Net sales 4 212 3 958 +6 %
Operating profit plus depreciation and amortization (EBITDA) 568 685 -17 %
Operating profit before amortization of goodwill (EBITA) 323 438 -26 %
- Life Science Products 113 97 +16 %
- Performance Materials 71 75 -5 %
- Polymers & Industrial Chemicals 82 224 -63 %
- Other activities 57 42 +36 %
Operating profit (EBIT) 309 438 -29 %
Profit on ordinary activities after taxation 212 307 -31 %
Extraordinary profit after taxation 70 - -
Net profit 283 307 -8 %




Per ordinary share in EUR*:      
- Profit on ordinary activities after taxation 2.09 3.07 -32 %
- Same as above, before amortization of goodwill 2.24 3.07 -27 %
- Net profit 2.84 3.07 -7 %
Average number of ordinary shares (x million) 96.0 96.5

* After deduction of dividend on cumulative preference shares

General

In the second quarter of 2001 DSM recorded a profit on ordinary activities after taxation of EUR 106 million, the same as in Q1 2001. Net earnings per share amounted to EUR 1.05.

Commenting on the Q2 results, Peter Elverding, chairman of the DSM Managing Board of Directors, said: "Given the sharply deteriorating economic conditions, I am not dissatisfied with a quarterly profit that is at the same level as the first quarter profit. Admittedly, the profit is substantially lower than our record profit for the second quarter of 2000, but without the portfolio shift towards Life Science Products and Performance Materials that we initiated several years ago and without our ongoing effort to improve our cost position, our profits would have been much lower. To me, this is a strong sign that we are heading in the right direction with our Vision 2005: Focus & Value strategy, one of the aims of which is to make our profits less cyclical."

"I expect the Q1-to-Q2 downward trend in our operating profit to persist in the third quarter."

Net sales

in EUR million

Second quarter:

First half:

 

2001

2000

2001

2000

Life Science Products 565 472 1 120 951
Performance Materials 494 553 989 1 076
Polymers & Industrial Chemicals 928 926 1 885 1 854
Other activities 100 37 218 77
 



Total 2 087 1 988 4 212 3 958


Net sales in the second quarter of 2001 amounted to EUR 2.1 billion, an increase of 5% compared with the second quarter of 2000. Despite the rapidly deteriorating economic climate DSM managed to achieve 3% autonomous volume growth. Acquisitions and divestments on balance resulted in a sales increase of 1%, and currency translation also accounted for an effect of +1%. Selling prices were on average 3% lower than in Q2 2000, while there was a 3% increase in net sales due to a change in DSM's consolidation principles with effect from the financial year 2001.

Operating profit

DSM's Q2 operating profit (after amortization of goodwill to an amount of EUR 7 million) amounted to EUR 150 million, which is 37% lower than the record profit in Q2 2000. The decrease was due to lower margins (selling prices less variable costs), especially in the Polymers & Industrial Chemicals cluster, with the exception of melamine. The operating profit for Life Science Products and Performance Materials combined was higher than in Q2 2000, especially if the divestment of DSM Engineering Plastic Products with effect from 1 January 2001 is taken into account.

Review by cluster

Life Science Products

in EUR million

Second quarter:

First half:

 

2001

2000

2001

2000

Net sales including intra-Group supplies 589 490 1 165 992
Operating profit plus depreciation and amortization 92 80 186 157
Operating profit 55 49 113 97

The cluster's Q2 sales were up 20% from Q2 2000 and its operating profit rose 12%. DSM Fine Chemicals saw its sales increase substantially, but its operating profit was slightly lower; both developments were the net effect of a positive contribution from DSM Catalytica Pharmaceuticals and lower sales volumes for some custom pharmaceutical intermediates which could not immediately be compensated for by the introduction of new products. DSM Bakery Ingredients posted lower profits than in Q2 2000 due to a margin squeeze resulting from price increases for the raw material molasses. DSM Anti-Infectives and DSM Food Specialties posted higher profits as sales volumes and margins were up.

