“Unchanged positive outlook”: DSM delivers growth in Q1, despite high inflation pressures
03 May 2022 --- DSM delivered a “good first quarter” in the company’s latest financial results, driven by a 9% organic sales increase in its Health, Nutrition & Bioscience segment. It also saw strong volume growth in its F&B sales, which reached US$362 million.
The group’s sales marked an 18% increase, with sales reaching US$2.6 billion and a 10% hike in adjusted EBITDA.
“The impact of inflation is going to be felt by the world for some time. But as there is often a time difference, we feel confident we can adjust where necessary,” a company spokesperson tells NutritionInsight.
“You can see the effect of this in our margins in Q1 with the dilutive consequences of increased costs and subsequent price rises. Our positive outlook for the year ahead is unchanged.”
Industry is feeling the impact of inflationary pressures as supply chain issues push consumers to make tough decisions on their purchases.
The company is implementing “effective pricing measures” to counteract inflation throughout the value chain.Combating volatility
According to the results, despite the highly inflationary environment and ongoing global supply chain challenges, all businesses delivered a good quarter.
As of January 1, 2022, DSM’s Health, Nutrition & Bioscience structure came into effect. The move is part of the company’s new strategy to fully focus its resources and capabilities to address the “urgent” societal and environmental challenges linked to the way the world produces and consumes food.
Comprised of Animal Nutrition & Health, Health Nutrition & Care and F&B, the segment’s sales amounted to US$2 billion, with sales up 16%, organic sales increased 9%.
Delivering growth amid inflationary pressures
Health Nutrition & Care marked an 11% increase in organic sales growth, delivering strong volume growth with good pricing under favorable market conditions, DSM underscores. F&B also saw “continued good market conditions,” reaching a 10% increase in organic sales growth. Dietary supplements showed “good results overall”.
“DSM had a good start to the year with robust demand across our businesses and effective pricing measures to counteract inflation throughout the value chain,” says Geraldine Matchett and Dimitri de Vreeze, Co-CEOs.
“Despite the ongoing global logistics and supply chain challenges, we were able to continue to satisfy our customers’ needs.”
While the two see ongoing volatility, resilient demand for DSM’s solutions and the company’s ability to drive effective pricing lead them to reiterate their full-year outlook, which is unchanged.
Favorable market conditions led to growth in Health Nutrition & Care.
Post COVID-19 impact
Plant-based alternatives to meat and fish continue to deliver double-digit growth year-on-year, due to product introductions with new and existing customers, DSM notes.
“Sales were strong, as consumer demand for packaged food remained resilient despite food producers implementing price increases onto end consumers,” the company underscores.
“Good growth was observed across dairy, bakery, savory and beverages. The reopening of economies led to higher sales for food services.”
Consumption patterns during lockdown have an observed shift, with companies tailoring to NPD. Nonetheless, food commodity prices continue to soar, while in the UK, manufacturers are wary about the risk of passing on the cost increases of rising inflation to consumers.
Additionally, Personal Care & Aroma delivered “very strong growth” driven by demand for skin, hair care and fine fragrances as consumers emerged out of lockdowns.
Reaping megatrends impact
In line with its unchanged outlook, DSM expects its Health, Nutrition & Bioscience activities to deliver a high-single digit adjusted EBITDA increase.
For the group, it expects a mid-single digit adjusted EBITDA increase, with a high-single adjusted net operating free cash flow increase. This outlook is based on DSM’s expectation of a stable adjusted EBITDA in Materials following the strong performance in 2021.
“DSM’s growth in Q1 has been the result of demand across all our businesses. This is a consequence of a number of global megatrends around a growing population, the necessary transformation of the world’s food supply and a growing public realization of the need to be proactive about our health and the health of the planet,” the spokesperson adds.
By Andria Kades with additional reporting by Olivia Nelson
