SCHIPHOL AIRPORT, The Netherlands, March 3, 2005 (PRIMEZONE) -- Fourth Quarter and Full Year Results 2004: Medium-Term Objective For Net Sales Growth 2007 Raised.
Financial Highlights Full Year 2004 (on a comparable basis)(1)
* Total net sales up 9.6%; EBITA margin at 19.9%
* Nutricia Baby net sales up 8.4%; EBITA margin at 19.0%
* Nutricia Clinical net sales up 11.9%; EBITA margin at 28.6%
* Net result at EUR 145 mln compared to EUR (504) mln in 2003 (actuals)
* Net debt position at EUR 987 mln; shareholders' equity improved by EUR 128 mln
* Trade working capital improved 100 basispoints to 12.7% of net sales
Financial Highlights Fourth Quarter 2004 (on a comparable basis)1
* Total net sales up 10.0%; EBITA margin at 19.4%
* Nutricia Baby net sales up 9.0%; EBITA margin at 18.3%
* Nutricia Clinical net sales up 12.2%; EBITA margin at 28.0%
* Revised strategy for China resulting in EUR 10 mln impairment and EUR 6.7 mln exit costs
* Free cash flow of EUR 66 mln before Valio transaction
CEO's Statement "We are pleased to announce record sales growth of 9.6% for 2004. Growth was driven by both divisions and by all regions. Clinical continued its double-digit performance with 11.9% sales growth, while Baby accelerated sales momentum with a record 8.4% increase.
In 2004, we made important progress in innovations, establishing the pipeline that will nourish future growth. With Numico's strong performance we feel confident to set our overall net sales growth target for 2005 at 8 -- 10%, with EBITA growth of 10%.
Looking toward our mid-term objectives for 2007, we elevate our net sales objective to 9 -- 11% growth."
Consolidated key figures fourth quarter and full year 2004
(EURmln) Fourthquarter %change Fullyear %change
2004 2003 comp. (2)actual 2004 2003 comp.(2) actual
Net sales continued
business 455 414 10.0% 8.4% 1,702 1,567 9.6% 8.1%
Net sales 455 635 8.8% (28.4%) 1,722 3,151 8.5% (45.3%)
EBITA (normalised (3))
89 71 21.6% 18.4% 339 300 11.8% 10.2%
EBITA
(incl. exceptional items)
71 85 16.1% (16.2%) 318 272 46.7% 17.0%
Normalised (3)
net result 54 198
Net result 3 41 145 (504)
EPS
(normalised (3))
0.33 1.19
OUTLOOK 2005 and OBJECTIVES 2007
We expect to achieve a total net sales growth of 8 - 10% and EBITA growth of 10% in 2005.
We have increased our net sales growth objective for 2007 to 9% -- 11% (previously 8% -- 10%) and reiterate our aim to achieve an EBITA margin of at least 20% by 2007. We also aim to improve working capital to 10% as a percentage of net sales. These targets are all based on constant currencies, constant scope of consolidation and barring unforeseen circumstances.
DIVIDEND
Numico's current negative shareholders' equity position prevents the Company from paying a dividend. Numico is confident that retained earnings as well as the intended share capital increase related to the acquisition of Mellin - the Italian Baby Food company - will allow the Company to return to a positive shareholders' equity by the end of 2005 and to resume a dividend in 2006. The dividend pay-out policy will be aligned with the (growth) profile of the Company and relevant peers.
FINANCIAL REVIEW (on a comparable basis) 2
Full Year 2004
The first successful results of Numico's high-growth, high-margin strategy are clearly reflected in Numico's performance in 2004. Total net sales of the continued business grew by 9.6% to EUR 1,702 mln in 2004. This strong performance was driven by a strong acceleration in growth in Baby Food and improved double-digit growth performance in Clinical Nutrition.
Total EBITA, excluding discontinued business and exceptionals, increased 11.8% to EUR 339 mln. This strong performance can be attributed to a strong margin pick up of 90 bps in Baby Food and resilient EBITA margin levels in Clinical Nutrition despite an overall increase of 18.8% in marketing spend and slightly higher non-allocated costs.
The tax charge was 26.8% for the year, excluding exceptional items. Net result improved to EUR 145 mln, from EUR (504) mln in 2003.
Fourth Quarter 2004 Net sales, excluding discontinued business, grew by 10.0% to EUR 455 mln -- the first double-digit growth quarter in over more than two years. Total net sales increased by 8.8%.
Total EBITA increased by 21.6% to EUR 89 mln, excluding the discontinued business and exceptionals of EUR 17 mln, relating to the new strategic direction chosen for China. This strong performance was mainly driven by a margin pick-up in Baby Food of 120 bps as well as a significant reduction in non-allocated costs in the fourth quarter. Normalised3 net result amounted to EUR 54 mln.
REVIEW BY SEGMENT (on a comparable basis (1))
Baby Food
Fourth quarter (EUR mln) Full year
2004 2003* change(2) 2004 2003* change(2)
295 273 9.0% Sales 1,101 1,033 8.4%
EBITA (excl
55 47 16.6% exceptionals) 210 188 13.9%
EBITA as a % of
18.3 17.4 120 bps sales 19.0 18.2 90 bps
(17) Exceptionals (17) (71)
Sales
6 Discontinued 14 25
EBITA
1 (1) discontinued (4)
295 279 8.1% Total sales 1,115 1,058 7.6%
39 46 (11.6%) Total EBITA 193 113 79.9%
Total EBITA as a
13.2 16.4 (290) bps % of sales 17.3 10.7 690 bps
* at actual rate
The performance of Baby Food in 2004 clearly reflects the positive impact of the new Baby Food strategy. Net sales in Baby Food increased by 8.4% to EUR 1,101 mln in 2004. The sales growth trend in Western Europe accelerated to 3.4% in 2004 versus 1.2% in 2003. This was primarily driven by the UK (+7.3%) as well as an improved performance in the Netherlands (+2.7%) and Germany (+4.1%). The countries outside Western Europe continued their double-digit growth trend at 16.2% which was particularly driven by strong performance in Russia, Turkey, Poland and Indonesia.
