UPDATE 2-DSM Q3 oper profit below fcast, lower margins hurt

* Operating profit 185 mln euros vs forecast 204 mln

* Says margins hit by rising raw materials prices

* Reiterates 2010 outlook for strong year

* DSM shares down 2.3 pct

(Adds details, shares)

By Aaron Gray-Block

AMSTERDAM, Nov 2 (BestGrowthStock) – Dutch chemicals group DSM
(DSMN.AS: ) reported third-quarter operating profit at the low end
of estimates, ending a run of positive earnings surprises, as
margins came under pressure from rising raw materials prices.

DSM, which supplies products to the cyclical electronics and
automotive markets, said its margins came under pressure because
of a time lag in passing on higher raw materials costs,
particularly at its engineering plastics and resins business.

Chief Financial Officer Rolf-Dieter Schwalb said the company
wanted to raise its prices, but added it was not always easy to
renegotiate existing contracts.

“No customer likes price increases so it is always a tough
discussion, but we are pushing it and we are also successful in
doing it. How long it will take … you cannot say because raw
materials prices continue to move,” Schwalb told reporters.

The world’s largest vitamins maker reported third-quarter
earnings before interest and tax (EBIT) of 185 million euros
($257.9 million), missing the average forecast of 204 million in
a Reuters poll and just above the lowest estimate of 184
million.

In the year-earlier period, DSM had restated EBIT of 144
million euros.

ABN Amro analyst Mark van der Geest said DSM’s results were
“disappointing” and cited weaker-than-expected figures at its
nutrition unit, which reported EBIT of 137 million euros — in
line with estimates but below Van der Geest’s forecast.

Earnings at the nutrition unit, which makes vitamins and
food ingredients and operates from Switzerland, were hit by the
strengthening of the Swiss franc in the third quarter, but DSM
expects this effect to subside in the fourth quarter.

DSM shares fell 2.3 percent to 37.62 euros at 0807 GMT to
underperform a flat STOXX Europe 600 Chemicals (.SX4P: ).

TWO-TRACK GROWTH

European chemicals companies have reported strong increases
in earnings over recent quarters, boosted by growth in Asia and
cost cuts, but economic worries still persist, particularly in
light of a moderate recovery in the U.S. and Europe.

DSM said it expects further end-market growth, especially in
high-growth economies, but warned medium-term macroeconomic
uncertainties remain. DSM reiterated it expects 2010 to be a
“strong year”.

“We don’t see the economy would really worsen significantly
(in 2011), but will continue to grow at different speeds in the
western world and high-growth economies — mostly Asia, but also
Latin America,” Schwalb said.

Sales rose 19 percent to 2.15 billion euros compared with
the average forecast of 2.14 billion.

Germany’s Bayer (BAYGn.DE: ) got a boost from the recovering
auto industry last week and its underlying earnings beat
forecasts, but Belgium’s Solvay (SOLB.BR: ) took an impairment
because of ongoing construction industry woes. [ID:nLDE69R1OC]

France’s Rhodia (RHA.PA: ), which makes products that end up
in car tyres, sportswear, light bulbs and shampoos, will report
its quarterly results on Thursday.

($1=.7172 Euro)

(Reporting by Aaron Gray-Block and Bate Felix; Editing by
Sara Webb and David Hulmes)

UPDATE 2-DSM Q3 oper profit below fcast, lower margins hurt