3. ACCIONES EN EL C.P SAN JUAN DE LA CADENA
3.2 Un marco de actuación en el centro escolar
DSM Nutritional Products amount to 24% of DSM's
overall net sales.
The VITAL project
The VITAL project was continued, as planned, by defining the strategy and new organizational outline of DSM Nutritional Products. In 2004, the focus had been on improving profits by reducing costs and on unbundling DSM Nutritional Products from its former parent company, the Roche Group, and integrating its systems, people and culture into DSM. In 2005, the project on Profitable Growth focused on improving the quality of profits and creating new options for growth and developing innovation management, while the running improvement programs and the unbundling/ integration efforts were continued. To capture the full innovation potential, DSM’s R&D model was introduced in research & development. In the second half of 2005, the Innovation Engine was started. The aim of the Innovation Engine is to bring high added-value, innovative products to market faster. It speeds up the selection, funding, development and testing process for new products and formulations.
Most of the outcomes of the three-stage VITAL project have been handed over to the line organization of DSM Nutritional Products to ensure that the achievements can be sustained. During the third stage of the VITAL project the organization focused on certain strategic issues, among other things on the concentration of vitamin C production in Dalry (United Kingdom), and it was announced that as a consequence vitamin C production in Belvidere (USA) would be discontinued.
DSM Nutritional Products is now an integral part of DSM’s core business and has contributed to the company’s operating profit from day one. The VITAL project will contribute approximately € 200 million in total by the end of 2006, thus exceeding the original target of € 150 million. The
contribution mainly results from reduced staff levels, global efficiency improvements, lower cost of purchased goods and gains in the aforementioned program focused on profitable growth. The planned closure of the Belvidere bulk vitamin C plant in 2006 and the newly formed alliance with North China Pharmaceutical Group Corporation represent steps in the strategic
repositioning.
From 2006 onwards, the integration of DSM Nutritional Products and DSM Food Specialties in a new Nutrition cluster and intensified cooperation with external organizations will allow for new
opportunities for innovative products. In 2005 DSM Nutritional Products defined its Dual Track strategy to improve and strengthen existing products and at the same time fully boost innovation and new business development. The new strategy offers business partners continuity as well as new opportunities to develop and exploit additional applications, while drawing on DSM Nutritional Products’ strengths in R&D, manufacturing and marketing & sales. To further support the implementation of the new strategy, the organizational structure has also been aligned. It is centered around two operational units allowing for a sharper focus on the two key industries – Human Nutrition & Health and Animal Nutrition & Health – and a new unit, New Business Development, fostering a broader and more intense approach to innovation.
Business Review
DSM Nutritional Products strengthened its position as the leading player in the market for nutritional ingredients, recording sales of € 1.9 billion and an operating profit of more than € 250 million. Despite the increase in new product growth, overall sales were generally stable due to the price pressure on some carotenoids and mature vitamins, such as vitamins E and C. Volume growth compensated for the price erosion at net sales level. DSM Nutritional Products’ approach of focusing on differentiation in customer products started to have effects. Recently launched products performed well and accounted for some 10% of aggregate sales, with recently launched forms contributing about 20%.
Human Nutrition & Health
The global food market was stable and saw a continued trend towards functional foods and dietary supplements. Functional food concepts are proving increasingly popular in the nutritional products sector, a trend that ties in well with DSM Nutritional Products’ strategy. Due to seasonal effects in Europe and local trends in the US, sales in the pharma segment were not as strong as in 2004. In Human Nutrition & Health, DSM Nutritional Products strongly increased sales of new products such as Lafti®, Optisharp and Teavigo®. Lafti® is a probiotic addressing gut health and well- being. Lafti® strains can strengthen the natural defense in athletes and reduce the overall severity of gastro-intestinal disturbances while showing excellent survival in the human gastro-intestinal tract. The range of Lafti® probiotic strains forms a complete package, offering targeted health benefits for functional foods or dietary supplements. Globally, probiotics is a rapid growth segment in the supplement market, and the range of different Lafti® strains offers excellent opportunities for growth. Teavigo®, now globally launched, showed significant growth. Many new beverages, food and dietary supplement products containing Teavigo® are being launched world-wide. In the second half of 2005, DSM launched Bonistein®, a high-purity genistein produced by a patented process. Genistein is a major health-beneficial component of soy. Bonistein® is a nature- identical health ingredient that helps prevent weakening of the bones.
DSM Nutritional Products launched a new program focusing on markets such as Africa, India and China: the Nutrition Improvement Program (NIP). The Program will mainly serve the developing markets as a sustainable business for the future of DSM
Section 2 Review of business
Life Science Products DSM Nutritional Products Performance Materials Industrial Chemicals Other Activities
Animal Nutrition & Health
Significant above-average volume growth and further price decreases affected the Animal Nutrition & Health business. The swine business had a good year globally in 2005, experiencing normal market growth. By contrast, the poultry business, after recovering in early 2005, was confronted in the second half of 2005 with the reappearance of avian flu, which may have an impact on consumer confidence in poultry meat, although this has not yet affected our sales.
