DSM to reduce 1,100 jobs amid slowdown

Royal DSM NV plans to cut as many as 1,100 jobs as a market slowdown prompts Chief Executive Officer Feike Sijbesma to cut costs at the Dutch maker of nutritional products, only months before he will update investors on his strategy for the nutrition division.

DSM, based in Heerlen, the Netherlands, said on Tuesday that it will eliminate 900 to 1,100 jobs by the end of 2017. The reduction, equal to about 5 percent of the workforce, will generate 125 million euros ($144 million) to 150 million euros in savings, while costing 150 million euros to 175 million euros.

Sijbesma is mid-way through putting together his next strategic plan for the company, to be announced on Nov 4. He announced his last strategic plan in 2010 and updated it in 2013.

The blueprint will need to extract greater synergies from acquisitions, and go someway to appeasing investors such as Third Point LLC, which advocated a split of the nutrition and performance materials division to unlock value.

The job cuts make sense, "if you see how much sales they have divested", said Joost van Beek, an analyst for Theodoor Gilissen Bankiers. Van Beek highlighted the recent plastics joint venture with CVC Capital Partners, which DSM does not have to support with its own employees anymore.

The CEO, now in his ninth year in charge, will focus his November update on nutrition, though Sijbesma has tempered any expectations of a breakup of DSM, saying a split is "something he rarely talks about".

Margins in nutrition narrowed to 16.7 percent in the second quarter of the year, compared with 20.7 percent in the year-earlier period.

The analyst also points to China as a key topic for the update as DSM generates 12 percent of its sales in the country, where the yuan is weakening and the economy is slowing down. The company faces increased competition in vitamin E manufacturing in China.