Published: May 01, 2006
Royal Numico: First Quarter Results 2006
Strong Start to the Year - Outlook Raised
2 May 2006
Financial Highlights First Quarter 2006 (on a comparable basis)
* Total sales up 13.6%; EBITA margin at 19.2%
* Nutricia Baby sales up 11.5%; EBITA margin at 19.3%
* Dumex sales up 28.3%; EBITA margin at 19.4%
* Nutricia Clinical sales up 11.2%; EBITA margin at 26.0%
* Normalised[2] profit up 43.5% and normalised basic EPS up
25.5%
(at reported rates)
CEO Statement
"2006 is off to a strong start, with record-high organic sales
growth
of 13.6% and EBITA margin reaching a high of 19.2%.
All three divisions delivered double-digit organic sales
growth,
driven primarily by volume increases. We are particularly
encouraged
by the very strong performance of Dumex, which became part of
the
Numico group in early 2006. Dumex achieved sales growth of
28.3%,
with margins at 19.4%. The integration is nearly complete,
having
been executed quicker than anticipated.
Nutricia Baby Food delivered nearly 12% sales growth at
healthy
margins of above 19%. The Baby division sourced this growth
from
strong performance in all regions. Contributing to this,
Mellin
advanced well, with volume growth of 14% and value growth of 9%.
The
integration of Mellin will be completed upon the insourcing
of
Mellin's IMF production, which takes place in the second quarter
of
2006, with confirmation of anticipated cost savings.
Nutricia Clinical continued its solid performance with a sales
growth
of 11.2% and margins at 26%. A somewhat lower sales growth
in
Germany was compensated for by stronger growth in the ROW.
Based on this strong start to the year, we feel confident to
raise
our sales growth target to between 12% - 13%, and to raise the
EBITA
margin target by 25 bps to 18.75% for 2006."
+------------------------------------------------------------+
| (EUR mln) | First Quarter | % change |
|-----------------------+----------------+-------------------|
| | 2006 | 2005[3] | comp.[1] | actual |
|-----------------------+------+---------+----------+--------|
| Sales | 633 | 565 | 13.6 | 42.6 |
|-----------------------+------+---------+----------+--------|
| EBITA | 118 | 107 | 9.2 | 45.7 |
|-----------------------+------+---------+----------+--------|
| Normalised profit | 63 | 44 | - | 43.5 |
|-----------------------+------+---------+----------+--------|
| Normalised EPS2 (EUR )| 0.33 | 0.26 | - | 25.5 |
|-----------------------+------+---------+----------+--------|
| | | | | |
|-----------------------+------+---------+----------+--------|
| Profit for the period | 47 | 45 | - | 6.3 |
|-----------------------+------+---------+----------+--------|
| Basic EPS (EUR ) | 0.25 | 0.26 | - | (4.2) |
|-----------------------+------+---------+----------+--------|
| Diluted EPS (EUR ) | 0.24 | 0.25 | - | (3.2) |
+------------------------------------------------------------+
OUTLOOK 2006
Based on the strong start to the year and the expected performance
for the remainder of 2006, Numico raises its total sales growth
target to 12% - 13% (previously 11% - 13%) and expects the EBITA
margin to improve by 25 bps to 18.75% for the year. These targets
are all based on constant scope of consolidation, constant
exchange
rates, excluding exceptionals and barring unforeseen
circumstances.
FINANCIAL REVIEW (on a comparable basis[4])
First Quarter 2006
(in %) Baby Dumex Clinical Total
Comparable sales growth 11.5 28.3 11.2 13.6
Acquisitions / divestitures 11.2 - (1.6) 25.0
Currency translation effect 3.1 12.9 2.2 3.9
Reported sales growth 25.8 - 11.8 42.6
Reported sales increased 42.6% to EUR 633 mln in the first
quarter of
2006. This growth consisted of 13.6% organic growth, 25.0% growth
through acquisitions and 3.9% growth as a result of currency
translation effects. Organic sales growth was driven by 11.3% in
volume and 2.3% due to price/mix. This is a record performance
for
Numico, driven by organic sales growth of 11.5% for Nutricia Baby,
28.3% for Dumex and 11.2% for Nutricia Clinical.
(EUR mln) Sales EBITA EBITA margin
Q1 06 Q1 05[4] change[5] Q1 06 Q1 06
Baby Food 363 325 11.5% 70 19.3%
Dumex 95 74 28.3% 18 19.4%
Clinical Nutrition 173 156 11.2% 45 26.0%
Non-allocated (13) -
Numico continued 630 555 13.6% 121 19.2%
The gross margin in Nutricia Baby and Nutricia Clinical improved
in
the first quarter 2006 compared to the first and the last quarter
of
2005. It is to be noted that Numico's overall gross margin in
the
first quarter of 2005 does not include the activities of Mellin
and
Dumex.
Numico's overall EBITA margin was 19.2% or 70 bps below the level
of
the first quarter of 2005 which can be explained by an increase
in
A&P and R&D spend of 27% and 23% respectively.
Normalised net profit and normalised earnings per share amounted
to
EUR 63 mln and EUR 0.33, respectively, up 43.5% and 25.5%.
REVIEW BY ACTIVITY (on a comparable basis[4])
Baby Food
Nutricia Baby sales increased 11.5% to EUR 363 mln in the first
quarter
of 2006. This performance was driven by improved sales growth
across
all regions. Western Europe grew by 3%, supported by
strong
performances in the UK, Italy and France.
Western Europe was adversely impacted by Germany as it repositions
to
improve its performance. Eastern Europe and the Rest of the
World
grew by 18% and 30%, respectively, with particularly strong growth
in
Turkey, Indonesia and the Middle East.
