Base Chemicals and Materials
The Base Chemicals and Materials cluster consists of DSM Agro, DSM Melamine, DSM Elastomers and a number of activities that have been carved out from other clusters.
DSM Agro produces fertilizers and is active in Northwestern Europe. DSM Melamine is the world’s largest producer of melamine, used in wood-based panels and laminates for furniture and flooring. DSM Elastomers manufactures synthetic rubbers (EPDM) for use in cars and other transportation vehicles, white goods, various industrial products and construction materials and as motor-oil additives.
x € million 2009 2008 Net sales: DSM Agro 338 578 DSM Melamine 151 200 DSM Elastomers 387 469 Other 258 325 Total 1,134 1,572 Operating profit (68) 174
Operating profit plus amortization
and depreciation 2 245
Capital expenditure and
acquisitions 78 82
Capital employed at 31 December 730 904
ROCE (8.3) 21.1
EBITDA as % of net sales 0.2 15.6
R&D expenditure 16 22
Workforce at 31 December 1,846 2,305
DSM Agro
DSM Agro is a producer of ammonia and high-nitrogen fertilizers for grasslands and agricultural crops; products and services for responsible fertilization. In agriculture, nitrogen is the prime determinant of crop growth and yield.
DSM Agro is the market leader in the Netherlands and ranks among the market leaders in Germany, France and Belgium. DSM Agro operates production sites at Sittard-Geleen and – until the end of 2009 – IJmuiden in the Netherlands. DSM Agro sells about 2.4 million tons of fertilizers per year, which includes a part of the ammonium sulfate produced by DSM Fibre
Intermediates. DSM Agro also produces products that serve as raw materials for products of other DSM business groups. In March 2008 DSM Agro reached agreement with the Dutch government on the termination of ammonia transport by rail between Sittard-Geleen and IJmuiden by 31 December 2009. As a result of the termination of these transports, the site in IJmuiden lost its reason for being. DSM therefore closed the site at the end of 2009.
In 2009, DSM Agro was once again faced with volatile business and market developments. The record profitability over 2008 sharply reversed into a loss in Q2 2009 as a result of much lower prices. In the latter part of the year, results recovered but remained considerably below those of 2008.
DSM Melamine
With a market share of over 15%, MelaminebyDSM™ is the leading global melamine brand. The main application of melamine is in wood-based panels and laminates used for furniture and flooring. It is also used in car paints, durable melamine tableware and flame retardants. The growing number of consumers in emerging economies, notably China, is driving demand.
Melamine is used in impregnating resins and adhesive resins for the wood-processing industry. It boosts the scratch, moisture and heat resistance of laminates. Melamine can be combined with softwood from fast-growing trees to obtain high-quality panels that can replace hardwood. The growing scarcity of hardwood is boosting the use of melamine. Stricter legislation on emission of formaldehyde is expected to have a positive impact as well.
The product is also used in paper money, glossy magazines, ice hockey sticks and printed textiles. The market for melamine is growing at an average rate of 4% per annum. Several new plants are being built in China. Total capacity in China still exceeds local demand. In addition, new world-scale plants will be built in areas with low-priced natural gas in the next few years.
DSM Melamine has plants in Sittard-Geleen (Netherlands), Pinglu and Jishan (China), and Bontang (Indonesia). The Chinese melamine is produced by Shanxi FengHe Melamine Co. Ltd., a joint venture with Shanxi Yangmei Fengxi Fertilizer Industry (Group) Ltd. (DSM 49%). The plant in Indonesia is a joint venture (DSM 60%) with P.T. Pupuk Kalimantan Timur and P.T. Barito Pacific Lumber Company.
The business group had a difficult first half of 2009. Lower demand together with de-stocking in the value chain
downstream industry put pressure on sales volumes. Also, sales prices declined, more than those for raw materials, resulting in losses in the first half year.
In the second half of the year, there were some signs of a recovery (mainly in Asia). Supply was scaled down in the industry to meet the current – lower – demand levels.
DSM Elastomers
With a market share of around 16%, DSM Elastomers is one of the global market leaders in EPDM (Ethylene Propylene Diene Monomer) rubber under the brand name Keltan®. It is also the
number two player in the market for EPDM-based – fully vulcanized – thermoplastic elastomers (TPVs). DSM sells these TPVs under the brand name Sarlink®.
Production plants for Keltan® are based in Sittard-Geleen
(Netherlands) and Triunfo (Brazil). Plants for Sarlink® are found in
Genk (Belgium) and Leominster (Massachusetts, United States). Keltan® EPDM is used in cars and other transportation vehicles,
white goods, various industrial products and construction materials and as a motor-oil additive. It is also used as a waterproof covering for roofs.