In the aquaculture market, the Norwegian salmon industry was impacted in the first half of the year by European import tariffs, affecting salmon farmers’ sales. Salmon prices remained strong in the second half of 2005, partly due to a tightening of salmon supplies. The Chilean situation was similar, with forecast supplies not meeting actual supplies, mostly due to disease problems in the freshwater phase resulting in fewer salmon entering the sea for production. Although salmon production was flat for 2005 compared to 2004, DSM Nutritional Products maintained its leadership position in supplying key products to the
aquaculture industry.
Review of business
DSM Nutritional Products
DSM Nutritional Products continued to see substantial sales growth in new products for Animal Nutrition and Health. Hy-D®, used by poultry farmers to improve bone health and animal performance, was distributed on a global scale. Feed enzyme products sold under the brands of Ronozyme® and Roxazyme® continued their excellent performance despite increased competition in various markets. In particular activities focusing on eubiotics, products that improve animal performance by gut flora modulation, enjoyed further growth. This growth was mainly fueled by the ban on antibiotic growth promoters, to be implemented early 2006. DSM Nutritional Products’ eubiotics portfolio includes VevoVitall®, Cyclatin and
MicroSource, which all achieved substantial growth. VevoVitall® is an organic acid that is used as a replacement of antibiotic growth promoters in the European, Latin American and Asian markets. It is a very successful product offering new ways for pig farmers to reduce ammonia emissions and improve performance of pigs. In Europe it is currently registered for use in growing and fattening pigs.
Personal Care
This segment saw strong volume growth, with leading cosmetics manufacturers on the lookout for active ingredients for skin, hair and oral care. Parsol®SLX, a new generation of UV-B filters, was well received by leading sun care manufacturers. In 2005, DSM Nutritional Products expanded its portfolio by introducing three new products, the two UV-filters Parsol® EHS and HMS and the skin care active Allantoin. Stay-C® 50, a stable form of vitamin C, made further progress in the skin care market, particularly in Asia where it showed exceptional growth.
Projects
In 2005, DSM took various steps to build a successful future for its Nutritional Products business and to underline its position as the world’s leading producer of vitamins for the food, pharmaceutical and personal care industries. New product forms were successfully launched, such as Rovimix® A- 1000 for the animal nutrition market. For the food and dietary supplements market lutein CWS/S-TG was launched to expand DSM’s animal-free ingredients portfolio. This portfolio already includes animal-free product forms of beta-carotene, vitamin A, vitamin E, vitamin D3, ALL-Q® (Coenzyme Q10) and Optisharp® (zeaxanthin). With this launch DSM is meeting the growing market needs and consumer requirements for animal-free ingredients.
In Dalry (Scotland, UK), DSM Nutritional Products will implement an extensive package of measures to optimize its vitamin C production, leading to considerable cost reductions and improved supply chain flexibility. Dalry is one of the last larger Western plants producing high-quality vitamin C, which fits in with the increasing demand for high-quality, traceable product grades. DSM also reconfirmed its ambition to secure its leadership position in the field of vitamin C by a strategic partnership with
the (low-cost) North China Pharmaceutical Group Corporation Ltd. In Belvidere, USA, DSM Nutritional Products will invest in an arachidonic acid production-related facility and in Grenzach, Germany in an upgrade and the integration of the last step of vitamin D3 production. In China, DSM Nutritional Products opened a new joint laboratory with the renowned Fudan University in Shanghai in 2005 to develop new
production processes. Also in China, DSM Nutritional Products will open
a new state-of-the-art feed premix plant and start a new project at its citric acid production site in Wuxi.
VITAL project in 2006
In 2006 DSM Nutritional Products will focus on the completion of the defined
improvement programs. The main topics for 2006 are the last steps in the implementation of performance improvement plans at the Sisseln, Belvidere and Dalry sites, the further enhancement of the plans focused on profitable growth, the implementation of strategic measures and the roll out of the new organization. Several initiatives will be anchored in the already improved marketing and sales organization, with redefined work processes and systems. The integration of the Activity- Based Costing tool and the hand-over to line management of the last remaining measures will be done in parallel with the implementation of the new organization. The business aspirations and related R&D targets for the coming years have been set. The new organizational model for DSM Nutritional Products has been defined and a start has been made on its implementation. Tracking and tracing of the detailed programs by the VITAL project office will be continued throughout 2006. DSM aims to finalize the VITAL project by the end of 2006.
Section 2 Review of business
Life Science Products DSM Nutritional Products Performance Materials Industrial Chemicals Other Activities
Directors of DSM Nutritional Products
Chairman Feike Sijbesma (1959). He combines this position with his membership of the DSM Managing Board
Animal Nutrition & Health Jos Schneiders (1951) Human Nutrition & Health Mauricio Adade (1963) Finance & ICT Geert Mooren (1951) Research & Development Manfred Eggersdorfer (1951) Human Resource Management Alexander Schmid-Lossberg (1959) New Business Development Krijn Rietveld (1956)
Strategy / VITAL project Bruno Müller (1956) Strategic projects Bob Hartmayer (1952)