After a quarter in which its animal health and nutrition business was confronted with low vitamin prices, soft demand for animal protein in China, and continued high input prices, DSM is counting on improved prospects in the second half of the year.
In a conference call accompanying the release of its quarterly trading update earlier this week, executives explained why such an upturn should be expected. For one thing, there is the recovery of Chinese demand to look forward to. Co-CEO Geraldine Matchett asserted the company’s belief that “consumption will pick up… [it’s] difficult to call out the African swine fever impact, but we really would be expecting to see an improvement when it comes to the dynamics in China for, in particular, swine, [keeping in mind] that China represents about 50% of the global swine demand.”
Beyond that factor, the company is anticipating a “normalisation” of vitamin A pricing, for two reasons. First, referring to the public statements of other vitamin producers, Dimitri de Vreeze, co-CEO of DSM stated: “today on vitamin A, nobody is making any money at these prices.” Second, he judged that the market is nearly finished working through a glut of vitamin A stock: “BASF is close to selling off all their produced stock when they were coming back, which is running out of shelf life, and that will also roll out and fade out throughout 2023.”
In terms of the utilization of DSM’s own vitamin production assets, de Vreeze noted that production in Sisseln had been shut down from November through late February, and added “we are now preparing a further shutdown during the summer period where we will prioritize our production to supply our human business, which obviously is a far higher added value business in that sense, and also premix and formulation.”
He also commented that “the majority of the vitamins are profitable.” While vitamin A is going through what he calls “a special situation which will normalise,” the portfolio also includes other vitamins. “Vitamin E is a completely different story, vitamin E has different dynamics. Supply and demand are relatively in balance. Obviously, it’s also a bit impacted by the soft demand in China, but supply and demand is nicely in balance.”