Net Sales Growth Target 2005 Raised
SCHIPHOL AIRPORT, Netherlands, Aug. 11, 2005 (PRIMEZONE) -- Royal Numico (Other OTC:KNUMF):
Financial Highlights
First Half Year 2005 (on a comparable basis)(a)
-- Total net sales up 12.5%; EBITA margin at 18.7%
-- Nutricia Baby net sales up 12.4%; EBITA margin at 17.9%
-- Nutricia Clinical net sales up 12.8%; EBITA margin at 27.5%
-- Normalised net result up 20.9% and normalised earnings per
share up 20.7%
-- Restored shareholders' equity position at 11 mln compared to
(306) mln at the start of the year
-- Net cash flow from operational activities up 26.0% at 63 mln
Financial Highlights Second Quarter 2005 (on a comparable basis)(a)
-- Total net sales up 12.9%; EBITA margin at 19.0%
-- Nutricia Baby net sales up 12.7%; EBITA margin at 17.7%
-- Nutricia Clinical net sales up 13.3%; EBITA margin at 28.0%
-- Normalised net result up 22.1% and normalised earnings per share
up 21.7%
-- Nearly half of ephedra claims resolved to date
CEO Statement
"Numico shows strong sales momentum, achieving record growth in both divisions in the First Half 2005. Clinical continued its strong growth pace, up 12.8%, with growth being delivered across all regions and noteworthy performance in the U.K. Babyfood sales increased to category leading levels of 12.4%, driven by growth acceleration in the U.K., Eastern Europe and Indonesia. As anticipated, total EBITA growth came in at 4.8%, due to exceptional charges and the phasing of the Babyfood restructuring plan.
"Numico also has true organisational momentum, with the steady strengthening of key management positions in both Baby and Clinical. With Sari Husada, our Indonesian Babyfood business, we increased our stake and stewardship in the company by making significant management changes and increasing our shareholding by 13.5% to 95%. This is a significant strategic initiative for us, given the strategic role of Indonesia in Numico's development.
"With these results, we feel comfortable to raise our net sales growth target for 2005 from 8-10% to 10-12%, while reconfirming our EBITA growth target at 10%."
Second (EUR mln /
quarter % change EUR) First Half % change
2005 2004 comp.(a)actual 2005 2004 comp. (a)actual
Net sales
491 425 12.9% 12.6% cont. business 935 820 12.5% 11.7%
491 435 13.3% 12.7% Net sales 935 837 12.4% 11.6%
Normalised
93 90 4.8% 3.0% EBITA(b) 174 169 4.8% 2.8%
90 90 1.9% 0.2% EBITA 171 160 9.2% 6.9%
Net result
attr. to
54 44 22.5% equity holders 97 72 34.6%
Normalised net
54 44 22.1% result(b) 96 80 20.9%
Earnings per
0.32 0.27 19.3% share 0.58 0.43 33.8%
Normalised
0.32 0.27 21.7% EPS(b) 0.58 0.48 20.7%
Fully diluted
0.31 0.26 17.7% EPS 0.56 0.42 33.0%
(a) Comparable basis is at constant scope of consolidation and constant exchange rates.
(b) Normalised: based on continued business and excluding exceptional items (IAS 37 provision of (9) mln in Q1 04 and restructuring cost China of (2) mln in Q2 05) and result divestments after tax.
OUTLOOK 2005
Based on the strong performance in the first half of 2005 and the expected performance for the remainder of the year, the overall organic net sales growth target for 2005 has been raised from 8 -- 10% to 10 -- 12%. The company reiterates that EBITA is expected to grow by 10%, including operational and exceptional losses in China, product innovation costs and various one-off non-allocated costs incurred in Q1 05. These targets are all based on constant currencies, constant scope of consolidation and barring unforeseen circumstances.
FINANCIAL REVIEW
First Half Year 2005
Total net sales for the continued business increased 12.5% to 935 mln on a comparable basis. This is a record performance for Numico, driven by a record-high sales growth for both Baby Food at 12.4% and Clinical Nutrition at 12.8%.
Total EBITA increased 4.8% to 174 mln, excluding discontinued business and exceptionals. The total EBITA margin was at 18.7%. This result includes the following anticipated items: (i) the phasing of project Focus-related costs, (ii) operational losses in Baby Food in China, (iii) product innovation costs and (iv) higher non-allocated costs partly due to one-offs in Q1 05.
Net result attributable to shareholders -- excluding a one-off provision of (9) mln related to IFRS in H1 04 -- increased 20.9% to 96 mln, supported by substantially lower net financial expenses. Earnings per share and fully diluted earnings per share amounted to 0.58 and 0.56, respectively, up 33.8% and 33.0%.
