DSM achieves record sales and operating profit

Commenting on DSM‘s results, Peter Elverding, Chairman of the DSM
Managing Board, said: “In 2006 we made a flying start in implementing our
strategy Vision 2010 – Building on Strengths.

“We have greatly increased
our innovation efforts and have supported these efforts with selected
acquisitions, which will put us in a good position for future growth. In 2006 we
launched more than 25 new products and applications.

“Economic growth
developed very satisfactorily, but raw-material and energy prices reached
unprecedented levels and were highly volatile, while the US dollar remained
weak.

“Nevertheless, we succeeded in posting a record operating profit
for the second year in a row. This was mainly due to solid volume growth (5%)
and the ongoing efforts to optimize our operations.”

Nutritional
products
In 2007 Elverding expects continued good volume growth, but some
attractive contracts related to the acquisition in 2003 of Roche’s Vitamins
division (now DSM Nutritional Products) will come to an end.

Since
the second part of 2006 DSM faced intensified competition in some of the more
mature parts of DSM Nutritional Products’ portfolio. DSM as the market leader
has deliberately chosen to defend and further strengthen its market position
even at the expense of margins.

Vision 2010
DSM’s new strategy
program Vision 2010 – Building on Strengths focuses on accelerating the
profitable and innovative growth of the company’s specialties portfolio. The
overall objective is strong value creation.

In market-driven growth and
innovation DSM devoted significant additional resources to innovation. The
additional spend in 2006 amounted to more than € 25 million. A considerable
number of new products and new applications of existing products were introduced
in the market.

As part of its open innovation policy DSM acquired CRINA, a pioneering company in plant extracts used as feed
additives, and acquired full ownership of LTP, a company with a technology
platform based on formulated lipids.

Business review
Nutrition
Full-year sales in this cluster were at the same level as last
year. Higher organic sales volumes were offset by the negative effects of lower
selling prices and exchange rates and the contractual phasing-out of the phytase tolling activities.

All businesses in this
cluster faced higher costs for energy and raw materials. Compared to 2005, both
Animal Nutrition & Health and Human Nutrition & Health in DSM
Nutritional Products achieved solid volume growth at lower prices.

DSM
Nutritional Products’ operating profit decreased slightly because higher volumes
did not fully compensate for higher innovation expenditure and negative price
effects. DSM Food Specialties’ sales and operating profit decreased due to the
contractual phasing-out of the phytase tolling business.