DSM: EBITDA Falls 24% on Challenging Market Conditions in Animal Nutrition

Narrow-moat DSM DSM reported first-quarter EBITDA of EUR 278 million, down 24% versus the prior-year period, but in line with Vara consensus. Animal nutrition appears to be the main source of the decline due to low vitamin prices, especially vitamin A, and soft demand in China. Both health, nutrition and care and food and beverage maintained healthy margins due to pricing initiatives. Volumes were down 8% for the group while prices increased 1% overall, despite a 4% decline in the animal nutrition segment. Challenging market conditions are expected to remain in the second quarter, but some improvement is anticipated in the second half of the year. Given the pending completion of the merger with Firmenich, the 2023 outlook will be updated with second-quarter results. We don’t expect to make a material change to our EUR 150 fair value estimate. At current levels, the shares look undervalued.