DSM announces EUR 100 million profit improvement program for DSM Nutritional Products

Royal DSM N.V. (DSM) today announces a comprehensive profit improvement program for DSM Nutritional Products that, through a mix of cost savings and increased profits from higher revenues, is expected to deliver an annual minimum of EUR 100 million of improved profitability.

The program will commence in the second half of 2007 and run through 2008 and 2009, enabling the Nutrition business to achieve the targeted EBITDA margin level of at least 18% as set out in Vision 2010. For 2008, the first full year of the program, it is expected that benefits will offset the negative impact of the expiration of the contracts made in conjunction with the acquisition of Roche Vitamins.

One time costs of the program are estimated at some EUR 40 million after tax, the majority of which are expected to be accounted for in 2008. In addition, DSM Nutritional Products will also invest in further optimizing its business processes, including the replacement of numerous legacy systems with an integrated SAP ERP system.

Commenting on the plan, Stephan Tanda, member of the Managing Board of DSM and responsible for DSM’s Nutrition business, said: “DSM Nutritional Products is well positioned to benefit from the major nutrition, health and wellness trends of our times. The comprehensive profit improvement plan announced today, focused on margin improvement through better management of our cost base, further differentiation of our products and an acceleration of innovation activities, is expected to deliver growth through efficiency and innovation and enable us to reach our targeted 18% EBITDA margin as set out in Vision 2010.”

The profit improvement plan, ‘Aspire to Win’, is based on three main pillars:

Cost reductions
The major elements of the cost savings program are related to SG&A (Sales, General and Administrative) expenses, including the implementation of a new, global ERP system, further streamlining of business processes and administrative overhead reductions. Additional cost improvements will be targeted in manufacturing, both at the main production sites and premix plants, including the sourcing of raw materials and services. Further options will be evaluated to optimize R&D expenditure and the operational footprint.

Enhancement of differentiation activities
Our customers face rapidly rising demands to meet the highest standards of quality, traceability and efficacy. DSM Nutritional Products is well positioned to help fulfill these needs of an increasingly brand and quality conscious market. The business will further enhance its differentiation activities and develop customer solutions in close cooperation with leading players in the food and feed industry. One example is the QUALI-C™ range of guaranteed safe Vitamin C products.

Accelerated innovation
A further boost to capturing the innovation potential in health enhancing ingredients for Animal Nutrition, Human Nutrition and Personal Care will be achieved through accelerated market penetration and new applications of young products like TEAVIGO™ (the purest green tea extract in the industry) and Hy.D® (the advance source of Vitamin D3 for poultry), and the introduction of new products like i-flex™ (a new joint health supplement) and BeauActive™ MTP (a natural ingredient for Cosmetics that reduces lines and wrinkles) Additional growth will be stimulated by an intensified acquisition program to in-source early stage products and technologies and acquire start-up companies and innovation leaders.