NETHERLANDS – In its latest business report, DSM-Firmenich’s Taste and Texture and Health (TTH) segment reported a 5% decline in organic sales in Q3.

Enzymes, Cultures, and Texturing Solutions demonstrated solid organic growth. However, the company noted that Vitamins and Yeast Extracts were experiencing weakness.

Despite strong pricing, the impact of record low vitamin prices and soft volumes, attributed to destocking and a strategic decision to discontinue low-margin products, including vitamins, took a toll on the business.

Dimitri de Vreeze, CEO at DSM-Firmenich, acknowledged the challenges and stated, “In the current global economic environment, we are working hard to mitigate the effects through strong internal actions. We are driving a broad range of self-help measures, with the largest contributor being the vitamin transformation program. In addition, we have pushed harder on cash flow, a key priority for us, and have seen good improvements this quarter.

TTH demonstrated resilience, with Taste, Texture & Health businesses weathering the challenging environment. 

However, destocking and continued pressure on vitamin prices, particularly affecting Animal Nutrition and Health (ANH) and Health, Nutrition, and Care (HNC) segments, remained a concern.

Regarding the company’s outlook for 2023, a pro forma basis estimation indicates an adjusted EBITDA of approximately €1,800 million (US$1,914 million). This estimation includes the impact of low vitamin prices and unfavorable foreign exchange effects. 

To address these challenges, the company has initiated a series of actions focused on enhancing the profitability of its vitamin activities and reducing exposure to price fluctuations.

The vitamin business transformation program, featuring a €200 million (US$212 million) cost reduction initiative, encompasses measures like plant closures, route-to-market simplification, and optimized service levels. 

The impact of these efforts is reflected in a 7% organic sales decline, with pricing down by 1% and volumes down by 6%, considering the negative effect of vitamin prices. Without this effect, prices would have increased by mid-single digits, and volumes would have decreased by low single digits.

TTH includes Taste, which offers flavors, natural extracts, sweetener solutions, and plant-based proteins, and Ingredients Solutions, which comprises food enzymes, textures, cultures, natural colorants, nutrients, and yeast extracts.

Despite the challenging conditions and a 5% decline in organic sales, TTH delivered a resilient performance. The adjusted EBITDA reached €134 million (US$142.5 million) and was influenced by a negative foreign exchange effect of approximately 6%. 

However, when excluding this effect, the adjusted EBITDA showed a 1% increase.

While HNC and ANH segments faced difficulties due to low vitamin prices, they continued to play crucial roles in improving health, enhancing diets, and sustaining animal farming practices. HNC focuses on providing critical nutrients to individuals, optimizing immunity, and driving medical innovation. 

Meanwhile, ANH supports the efficient and sustainable delivery of animal proteins while promoting transparency in animal farming practices.

In conclusion, despite the ongoing challenges, global animal protein consumption remained resilient, driven by the poultry sector. Demand in China stabilized, albeit with a slower recovery than anticipated. 

However, the destocking of animal protein continued to impact the global feed additive marketplace, with ANH facing particularly challenging conditions due to low vitamin prices and oversupply. 

Organic sales for ANH declined by 13%, while performance solutions showed strength, benefiting from farmers’ focus on feed efficiency and yield management.