DSM unveils new strategy

Dutch group DSM unveiled a new strategy on Thursday, targeting higher sales in China and more emphasis on specialty chemicals but disappointed investors by refusing to commit to a cash return.
The world's largest vitamin maker said it would only consider a share buyback from the second half of 2006 despite calls from investors for a share of the fruits of DSM's previous strategic programme.
DSM's five-year transformation dubbed "Vision 2005", which sharpened its focus on specialty chemicals and reduced exposure to cyclical commodities, has by most measures been a success, analysts say, and it could have billions of euros to hand back.
The firm now boasts a light debt load and analysts say its specialty chemicals units are outperforming some rivals because it supplies high-growth markets such as pharmaceuticals, electronics and nutrition, and is not focused on paper, textile and leather markets like Ciba or Lanxess.
DSM had 650 million euros in cash on hand at end June and it will free up more as it moves its gearing from around zero now to the 30 to 40 percent that CFO Henk van Dalen is targeting.
But Van Dalen said before DSM returned money to shareholders, it would spend the next six to nine months deciding how much was needed for acquisitions. "After that we can decide what is left over," he told a news conference.
"We believe this statement contains elements to please both bulls and bears in DSM ... The lack of a firm commitment (to a cash return) will disappoint the market," said Petercam analyst Jan van den Bossche.
"We remain, however, convinced that in case business environment does not deteriorate drastically, DSM will have no other option than to engage in a share buyback."
Chief Executive Peter Elverding, however, said share buybacks were not a key point in DSM's new strategy.
"Our objective is to build shareholder value," he told a press conference. "Our objective is to build shareholder returns in excess of the average of our colleagues in this sector."
Shares in DSM, which traces its roots back to the Dutch State Mines founded a century ago, were down 1.7 percent to 32.24 euros by 1130 GMT, in line with the DJStoxx chemicals index, which lost 1.9 percent.
But market players said DSM's new vision offered reasons for optimism, including plans to double sales in China by 2010 to $1 billion and for underlying sales growth of 3-5 percent per year.
DSM also raised its forecast for the third quarter, now expecting earnings before interest and tax (EBIT) at around 40 percent above the 153 million euros posted a year before.