NETHERLANDS- DSM-Firmenich has announced that it would accelerate its plans to restructure its vitamin business to improve its performance as the vitamin markets continue weakening, negatively affecting its outlook for the second half of 2023.
“The challenging conditions in vitamin activities have further deteriorated during June, affecting both pricing and volumes, where the company had expected stable to improving conditions in a normally very strong month,” the company said in its most recent trading update.
According to the company, these difficult conditions in vitamins are primarily affecting Animal Nutrition & Health, but also Health, Nutrition & Care to a lesser extent.
Owing to these difficult conditions, DSM-Firmenich expects for the second quarter of 2023, on a pro forma basis, an adjusted EBITDA to be in the range of EUR400 million (US$434.8 million) to EUR420 million (US$456.6 million), which is significantly lower than that of the first quarter (EUR521 million).
With this estimated second-quarter result, the first half pro forma adjusted EBITDA will be in the range of EUR920 (US$998.98) million to EUR940 (US$1020.70) million, compared with EUR1.18 (US$ 1.28) billion in the first half of 2022.
Moreover, the global nutrition specialist holds that it does not expect an improvement in business conditions in the second half of 2023 as vitamin prices are expected to remain at low levels through to the end of the year, with some ongoing destocking through the value chain across its business.
“The vitamin effect has been exacerbated by high vitamin inventories, produced at elevated costs, delaying the expected positive impact from lower input costs in H2 2023,” the company said.
Steps to restructuring
As such, DSM-Firmenich will be setting several restructuring plans in motion to accelerate the post-merger strengthening of its portfolio.
One of these plans includes the closure of the Xinghuo vitamin B6 plant in China and the refocusing of the company’s vitamin C activities on its specialty Quali-C from Dalry, U.K., only to significantly reduce costs.
Another plan involves the exploration of a range of options for the Jiangshan site including partnerships or the repurposing of the manufacturing assets after the production of Vitamin C in the site was completely shut down in mid-May.
Additionally, the company will be creating a new separate vitamin unit within ANH that will be tailored to the changed market dynamics, which will result in a simpler, more responsive “go-to-market” model, and a more efficient and agile organization.
The company will also reduce its working capital, extending shutdowns of the vitamin A and E plants in Sisseln, Switzerland, scheduled for the third quarter of 2023.
To see to it that this restructuring goes well, the company will establish a new senior executive role, vitamin transformation program director, to deliver these performance plans, directly reporting to CEO Dimitri de Vreeze.
According to the company, all these actions are expected to result in an estimated saving of around EUR200 (US$217.48) million per year with the full run rate to be reached by the end of 2024.