Second Quarter 2005
Total net sales grew by 12.9% to EUR 491 mln, on a comparable basis, driven by record net sales growth for Baby Food (+12.7%) and Clinical Nutrition (+13.3%).
Total EBITA increased by 4.8% to 93 mln, excluding discontinued business and the restructuring cost of 2 mln in Q2 05, related to the completion of the rationalisation of the Baby Food operations in China. The total EBITA margin was 18.9%, representing a decline of 150 bps. EBITA performance was driven by a healthy EBITA growth in the Clinical Nutrition division, a modest performance in the Baby Food division due to reasons mentioned above and stable non-allocated costs.
The normalised net result increased 22.1% to 54 mln supported by a continued reduction of net financial expenses. Earnings per share and fully diluted earnings per share amounted to 0.32 and 0.31, respectively, up 19.3% and 17.7%.
REVIEW BY SEGMENT (on a comparable basis(c))Baby Food
Second Quarter (EUR mln) First Half
2005 2004 change(c) 2005 2004 change(c)
317 276 12.7% Sales 606 532 12.4%
EBITA (excl
56 57 (1.8)% exceptionals) 109 108 0.7%
EBITA as a %
17.7 20.7 (260) bps of sales 17.9 20.3 (210) bps
(2) -- Exceptionals (2) (5)
Sales
-- 7 Discontinued -- 12
EBITA
-- (1) discontinued -- (1)
317 283 13.0% Total sales 606 544 12.3%
54 56 (2.6)% Total EBITA 106 102 6.9%
Total EBITA
as a % of
16.9 19.9 (270) bps sales 17.5 18.7 (90) bps
(c) Comparable basis is at constant scope of consolidation and constant exchange rates.
The Baby Food division was able to sustain its first ever double-digit growth performance of the first quarter 2005 into the second quarter of this year. Net sales in Baby Food increased 12.4% to 606 mln in the first half of 2005; 8.9% was driven by volume and 3.5% by changes in price/mix. This record growth performance was driven by improved net sales growth across all regions. Western Europe grew by 3.2%, supported by strong performance from the U.K., Ireland and France. Eastern Europe and the Rest of the World grew by 29.1% and 24.0%, respectively, with particularly strong growth coming from Turkey, Russia, Indonesia and Poland.
EBITA in Baby Food increased slightly to 109 mln in the first half of 2005, excluding the one-off cost of 2 mln related to the completion of the restructuring of the Baby Food operations in China in Q2 05 and the IFRS one-off cost (IAS 37 provision) taken in Q1 04. The anticipated performance is explained through the impact of (i) the phasing of project Focus-related costs, (ii) operational losses in Baby Food in China and (iii) ongoing product innovation costs. A&P spend increased compared to the preceding quarter and is expected to continue this trend in the second half of the year. The EBITA margin was at 17.9%; a relatively stable performance compared to the second half of 2004 and a decrease of 210 bps compared to the first half of 2004.
Net sales in Baby Food in the second quarter 2005 exceeded the record-high sales growth of the first quarter with a growth of 12.7%. 8.0% of the growth was driven by volume and 4.7% by price/mix. EBITA decreased by 1.8% in the quarter, which can mainly be explained by the factors mentioned above. The EBITA margin remained relatively stable at 17.7% compared to the preceding three quarters. Compared to the second quarter of 2004 the margin decreased 260 bps.
Clinical Nutrition
Second Quarter (EUR mln) First Half
2005 2004 change(d) 2005 2004 change(d)
174 150 13.3% Sales 329 288 12.8%
EBITA (excl
48 44 9.5% exceptionals) 89 82 10.2%
EBITA as a %
28.0 29.1 (100) bps of sales 27.5 28.4 (70) bps
-- -- Exceptionals -- (2)
Sales
-- 2 Discontinued -- 2
174 151 14.9% Total sales 329 290 13.9
48 44 9.3% Total EBITA 89 79 13.2
Total EBITA
as a % of
27.5 29.1 (140) bps sales 27.0 27.4 (20) bps
(d) Comparable basis is at constant scope of consolidation and constant exchange rates.
Net sales in Clinical Nutrition grew by 12.8% to 329 mln in the first half of 2005; 10.1% was driven by volume and 2.7% by price/mix. All regions delivered double-digit growth with particularly strong performance coming from the U.K., Germany, France, Spain and Italy. This overall strong performance was supported across all channels and product segments.
EBITA increased by 10.2% to 89 mln in the first half of 2005, despite the continued higher marketing and sales spend of 14.5% and incremental costs related to the plastic bottle. The EBITA margin decreased 70 bps to 27.5%.
Net sales in Clinical Nutrition reached a record high level of 13.3% in the second quarter of 2005; 10.5% was driven by volume and 2.8% by price/mix. EBITA increased by 9.5% in the quarter resulting in an EBITA margin of 28.0%.
