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Naturex First-Half Restated Rev Fell 0.1% On Tough Comparisons

Posted: July 28, 2014

Naturex’s restated first-half revenue fell 0.1%, mainly due to tough year-ago comparisons, foreign currency translation and a product portfolio shift to flavor from commodities products.

By segment, food and beverage, which represents 65.1% of restated sales, showed good growth momentum over the first two quarters of 2014 with levels for sales exceeding all quarters of the prior year. Nutrition and health sales revenue, restated to eliminate sales of slimming ingredient Svetol, had a 6% decline at constant exchange rates, due to destocking by selected customers in the second quarter. Personal care achieved 6.5% growth at constant exchange rates and still occupies a limited position in the revenue mix.

Read the earnings release below or click here.

2013 was marked by strong sales from Svetol in the 1st half in response to extensive media coverage and Toll Manufacturing sales including krill extraction sales for AKER BioMarine that were very robust in the 1st quarter. The major portion of krill extraction activity for AKER BioMarine, recognized under Toll Manufacturing will be transferred outside the reporting scope for revenue starting in the 2014 second half, in light of the commencement of operations of the joint venture created with AKER BioMarine. In line with trends registered at the start of the year and as expected, 2014 first-half sales came to €158.3 million with a marginal decrease reflecting mainly: an unfavorable comparison base for the first two quarters amplified by exceptional market conditions in the 2013 first half linked to promotional campaigns for two products: Svetol (strong media coverage in the United States promoting the slimming effects of this green coffee bean extract) and the krill toll manufacturing; the continuing realignment of the portfolio in favor of value-added products (decrease in share of so-called "commodities" products); a currency effect that remains negative at -2.8% (USD and selected emerging country currencies). As for acquisitions, they had a limited impact on first-half sales (2%) and originated mainly from Vegetable Juices Inc. included in the Group structure as from June 2014 and, to a lesser extent, Chile Botanics included as from January 2014. Restated to adjust for Svetol and krill toll manufacturing sales,first-half revenue was up 2.8% at constant exchange rates.

Food & Beverage that represents 65.1% of restated sales showed good growth momentum over the first two quarters of 2014 with levels for sales exceeding all quarters of the prior year. This growth in part reflects the adoption of a structured commercial organization and a more targeted marketing approach in a slightly more favorable market environment. Concrete advances in the implementation of interesting projects in the coming months should confirm this positive trend. The Ukrainian-Russian crisis nevertheless has had serious repercussions on certain key customers in the coloring segment which is normally very buoyant in this region. The integration of sales from Chile Botanics (January 2014) and Vegetables Juices Inc. (June 2014) has also contributed to additional growth.

Nutrition & Health sales revenue, restated to eliminate Svetol sales, registered a 6% decline at constant exchange rates, linked to the adverse impact in the 2nd quarter of destocking by selected customers. June has however shown encouraging signs of recovery, particularly with respect to products with high added value; Personal Care achieved 6.5% growth at constant exchange rates and still occupies a limited position in the revenue mix. In the second half, the implementation of new projects with major names in the Cosmetics industry should provide opportunities for considerably accelerating growth; Toll Manufacturing, restated to adjust for sales from krill extraction, contributed marginally to sales in the period. Nevertheless, in light of the capacity freed up from the transfer in progress of krill extraction operations to the joint venture with AKER BioMarine, interesting development projects are currently under study.

Europe/Africa was down slightly in relation to the 2013 first half excluding krill toll manufacturing sales. Slightly more favorable trends in selected Western European countries are however offset by the adverse impacts of the Ukraine/Russian crisis on sales momentum for customers in this region

Sales in the Americas rose 6.2% at constant exchange rates (excluding Svetol sales), confirming the strength of the US market benefiting in particular from the deployment of a regional sales force at the end of 2013 as well as the integration of sales from Vegetable Juices Inc. in June 2014. Latin America remains very buoyant with a robust contribution from Brazil in the period.

The Asia/Pacific region achieved strong growth of 8.3% at constant exchange rates, confirming the increasing contributions from the sales offices opened in Asia and the Middle East (60.5% of the region's sales) as well as significant gains in Australia centered on Naturex's ranges in the nutraceutical sector. The historic ingredients distribution segment remains impacted by the particular context of the local food industry. Over the first half, with growth at constant exchange rates of 7.7%, all emerging countries accounted for 18% of Group sales, up from 16.4% from last year's same period. “Sales in the 2014 first half confirmed, in line with expectations, trends reported at the start of the year in terms of growth profile in a foreign exchange environment that remains challenging. Our new organization and the clarification of our offering have started to produce results, and in particular, provide real momentum to the Food & Beverage business, and on that basis, we can look to the second half with confidence", commented Thierry Lambert,

Naturex's Chairman and Chief Executive Officer. "Several projects in progress are expected to lead to concrete developments in the coming months, and with the synergies to be obtained from the continuing integration of acquisitions, will provide sources of additional growth."