DSM maintained the position of Keltan® as the global innovative
leader in the EPDM market in 2009. The first EPDM grade manufactured using Keltan ACE™ technology was introduced. This technology enables DSM to produce products with a high amount of VNB (2-vinyl-5-norbornene) as a third monomer, which is unique in the world of EPDM.
Despite the economic downturn, the business group maintained its innovation strategy, as illustrated by the development and launch of six new Keltan® grades.
Sarlink® TPVs are used in a wide variety of applications including
automotive, consumer electronics, electrical, food, building, medical and industrial applications.
DSM Elastomers was severely influenced by the economic downturn but showed a recovery from the bottom reached in Q1 2009. As a result of a pickup in volumes, DSM Elastomers’ operating profit approached a level comparable to last year. Fixed-cost saving programs contributed considerably to the result.
Other
The Base Chemicals and Materials cluster also includes several activities that have been carved out from other clusters. These include Citric Acid, DSM Special Products and the Maleic Anhydride and derivatives business. These activities together achieved a higher operating profit and lower sales in 2009.
Review of business
Other activities
Other activities comprises various activities and businesses that do not belong to any of the five reporting clusters. It consists of both operating and service activities and also includes a number of costs that cannot be logically allocated to the clusters. Other activities includes the DSM Innovation Center, DSM Venturing and a number of other activities such as Sitech Services, EdeA, DSM Insurances and part of the costs of corporate activities. They normally have a negative operating result.
x € million 2009 2008
Net sales 381 436
Operating profit (189) (135)
of which:
- Defined benefit plans (75) (3)
- Innovation Center (54) (59)
- Other (60) (73)
Operating profit plus amortization
and depreciation (122) (80)
Capital expenditure and
acquisitions 80 188
Workforce at 31 December 3,454 3,385
DSM Innovation Center
The DSM Innovation Center has been set up to facilitate the
Vision 2010 change program towards an intrinsically innovative
organization. To the extent that costs of the DSM Innovation Center cannot be directly allocated to clusters, they are reported in Other activities. A comprehensive description of the activities of the DSM Innovation Center is provided in the Innovation and R&D chapter starting on page 28.
DSM Venturing
DSM Venturing participates in external start-up companies or funds and is constantly on the lookout for investment opportunities in innovative businesses or technologies in the fields of Life Sciences and Materials Sciences. DSM Venturing plays an important part in DSM’s open innovation policy and invests in activities that are of immediate or potential relevance to DSM. In addition to direct investments DSM Venturing is also involved in a number of venture capital funds. For more information see the Innovation and R&D section on page 28.
Sitech Services
Sitech Services was founded on 1 September 2008, combining DSM Manufacturing Services, Chemelot Park Protection and Chemelot Infra. Services provided include technological consultancy, expertise in energy and auxiliary materials, the supply of utilities and human resources.
EdeA
EdeA VoF owns, operates and maintains most of the production and distribution facilities for utilities (for example steam, power and water) at the Chemelot site in Sittard-Geleen (Netherlands). EdeA VoF is a joint venture with Essent, an energy production and distribution company. DSM’s stake is 50%.
Corporate activities
Various holding companies and corporate overheads are reported in Other activities. The most important cost elements in this respect are related to defined benefit pension plans and share-based compensations for the group.
DSM Insurances
DSM retains a limited part of its Property Damage and Business Interruption and Product Liability risks via a captive insurance company. Damages incurred in 2009 were very limited. Defined Benefit Plans
The costs for Defined Benefit Plans are not allocated to the clusters, because objective allocation criteria are lacking. A substantial part of the defined benefit liability relates to former employees.
Associates
DSM has a share in a limited number of associates. Their contribution to the result was negligible.
Discontinued activities
DSM completed the disposal of DSM Energie Holding B.V. (DSM Energy) to TAQA Abu Dhabi National Energy Company PJSC on 30 September 2009. The disposal consisted of the participations which DSM had in oil and gas exploration and pipelines, including the 40% participation in Noordgastransport B.V. The related activities are reported as discontinued operations. Before reclassification the activities were reported in the Base
Chemicals and Materials cluster and Other activities, respectively.
On 6 October 2009 DSM completed the agreement with Maire Tecnimont S.p.A. for the disposal of DSM's urea-licensing subsidiary Stamicarbon B.V. The activities are reported as discontinued operations. Before reclassification Stamicarbon B.V. was reported in the Base Chemicals and Materials cluster.