OTHER FINANCIAL INFORMATION
Tax
The effective tax charge and cash tax rate were 30% and 25%, respectively, in line with expectations for the full year. 7 mln (net) of the deferred tax asset (DTA) related to the U.S. liquidation loss was utilised in the first half of 2005. The remaining part of this DTA amounted to 346 mln at 30 June 2005.
Trade Working Capital
Numico's continuous effort to lower the level of trade working capital as a percentage of sales has resulted in an improvement of 250 bps to 14.0% compared to a year ago. The reduction was driven by a decrease in receivables of 160 bps and an increase in payables of 80 bps. Numico aims to reduce trade working capital as a percentage of sales to 10% in 2007.
Cash Flow
Capital expenditure amounted to 48 mln, or 5.1% of net sales in the first half of 2005, in line with full year expectations. Project Focus and the plastic bottle project continue to be important components of the capital expenditure.
Net cash flow from operational activities increased 26.0% to 63 mln in the first half of 2005, supported by the continuous effort to reduce trade working capital. Free cash flow amounted to 33 mln, excluding the net cash payment related to the Mellin transaction of 198 mln. In the second quarter, net cash flow from operations and free cash flow amounted to 30 mln and 11 mln, respectively, excluding the Mellin acquisition.
Net Debt
Numico successfully completed the issuance of US$ 425 mln (340 mln) of senior notes through a U.S. private placement on 23 June 2005. This transaction has enabled Numico to diversify the company's capital structure and improve its overall debt maturity profile at very attractive conditions.
On 26 June 2005, Numico repaid the subordinated convertible bonds 2000 of 627 mln with cash drawn partly from the existing senior bank loan facility as well as with the proceeds from the U.S. private placement. The company also used the bank loan facility to finance the cash component (200 mln) of the Mellin acquisition resulting in an increase in net debt of 187 mln to 1,126 mln in the first half of 2005. Numico has drawn 635 mln of the bank loan facility of 1,000 mln as at 30 June 2005.
Shareholders' Equity
Shareholders' equity improved by 317 mln to 11 mln in the first half of 2005. The significant improvement was driven by retained earnings of 97 mln and the share capital increase of 216 mln related to the acquisition of Mellin. This marks a significant improvement versus 1 January 2004 when Numico's shareholders' equity was at (398) mln.
DIVIDEND
Given Numico's strong generation of retained earnings, the company is confident that its shareholders's equity will be sufficiently restored by the end of 2005 to be in a position to propose a (modest) dividend in 2006, barring unforeseen circumstances.
UPDATE ON EPHEDRA
The number of ephedra claims filed per month continues to reflect a downward trend. Out of all ephedra cases in which GNC is named as a (co-)defendant, 52 cases have been dismissed and 79 have been settled to date, bringing the total number of active ephedra cases related to GNC down to 141. Out of the total number of ephedra cases in which Rexall Sundown is named as a (co-)defendant, 24 cases have been dismissed and 23 cases have been settled to date, bringing the total number of active ephedra cases related to Rexall Sundown down to 48. As a result, 49% of all cases that were filed to date, have been settled or dismissed, compared to 21% at the beginning of the year. Numico has adequate insurance in the form of an occurrence-based policy, to cover the ephedra litigation risk and all related administrative and legal costs.
GENERAL INFORMATION
The balance sheet, profit and loss account and the cash flow statement are based on the IFRS standards currently endorsed by the EU. However these are subject to ongoing review or possible amendments by interpretive guidance from the IASB and are therefore still subject to change.
The cash flow statement has been prepared in accordance with IFRS by using the indirect method and for the required components using the direct method. Cash flows in foreign currencies have been translated at average exchange rates.
Numico's first Annual Report prepared in accordance with IFRS will be the 2005 Annual Report. We refer to the 2004 Annual Report and the supplementary information on the transition to IFRS. We also refer to the appendices of Numico's press release regarding the Full Year 2004 Results, issued on 3 March 2005, as well as Numico's presentation related to the Quarterly Financial Information on the Impact of IFRS in 2004, issued on 23 March 2005.
Numico is in the process of finalising the Purchase Price Allocation (PPA) for Mellin. The final PPA will have an impact on goodwill and brands allocation as well as on the deferred tax liability related to the brand. The required accounting treatment for the PPA is IFRS-driven and has a non-cash impact. The PPA will be finalised in the second half year of 2005.
It should be noted that all figures presented are unaudited.
A live audio and video web cast of the analyst presentation in London will be available on our website (www.numico.com) as of 16:30 hrs CET. Additionally, an interview with Jan Bennink (CEO) and Jean-Marc Huet (CFO), containing the key messages, in video and text will be available on www.numico.com and on www.cantos.com at 08:00 hrs CET.
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