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Hef Overloon 1
6400 AB Heerlen
The Netherlands
(045) 788111

Public Company
Incorporated: 1902
Employees: 28,610
Sales: Dfl 15.885 (US$ 7.229 billion)
Market Value: Dfl 14.693 billion (US$ 6.686 billion)
Stock Index: Amsterdam

Near the turn of the century many Dutch companies had tried and failed to establish operations, or even purchase an interest in Hollands energy supply. All coal production, including that within the country and that imported, was held entirely by foreigners. Not only did this leave Holland vulnerable to political and economic changes in other countries, but there was the fear in Holland itself that the continuing exploitation of the coal mining concessions by foreigners would lead to destruction of the local agrarian communities. More experienced in trade than in production and mining, Dutch businesses repeatedly failed to form their own energy companies. For this reason, the government decided to take measures to rectify the situation.

In 1902 the government established Dutch State Mines, a government owned but competitively operated company. The company was run by a politically independent managing board of directors and given full authority to create company objectives based on economic and competitive principles rather than on any state ideology. The company staff was not comprised of civil servants, but was given separate status and pay competitive with that in private industry, enabling the company to attract talented businessmen. The Ministry of Finance was responsible for the overall expenditures of the company, but profits could be retained by the company to finance its own operations. Since 1939 the company has paid taxes on those profits, as well as dividends to the state, the sole shareholder. DSM increased its holdings to include four large mines and two coking plants operated in Dutch Limburg. Soon afterwards, the companys production of anthracite and bituminous coal grew to 12 million tons per year, about two-thirds of all Dutch output.

The company later formed its own coke and gas production business. However, when coke oven gas was no longer used exclusively for the public gas supply, DSM moved into other areas. In 1929 the companys nitrogen works, utilizing the coke oven gas, were established to produce fertilizers. Gradually, DSM began to produce other chemicals. Yet it was the post-war energy shortage that stimulated significant growth for the company through the coal and coke production facilities. After 1945 a large corporate research laboratory was established and the chemical works expanded to include the production of plastics. Up to 1960 DSM remained small internationally, occasionally adding to its production line items such as yarn and fiber feedstocks.

In the 1960s Hollands national government, like many other European governments, was forced to accept the fact that coal was an outmoded energy source, and that it was time to close the countrys collieries and coking plants. The coal and coke operations had given DSM nearly two-thirds of its total sales and profits. However, with this source of its profits gone, this company had to expand its chemical works simply to survive. Therefore, from 1965 to 1979 a major investment program was carried out with two objectivescontinuity of the company and profitability. In 1967 DSM became a Naamloze Vennootschap (an unquoted public limited company). The company was no longer dependent upon the Ministry of Finance, but would have to continue operations on investments from the capital markets. DSM also hoped to enter into joint ventures with other companies, which would not have been easily done if it remained under the Ministry of Finance. The states control was reduced to the appointments of the Board of Supervisory Directors, and to the final approval of company policy.

By 1970 all coal mining operations in The Netherlands had been phased out. During this time, the gas distribution operations were transferred from DSM to N.V. Nederlandse Gasunie. The companys use of coke oven gas was replaced by natural gas and petroleum products for chemical production. In the northern part of Holland there was a supply of naphta gas, and pipelines were constructed to transport this gas inland from Antwerp and Rotterdam on the coast. More pipelines were built to exchange ethylene, an important chemical intermediate, with other companies. In co-operation with a number of Dutch companies, DSM moved into the production of industrial chemicals, plastics, and resins, while spinning off its European fertilizer businesses into a wholly owned subsidiary called Unie van Kunstmestfabrieken (UKF).

With European chemical production becoming extremely competitive during the 1960s and 1970s, particularly in West Germany, DSM concentrated not only on expanding its market share, but on what it could produce from the basic materials obtained from its own cracking installations. DSM also improved its marketing organization by acquiring controlling interests in companies that already had captive markets and by creating a worldwide sales organization. To market its own discoveries from company research laboratories, DSM established another subsidiary called Stamicarbon. Much of DSMs early expansion occurred in the United Kingdom, the United States, Mexico, Brazil, Belgium and West Germany. By 1976 DSM ranked 61st in the Fortune 500 list of non-U.S. firms, employed 32,000 people, and had achieved sales of nearly 10 billion guilders.

DSM presently handles the states 40% interest in the distribution operations of the Dutch natural gas reserves through its subsidiary DSM-Aardgas B.V. Nevertheless, the national government still has direct control over the sale and pricing policy of the gas and retains final power of approval on all export contracts.

In the 1980s management at DSM considers that its major investment and expansion programs are completed, and that work must now begin on streamlining company operations. While continuing to emphasize the production of bulk chemicals, DSM has recognized that sales for these products will grow more slowly in the future, and that the company must increase the number of special and fine chemicals in its product line. With the fall in oil prices and the low dollar, profits for the past two years have been unimpressive but steady. In 1986 sales dropped by 34% in fertilizers, by 25% in chemical products, and by 32% in plastics. However, resins sales did rise by 8%. DSMs operating profits for the year were Dfl 727 million. With this decline in sales, DSM has again increased funds for its research and development division. Quite a number of new polymer blends have been developed, as well as new production techniques. DSM hopes to build its future on these innovations.

Principal Subsidiaries

Columbia Nitrogen Corp.; Unie van Kunstmestfabrieken BV; UKF Deutschland GmbH; Chemische Industrie Rijnmond BV; Chemische Fabrik Chem-Y GmbH; Methanol Chemi Nederland VoF (50%); Nederlandsche Benzol Maatschappij (60%); Neder-landsche Verkoopkantoor voor Chemische Production B V (55%); Nipro Inc.; DSM Transportmaatschappij BV; DSM Resins BV; DSM Kunstharze GmbH; DSM Resins Ltd.; Custom Chemicals Corp.; Daniel Products Co.; VPVereingte Pulverlack GmbH; DSM Aardgas BV; DSM Energie BV; Ck Addison and Co., Ltd.; Curver BV; Firma Robert Travernier NV; Fardem Group BV; Belton Son BV; Calmont BV; Coban BV; Royal MOSA BV; Ontwikkelung Bouw-en Exploitatie Maatschappij BV; Teewen BV; BV Computer Centrum Nederland; DSM Assurantiekantoor BV; DSM Limburg BV; DSM North American Inc.; Macintosh NV Stein (57%); Stamicarbon BV.