DSM Earnings Per Share to Increase to EUR 5-7 by 2002 Through Autonomous Growth, Portfolio Shift and Operational Excellence.

HEERLEN, The Netherlands--(BUSINESS WIRE)--Sept. 30, 1999--

Peter Elverding, Managing Board chairman of DSM N.V., the Dutch chemicals group, will speak today at an analysts' conference.

"We expect DSM's earnings per share to rise to a level between EUR 5 and EUR 7 by 2002. This increase will be achieved through autonomous growth at a rate of 6% per year on average, a further portfolio shift towards activities with more stable results and our Operational Excellence program, which should create added value in the order of EUR 275 million." This forecast is to be made by Mr. Elverding, chairman of the Managing Board since July 1 this year, at a conference for financial analysts to be held today.

Here is a preview of Mr. Elverding's statement to the analysts regarding the company's strategy for achieving profitable growth.

One of DSM's strategic objectives is to increase its earnings per share. The forecast of an EPS level of EUR 7 by 2002 is based on the assumption that economic conditions will be as good as in the period 1995-98. In this period, the company's EPS averaged EUR 4. If, however, economic conditions in 2002 are the same as in the first half of this year, the EPS level is expected to rise to EUR 5 by 2002.

Autonomous growth

The company's earnings per share will increase as a result of an autonomous volume growth of 6% per year on average (based on the investment program for the period 1998-2002), combined with increased focus on leadership positions. Any additional volume growth would have to be realized through acquisitions. In how far DSM can make acquisitions will, of course, depend on the opportunities that present themselves and on the price to be paid.

Portfolio shift

Last year DSM realized a major portfolio shift towards activities with more stable results by acquiring Gist-brocades. The Gist-brocades activities now form part of DSM's Life Science Products cluster. DSM wants to achieve a further portfolio shift towards Life Science Products and Performance Materials through autonomous growth and especially acquisitions.

DSM's performance target for the integrated DSM and Gist-brocades activities - the Life Science Products cluster - is a doubling of the operating result to EUR 300 million. The results of four of the five business groups in the Life Science Products cluster are developing according to plan. However, market conditions for penicillin (DSM Anti-Infectives) are difficult and this may mean that it will take DSM somewhat longer to achieve the targeted doubling of the operating result. DSM does not expect this situation to improve in the short term. Preparations are now under way for structural measures to improve profitability, such as cost reductions, further integration of production sites and technological improvements.

Operational Excellence

DSM hopes to generate EUR 275 million worth of extra value in the Performance Materials and Polymers & Industrial Chemicals clusters by the year 2002 via an Operational Excellence program. This translates to a net contribution of EUR 1 to earnings per share. As a result of this program, about 1,000 DSM jobs worldwide are expected to become redundant over the next three years. However, in view of transfer possibilities and natural wastage DSM does not expect any major problems in this area.

The Operational Excellence program comprises projects aimed at improving results and enabling better utilization of synergy opportunities and greater sharing of know-how and experience by the DSM business groups. Examples of Operational Excellence projects are: `Manufacturing Excellence', which is aimed at achieving higher capacity utilization rates, more efficient processes and standardization; `Coordinated Sourcing', which seeks to improve synergy in the field of purchasing; and `Order-to-Cash', which is expected to upgrade DSM's entire sales process, using Information & Communication Technology.