Mellin's improved sales performance in the second half of
2005
continued in the first quarter of 2006. Sales were up 14.0%
in
volume and 9.1% in value terms, thereby continuing to gain
market
share in the first quarter of 2006. The integration of Mellin is
now
completed with the insourcing of Mellin's IMF production taking
place
in the second quarter of 2006. Numico reconfirms gross
annualised
cost savings of EUR 15 mln which will be used to reinvest
into the
business and increase the EBITA margin.
The EBITA margin was 19.3% or 60 bps lower than in the first
quarter
of 2005, despite an increase in A&P and R&D spend of 18% and
22%,
respectively.
Dumex
Sales in Dumex grew by 28.3% to EUR 95 mln in the first
quarter of
2006, with particularly strong growth coming from China
and
Vietnam. This strong start to the year was supported by
Dumex'
strategic focus on the premium product segment.
The EBITA margin was 19.4% which was substantially higher than
the
average pro forma EBITA margin of 14% in 2005. A&P spend
increased
71%, representing an increase of 370 bps to 14.9% of sales
compared
to the first quarter of 2005. Due to the anticipated
marketing
initiatives in the remainder of the year the average level of
A&P
spend as a percentage of sales in 2006 will be higher than the
level
in the first quarter of 2006.
The integration of Dumex is nearly complete. The integration
and
optimisation of the continued operations have been finalised and
the
Hangzhou cereals plant in China has been sold. The operations in
the
Philippines and the Cow & Gate operation in China are being
closed
and a decision on India will be announced before the end of
the
second quarter 2006. The various efficiency initiatives are well
on
track to generate the anticipated annualised cost savings
of
EUR 5 mln. Acquisition and integration costs for Dumex will
amount to
EUR 35 mln, of which EUR 17 mln has been taken in the first
quarter of
2006. Most of the remaining costs will occur in the second
quarter
of 2006.
Clinical Nutrition
Sales in Clinical Nutrition grew by 11.2% to EUR 173 mln in the
first
quarter of 2006. Growth was driven by Southern Europe (+13.1%)
and
the Rest of the World (+21%) and to a lesser extent by
Northern
Europe (+7%) the latter being impacted by the short term effects
of
the changes in reimbursement in Germany. The Nordic
countries,
France and Brazil delivered particular strong performances.
All
product categories contributed to this performance with
particularly
strong growth in GI Allergy.
The EBITA margin was 26.0% despite an increase in R&D and A&P
spend
of 26% and 21%, respectively, which explains the decrease of 70
bps
compared to the first quarter of 2005.
OTHER FINANCIAL INFORMATION
Trade Working Capital
Total trade working capital as a percentage of sales improved 210
bps
to 12.5% compared to the first quarter of 2005. Numico's
continuous
effort to lower the level of trade working capital as a percentage
of
sales has resulted in an improvement of 190 bps to 12.1% for
Nutricia
Baby and Clinical compared to a year ago. Dumex improved its
trade
working capital by 430 bps to 15.0% compared to a year ago.
Cash Flow
Cash flow from operating activities increased by EUR 46 mln to
EUR 79 mln
in the first quarter of 2006, driven by the strong increase
in
operating profit and supported by the continuous effort to
reduce
working capital. Free cash flow amounted to EUR 49 mln,
excluding the
net cash payment related to the EAC Nutrition transaction
of
EUR 1,190 mln.
Capital expenditure amounted to EUR 31 mln, or 5% of sales in the
first
quarter of 2006, which is below Numico's full year expectation
of
between 6 - 7%. This can mainly be attributed to the phasing
of
certain projects that will only commence during the remainder of
the
year. Investments related to innovations, quality and food
safety
and the Dumex plant in Shanghai are the most important components
of
the capital expenditure in addition to ongoing maintenance and
IT
investments.
Net Debt and Finance Costs
Net debt increased by EUR 1,140 mln to EUR 1,655 mln in the
first quarter
of 2006. The increase is due to the acquisition of EAC
Nutrition
(EUR 1,190 mln) which was completed on 2 January 2006. In the
first
quarter, EUR 145 mln of the bank loan facility was redeemed
and the
commercial paper programme was increased by EUR 69 mln.
Net finance costs amounted to EUR 28 mln in the first quarter of
2006
compared to EUR 16 mln in the fourth quarter of 2005, driven
by an
increase in the net debt position as well as by negative
foreign
exchange impacts on foreign currency denominated deposits
of
EUR 4 mln. More information can be found in appendix 8.
Shareholders' Equity
Shareholders' equity improved by EUR 59 mln to EUR 739 mln in
the first
quarter of 2006. The improvement was mainly driven by
retained
earnings of EUR 47 mln and direct equity movements. An overview
of the
movements in shareholders' equity can be found in appendix 4.
A live audio web cast of the analyst conference call and the
related
presentation slides will be available on our website
()
as of 10:30 hrs CET.
[1] 'Comparable basis' is at constant scope of consolidation and
constant exchange rates and excluding exceptionals (refer to
appendix
5 and 9)
[2] 'Normalised' excludes discontinued businesses, acquisition and
integration costs and result divestment after tax (refer to
appendix
6)
[3] For reconciliation of pro forma Q1 05 sales and EBITA, please
refer to appendix 5
[4] For reconciliation of pro forma Q1 05 numbers, please refer to
appendix 5
[5] Based on constant scope of consolidation and constant exchange
rates and excludes exceptionals (pls refer to appendix 5 and 9)
For any questions you might have, please contact:
Numico Corporate Communications
Tel +31 20 456 9077
Numico Investor Relations
Tel +31 20 456 9003
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