DSM raises vitamin and carotenoid prices
carotenoids on a worldwide basis, as a result of increasing energy,
raw material and transportation costs.
The company has said that it has taken steps to compensate for these rising costs, but these have been only partially successful, leading to "unsustainable situations". The worst-hit areas are the fat soluble vitamins and carotenoid product range.
It has given no indication of the level of the increases, which will be effective as of April 1, but has said that the new prices will be communicated to customers in due course.
Vitamins manufacturing as a whole has come under increasing price pressure in recent years from Chinese suppliers entering the market.
While such increases might possibly compound the problem for DSM, the underlying issues are affecting the whole manufacturing sector. And DSM is by no means the only player in the sector to be forced to raise prices. For instance, Lonza recently announced price increased for niacin (vitamin B3), as has US-based Reilly Industries. The main raw materials required for niacin production are derived from petrochemicals.
Moreover, DSM has worked hard to position itself on quality assurance, which will be appreciated by China-wary customers in from the US and Europe - thereby justifying higher prices than Chinese competitors.
Since BASF announced that it is ceasing production of vitamin C in December, DSM is now one of the only Western vitamin C producers left standing. Last year it sought to tackle price pressure in this area head on by ceasing production at its plant in Belvidere, New Jersey, and concentrating its extra-China production in Dalry, Scotland. It has also entered into a partnership for vitamin C with the North China Pharmaceutical Group Corporation.
At the financial results conference in at DSM's headquarters in Heerlen, The Netherlands, in January, Feike Sijbesma, CEO of DSM Nutritional Products said that vitamin E and carotenoids are also feeling the squeeze from overseas. He did not discount the possibility of the future action to counter this.
DSM Nutritional Products has reported operating profit of $252 million in full year 2005, up 25 per cent on 2004. Net sales, including intra-group supplies, were $1.95 billion compared to $1.91 billion.
Sijbesma said that margins were affected by the price pressure, but the division is shifting its emphasis away from traditional, mature vitamin in favour of new products, which now make up 20 per cent of its portfolio. These include TeaVigo green tea extract and Bonistein high-purity genistein.
