* Q2 EBIT 79 million euros vs expected 77 million
* Sales 1.92 bln euros vs forecast 1.93 bln
* No full-year outlook, sees no short-term improvement
* Will exceed savings target by tens of millions of euros
* Shares down 5.4 percent
(Recasts, adds CFO, analyst comments, updates shares)
By Aaron Gray-Block
AMSTERDAM, Aug 4 (Reuters) - Dutch life sciences group DSM NV targeted increased cost savings on Tuesday as it warned market conditions were unlikely to show any further improvement in the short term, sending its shares lower.
Posting an expected 71 percent fall in second-quarter operating profit, the supplier of products ranging from foodstuffs to polymers noted improving quarter-on-quarter demand, but said it did not expect any further short-term upturn in market conditions despite an end to destocking by customers.
It gave no specific outlook for the rest of the year.
DSM shares, which touched a year high of 26.30 euros on Monday and are up 33 percent since the start of the year, fell 5.4 percent to 24.35 euros by 0836 GMT, lagging the DJ Stoxx European chemicals index which fell 1.5 percent.
"We see several short-term hurdles: nutrition pricing level, weak Pharma earnings momentum, (the) industrial summer dip and challenging forex comparison. Today's results will not help to spur momentum," analyst Jan Van den Bossche at brokerage Petercam said.
DSM's earnings have been supported in recent quarters by the company's more resilient nutrition and pharmaceutical businesses, but concerns have started to develop over the impact of falling vitamins and penicillin prices.
The group said earnings before interest and tax (EBIT) dropped to 79 million euros ($113.7 million), in line with an average forecast of 77 million based on a Reuters poll of 10 analysts. Last year, DSM reported EBIT of 276 million euros in the second quarter.
Chief Financial Officer Rolf-Dieter Schwalb said DSM will exceed its cost savings target of 125 million euros by a couple of tens of millions of euros through efficiency measures in areas such as purchasing, but gave no specific target.
"Earnings were up sharply compared with the first quarter, driven by Materials Sciences as inventory writedowns and customer de-stocking have largely run their course," Chief Executive Feike Sijbesma said in a statement.
CHINA DEMAND
But Sijbesma said there was remaining uncertainty about demand. "In China, it looks very good at this moment, but we know that is stimulated by the government, so we don't know how that will go either," he told reporters.
DSM said its nutrition unit is expected to achieve full-year results somewhat above the 2008 level, adding it expects prices to remain firm and sees a further recovery in demand. Second-quarter results at the unit were in line with estimates.
CFO Schwalb said prices of vitamins A and E, an important part of the unit's earnings with vitamin C, fell at the start of the quarter, but recovered towards the end of the period. DSM does not expect significant price declines for the full-year.
In the Pharma unit, which missed estimates on weak volumes, DSM said results were expected to be substantially lower than last year due to lower prices, but results were expected to improve towards the end of the year. Results last week from a string of European chemicals companies showed no signs of an upturn as demand from the car, electrical and building sectors, all of which have been hit hard by the recession, stayed weak.
But DSM's Materials Sciences business, which includes its performance material and polymer intermediate operations, returned to profitability in the quarter due to the reduced impact from destocking.
DSM warned, however, that its Dyneema fibre business is expected to report lower sales for the year.
CEO Sijbesma said Dyneema was being hit by a slowdown in the marine and fishing industries and protective sectors such as the glass industry. The company had previously said the business would show continue to grow in 2009. (Editing by David Holmes) ($1=.6949 Euro)