Performance Materials

in EUR million

Second quarter:

First half:

 

2001

2000

2001

2000

Net sales including intra-Group supplies 513 561 1 024 1 094
Operating profit plus depreciation and amortization 60 65 118 124
Operating profit 35 40 71 75

The sales figure adjusted for the divestment of DSM Engineering Plastic Products with effect from 1 January 2001 was at virtually the same level as in the second quarter of 2000. Sales volumes were slightly lower due to the adverse economic climate worldwide, especially in the automotive and electrics & electronics sectors, while selling prices were on average slightly higher. The operating profit adjusted for the above-mentioned divestment increased somewhat. DSM High Performance Fibers and DSM Desotech in particular showed an excellent performance.

Polymers & Industrial Chemicals

in EUR million

Second quarter:

First half:

 

2001

2000

2001

2000

Net sales including intra-Group supplies 1 004 1 009 2 056 2 011
Operating profit plus depreciation and amortization 84 192 178 335
Operating profit 37 127 82 224

Lower selling prices - except for melamine and fertilizers - resulted in a fractional decrease in Q2 sales compared with the second quarter of 2000. The petrochemicals business posted an increase in sales volumes. However, because of a decrease in margins the operating profit for this business was much lower than in Q2 2000, although it remained at the Q1 2001 level. Sales of industrial chemicals were down on Q2 2000 as both prices and sales volumes were under pressure, in particular in the caprolactam and acrylonitrile businesses. These factors, aggravated by higher raw material costs, caused the operating result for fibre intermediates to dip into the red. DSM Agro's operating profit decreased strongly due to a decrease in margins and sales volumes. The melamine business saw its operating profit improve.

Other activities

in EUR million

Second quarter:

First half:

 

2001

2000

2001

2000

Net sales including intra-Group supplies 103 38 223 78
Operating profit plus depreciation and amortization 43 37 86 69
Operating profit 30 23 57 42

Sales were up on Q2 2000, mainly because the ABS tolling activities, which previously belonged to the Polymers & Industrial Chemicals cluster, were grouped under Other activities with effect from 1 January 2001, while the Noordgastransport joint venture has become part of DSM Energy as a result of a change in consolidation principles. The operating profit also increased, mainly on account of a higher contribution from DSM Energy.

Net profit

The balance of financial income and expense amounted to an interest expense of EUR 26 million, which is EUR 11 million higher than in Q2 2000. The increase was due to the financing of the acquisition of Catalytica Pharmaceuticals.

At 19%, the effective tax rate in Q2 2001 was lower than in Q2 2000 (27%). The decrease was due to the fact that the profit included a larger proportion of tax-exempt income and income taxed at a relatively low rate.

The profit on ordinary activities after taxation amounted to EUR 106 million, the same as in Q1 2001.

Compared with Q2 2000, DSM's net profit decreased by EUR 63 million and stood at EUR 106 million.

Cash flow, capital expenditure and financing

In Q2 2001 the cash flow (net profit plus depreciation and amortization) amounted to EUR 235 million, which is EUR 69 million less than in Q2 2000. At EUR 171 million, capital expenditure was slightly higher than in Q2 2000 (EUR 161 million). Capital expenditure in the first half of 2001 amounted to EUR 270 million (H1 2000: EUR 300 million).

Balance sheet

The financial data of Catalytica Pharmaceuticals, whose acquisition was completed at the end of 2000, have been consolidated from the financial year 2001 onwards. In the balance sheet as at year-end 2000, the takeover sum was accounted for under Financial fixed assets in its entirety. The consolidation of this company led to major changes in the balance sheet.

Outlook

The economic slowdown that was already making itself felt in the first quarter continued more strongly than expected into the second quarter. In Europe and Asia the slowdown worsened, and the situation in the USA certainly showed no improvement. On the other hand, the prices of raw materials linked to oil and natural gas started to decrease. On balance, market conditions deteriorated in end markets that are important to DSM, such as the automotive industry, the E&E industry, the packaging sector and the textile industry. It is difficult to predict when these markets will start to recover.

Over the next few months DSM expects the profits of the Polymers & Industrial Chemicals cluster to be lower than in the first half of 2001. This will be the net effect of lower profits in petrochemicals and an improvement in results for industrial chemicals.
The Performance Materials cluster, too, will be under somewhat greater pressure from market developments.
DSM expects the profit growth in Life Science Products to continue at an increased pace.

All things considered, DSM expects the Q1-to-Q2 downward trend in its operating profit to persist in the third quarter.

