Cycle avoidance is key as DSM shifts gears
15 Jan 2000
Dutch chemical major DSM is continuing its shift towards the low-volume, high-value end of the chemicals industry, a move it began last year with the acquisition of Gist-brocades. The company's board hopes to grow the company by 6 per cent each year to 2002 as a result of the portfolio shift - a policy which will see around 1000 jobs lost.
Historically, DSM's production portfolio has been based around bulk commodity chemicals, and its performance has been marked by the heavy cyclical swings that characterise these markets. Its chairman, Peter Elverding, is now aiming to shift the company's activities towards more stable, higher margin life science and performance materials.
Gist-brocades has been absorbed into the `life sciences cluster', whose operating profit DSM plans to double to E300million. So far, four of the cluster's five businesses are `developing according to plan,' says Elverding, but the fifth, anti-infectives, is suffering from difficult conditions in the antibiotic market.
Further growth will depend on `structural measures,' Elverding says. These will include cost reduction, integration of production sites and development of more efficient process technologies.
The job losses will come in the performance materials business, with 1000 redundancies projected over the next three years. All of these will be accomplished by transfers and natural wastage, the company says. As a result of this, Elverding expects to cut the division's costs by E275million per year.
