The Polymer Intermediates cluster consists of DSM Fibre Intermediates. x € million 2009 2008 Net sales DSM Fibre Intermediates 849 1,201 Total 849 1,201 Operating profit 6 19
Operating profit plus amortization
and depreciation 36 43
Capital expenditure and
acquisitions 25 54
Capital employed at 31 December 369 431
ROCE 1.5 4.5
EBITDA as % of net sales 4.2 3.6
R&D expenditure 13 22
Workforce at 31 December 1,321 1,427
Strategic context
Caprolactam – the main product of DSM Fibre Intermediates – is an intermediate primarily used in the production of polyamide 6 fibers and resins. More than two-thirds of caprolactam is used for the production of fibers for textile, carpet and industrial yarns. The rest is used for engineering plastics and packaging films. Polyamide 6 resins are increasingly used in engineering plastics due to a combination of high stiffness and strength at higher temperatures. For example, they can be used to replace metal in automotive applications. Resistance to oil and grease allows these plastics to be used in for instance engine covers and gears. Other applications are for example in technical components for the electrical and electronics and packaging industries. The market for polyamide 6 fibers is mature and has been declining in the western world, with growth in Asia. However, in the engineering plastics market, demand for polyamide 6 resins is growing by about 6% per year. This fast growth of polyamide 6 for engineering plastics is expected to result in ongoing expansions of polyamide 6 polymerization capacity while expansions of caprolactam capacities are lagging behind. Another product of DSM Fibre Intermediates is acrylonitrile. Within this mature market the main growth area is the
acrylonitrile-butadiene-styrene (ABS) market. ABS is increasingly used in the electronics industry (mobile phones, computers, MP3-players) while the automotive industry is also an important market.
A strong advantage for DSM is the backward integration of DSM Engineering Plastics in DSM Fibre Intermediates. DSM Fibre Intermediates supplies important intermediates (caprolactam and acrylonitrile) to DSM Engineering Plastics. As such, the business group provides security of supply and enables growth in all areas, provides margin stability and thus contributes to the success of DSM Engineering Plastics.
DSM Fibre Intermediates
DSM Fibre Intermediates produces caprolactam and acrylonitrile, which are raw materials for synthetic fibers and engineering plastics. Other products include ammonium sulfate (a fertilizer), diaminobutane, sodium cyanide and cyclohexanone.
Key drivers of profitability
• Growth (applications and Asia) • Utilization rates
• Volatility of raw material prices
Key success factors
• Low-cost operations
• Security of sales (excellent global coverage) • Reliable supply, consistently good product quality • Technology leadership
Organization and market position
DSM Fibre Intermediates, with plants in the Netherlands, the United States and China, is the largest merchant caprolactam producer in the world, with a market share of 20%. DSM is a major player in the merchant acrylonitrile market in Europe with a market share of 25%.
DSM’s caprolactam production capacity is more than 600,000 tons per annum (tpa). In addition, the business group produces about 1.2 million tpa of fertilizer (ammonium sulfate) as a co- product.
Total global demand for caprolactam was about 4,500 kt (merchant and captive) in 2009. Global growth is about 1-2% per year, with the United States and Europe being relatively stable and China showing a growth rate of about 5% per year. Caprolactam is the intermediate for polyamide 6, used in dentists’ chairs, hooligan-proof stadium seats, food packaging,
medical packaging, lingerie, sleeping bags, parachutes and tennis racket strings. Polyamide 6 is also the most widely used material in carpets, having excellent resistance to wear, crushing, matting and dirt. It is recyclable.
Polyamide 6 has reached the mature phase of its life cycle, where market demand and selling prices are strongly influenced by supply/demand cycles. It is facing mild competition from other materials, such as polyamide 66, polyester and polypropylene. Acrylonitrile is a raw material used in textile fibers (acrylic or modacrylic), ABS plastics used in automotive, toys and computers, latex rubber, paints, coatings and water-purification products. It is also used in baby-food jar closures.
The business group’s acrylonitrile production capacity is 260,000 tpa. DSM Fibre Intermediates also produces about 25,000 tpa of sodium cyanide, which is used in detergents and in the synthesis of vitamins. It also produces diaminobutane, an intermediate for the engineering plastic Stanyl®.
DSM Fibre Intermediates’ distinguishing characteristics are its process technology, reliability and service. The business group aims to exploit its global cost and technology leadership position in caprolactam while growing its position in China parallel to a further strengthening in Europe and North America in close cooperation with DSM Engineering Plastics, for which
caprolactam is a main raw material. For acrylonitrile the business group aims to strengthen its manufacturing base in Sittard- Geleen (Netherlands).
Developments in 2009
The beginning of the year was characterized by very difficult market conditions as demand in the last quarter of 2008 had weakened strongly in combination with significant customer destocking in anticipation of lower prices following the drop in oil prices and a recession in North America and Europe. DSM Fibre Intermediates responded by temporarily shutting down a number of plants.
The slow demand and lower feedstock costs resulting in a drop in caprolactam prices put pressure on operating profit and margins. In the first two quarters of the year, DSM Fibre Intermediates was loss-making.
The downturn in China and Taiwan was steep but shorter than in other regions. Imports of caprolactam into China started to recover as early as the end of Q1 2009. DSM Fibre Intermediates could quickly increase its sales to Asia, compensating for part of the decline in sales in other regions.
Throughout the downturn, the business group remained close to its customers. This enabled it to quickly benefit from the recovery. The business group became profitable again in Q2 2009 and managed to finish the year with a positive operating result.