Interim dividend

It has been decided to pay out an interim dividend of EUR 0.58 per ordinary share for 2001 (2000: EUR 0.51); this represents a third of the total dividend of EUR 1.75 paid out for 2000. The interim dividend is no indication of the total dividend for 2001. The interim dividend for 2001 will be paid out in cash.

Consolidated statement of income

in EUR million

Second quarter:

First half:

 

2001

2000

2001

2000

Net sales 2 087 1 988 4 212 3 958
Operating profit plus depreciation and amortization (EBITDA) 279 374 568 685
Operating profit before amortization of goodwill (EBITA) 157 239 323 438
Amortization of goodwill -7 - -14 -
Operating profit (EBIT) 150 239 309 438
Balance of financial income and expense -26 -15 -54 -34
 



Profit on ordinary activities before taxation 124 224 255 404
Tax on profit on ordinary activities -23 -60 -56 -109
Profit of non-consolidated companies 5 6 13 12
 



Profit on ordinary activities after taxation 106 170 212 307
Extraordinary profit after taxation - - 70 -
 



Group profit after taxation 106 170 282 307
Minority interests' share in profit 0 -1 1 0
 



Net profit 106 169 283 307

Net profit 106 169 283 307
Dividend on cumulative preference shares -5 -5 -11 -11
 



Net profit available to holders of ordinary shares 101 164 272 296

Cash flow 235 304 542 554
Depreciation and amortization 129 135 259 247
Capital expenditure 171 161 270 300

Per ordinary share in EUR*:        
- Profit on ordinary activities after taxation 1.04 1.70 2.09 3.07
- Same as above, before amortization of goodwill 1.12 1.70 2.24 3.07
- Net profit 1.05 1.70 2.84 3.07
- Cash flow 2.39 3.11 5.53 5.63
         
Interim dividend     0.58 0.51
         
Average number of ordinary shares (x million) 96.1 96.0 96.0 96.5
Number of ordinary shares, end of period (x million) 96.1 95.4 96.1 95.4

Workforce     22 288 **21 758
- of which in The Netherlands     10 531 **10 662

* After deduction of dividend on cumulative preference shares
** year-end 2000; the year-end 2000 overall workforce figure adjusted for changes in consolidation principles, the acquisition of Catalytica Pharmaceuticals and the deconsolidation of DEPP was 22,737.

Consolidated balance sheet

in EUR million

30 June 2001

31 December 2000

Fixed assets      
Intangible fixed assets 656   75  
Tangible fixed assets 3 591   3 130  
Financial fixed assets 370   1 326  
 
 
 
    4 617   4 531
Current assets        
Inventories 1 380   1 224  
Receivables 2 181   1 888  

Cash

161   204  
 
 
 
    3 722   3 316
   
 
Total   8 339   7 847

Group equity        
Shareholders' equity 3 137   3 040  
Minority interests' share 64   30  
 
 
 
    3 201   3 070
Equalization account   31   27
Provisions   966   857
Long-term liabilities   1 601   1 482
Current liabilities         
- interest-bearing 828   870  
- non-interest-bearing 1 712   1 541  
 
 
 
    2 540   2 411
   
 
Total   8 339   7 847

Capital employed   6 096   4 776
Net debt   2 268   2 148
Group equity / total assets   0.38   0.39
Net debt / group equity   0.71   0.70

 

Statement of cash flows

First half (in EUR million)

2001

2000

Cash at beginning of period 204 159
Operating activities:    
- Cash flow 542 554
- Change in working capital -196 -124
- Other changes -155 51

 
 
Net cash provided by operating activities 191 481
Investment activities:
- Capital expenditure and capital payments -285 -319
- Divestments 206 12
- Other changes 42 -3


Net cash used in investing activities   -37   -310
Dividend paid -134 -54
Net cash used in financial activities -63 -99
 

Cash at end of period 161 177


Statement of changes in Shareholders' equity

First half (in EUR million)

2001 2000
Shareholders' equity at beginning of period 3 040 2 620
Changes:    
- Net profit 283 307
- Dividend on ordinary shares -178 -94
- Dividend on cumprefs -22 -18
- Exchange differences 10 21
- Share buy-back - -119
- Other 4 1
 

Shareholders' equity at end of period 3 137 2 718

The financial information set out in this quarterly report is unaudited.