Koninklijke Exec Insights: Performance Materials, Raw Materials Environment

On Tuesday, Koninklijke DSM NV (NYSE:DSM) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Performance Materials

Fabian Smeets – ING: Two question from my side please. In Performance Materials, you’re guiding for an increase in results for the full year. It seems that you’re also targeting some more cost savings. Could you share some of the details on those cost savings with us and especially, how much you’re planning and when you think they will be falling? Secondly, on Polymer Intermediates I see the factory turnaround has been a little bit postponed. Can you give us maybe a little bit of an indication whether you expect for the second quarter compared to the first quarter of 2011?

Rolf-Dieter Schwalb – CFO: For the turnaround maybe first, it has not really been postponed. It took a little bit longer. The impact is partly in the second quarter because in the beginning of the turnaround we still had inventories which we could sell in the first quarter, so the impact in total we estimate at about €15 million to €20 million, of which part is in the first quarter, part in the second. To exactly split that is difficult. Maybe it’s a good assumption to take it half, half; maybe a little bit more in the second quarter, but that is very difficult to really exactly split. On the Performance Materials cost savings and by the way, not only in Performance Materials we look for cost savings for the whole Company always and of course especially also in these times, but of course, also in Performance Materials. We are still writing out the detail of some activities and expect to be able to report more in the second quarter press release beginning August, but we also would expect a exceptional item to go along with it for the costs associated with some of the cost reduction and cost savings activities, but that will all be in the second quarter, and I guess you have to wait for final announcements on that one in between.

Raw Materials Environment

Joe Dewhurst – UBS: Just if you can give us more color on to the raw materials environment particularly for Polymer Intermediates and Performance Materials? Then just for second question, if we could just have an update on POET’s and essentially the timeline there and then any sort of other color you can give us on the projects.

Rolf-Dieter Schwalb – CFO: Okay, I will do the raw materials and Fieke most likely will do then the POET update. The raw material prices, if you look at caprolactam, benzene prices and also then the margin over benzene then in the first quarter compared also to, say, November-December, prices have been slightly up. Most recently, April-May, prices again down in caprolactam and benzene prices unfortunately slightly up, so the margin has come down somewhat. In the Performance Materials that is more difficult because you have so many different grades. If you look at some of them relatively stable in the last month, but not a big change.

Feike Sijbesma – Chairman: On POET’s, there’s not much news compared with which what we announced earlier. At this moment we are executing the investments in the large-scale factory, which will come on stream in the second half of 2013, towards the end of 2013 and that is on schedule, so we expect that and we are executing that one. For the rest, it’s all according to clearly expectations and as you know in the coming years, we expect a lot from this business. Next to the deal with POET’s, we’re also investing in biosuccinic acid, which will come on stream this year with Roquette in Italy, the large-scale factory and which those two, as you know we put the whole biochemicals, biofuels aspiration of DSM, the new growth platform on the map, which we did also with the acquisition of Kensey Nash or the tender offer of Kensey Nash last week on the biomedical area. So, in fact, I think both biomedical and biochemicals, biofuels are now being established as to view new growth platforms for DSM.