EBITA in Baby Food, excluding exceptionals, grew by 13.9% to EUR 210 mln in 2004, notwithstanding an increase in marketing spend of 18.8%. This resulted in an EBITA margin improvement of 90 bps to 19.0% for the year, helped by the savings in the variable (Booster) and fixed (Focus) cost base.
Net sales in Baby Food were able to continue record-high sales growth of 9.0% of the third quarter into the fourth quarter of 2004, notwithstanding the high comparables in the fourth quarter of 2003. EBITA grew by 16.6% in the fourth quarter, despite an increase in marketing spend of 16.2%. The EBITA margin in the fourth quarter improved 120 bps to 18.3%.
Strategic Initiatives China and Brazil
Numico has set-out a new strategic direction for its Baby Food business in China. Numico has decided to fully focus its efforts on its premium brand Cow & Gate in Shanghai and the Guangdong province. Numico has entered into an exclusive marketing and distribution agreement with Hutchison to specifically further develop the Guangdong province.
Numico has accordingly decided to divest QQBB -- a mainstream baby milk brand -- and has signed a letter of intent to sell its factory in North China and the HLRN brand -- a milk powder brand -- to Industrias Lacteas Asturianas S.A.
The financial impact of the decision to divest the production facility and focus on one brand is a one-off asset impairment of EUR 10 mln (non-cash) and restructuring costs (product sell-out and terminations) amounting to EUR 6.7 mln, to be taken in the fourth quarter of 2004.
Numico has also decided to withdraw from the Brazilian Baby Food market, given the operations' lack of scale and relatively weak competitive position. Numico is currently in discussions to sell its Brazilian factory and brands. The financial impact is not expected to be material.
Clinical Nutrition
Fourthquarter (EURmln) Fullyear
2004 2003* change(2) 2004 2003* change(2)
160 141 12.2% Sales 600 534 11.9%
44 42 6.8% EBITA(exclexceptionals) 171 156 8.9%
28.0 29.5 (130)bps EBITAasa%ofsales 28.6 29.3 (80)bps
Exceptionals (2)
2 SalesDiscontinued 2 8
(1) EBITAdiscontinued (1)
160 143 12.0% Totalsales 602 542 11.1%
44 41 8.1% TotalEBITA 169 155 8.2%
28.0 28.7 (100)bps Total EBITA as of sales 28.1 28.7 (80)bps
Net sales in Clinical Nutrition grew by 11.9% to EUR 600 mln in 2004. All regions delivered double-digit growth with accelerated growth of 14.4% coming from Southern Europe, most notably France (+20.1%) and Spain (+13.4%). Growth in Northern Europe of 10.8% was driven by strong performance in the UK (+13.4%) and Germany (+9.8%). This overall strong performance can be attributed to an increased focus on disease-specific products coupled with sustained levels of growth in general malnutrition.
EBITA increased by 8.9% to EUR 171 mln in 2004, excluding the restructuring charge of EUR 2 mln in the third quarter. The EBITA margin decreased 80 bps to 28.6% which can mainly be attributed to increased marketing spend and costs related to the introduction of plastic bottles.
In the fourth quarter, net sales in Clinical Nutrition increased by 12.2% compared to the same period last year. EBITA increased by 6.8% in the quarter and the EBITA margin decreased 130 bps to 28.0% which can mainly be explained by incremental costs related to the plastic bottle project.
OTHER FINANCIAL INFORMATION
Tax In December 2004, the Dutch government ratified the proposed reduction of the Dutch corporate income tax rate from 34.5% to 31.5% for 2005 as well as the proposed reduction to 30.5% in 2006 and 30% in 2007. In accordance with the prevailing accounting principles, the deferred tax asset needs to be revalued taking into account these new tax rates. As a result, the value of the deferred tax asset (DTA) -- that resulted from the liquidation of Numico's former U.S. subsidiaries -- has been lowered by EUR 50 mln (non-cash) and recorded as an exceptional item in the tax line in the fourth quarter.
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 100 bps to 12.7%. Numico aims to reduce trade working capital as a percentage of sales to 10% in 2007.
Cash Flow (at actual rates) (please see appendix 4) Cash flow from operations and free cash flow excluding the acquisition of Valio, the Finnish Baby Food company, amounted to EUR 227 mln and EUR 161 mln, respectively, in 2004. In the fourth quarter, net cash flow from operations and free cash flow, excluding the acquisition of Valio, were EUR 96 mln and EUR 66 mln, respectively.
Capital expenditure amounted to EUR 89 mln, or 5.0% of net sales in 2004, in line with previous indications. Given the various strategic initiatives that Numico has initiated in 2004 that will continue in 2005, Numico expects similar levels of capital expenditure as a percentage of sales for 2005.
Debt Position (at actual rates) (please see appendix 6)
In 2004, the net debt position improved EUR 82 mln to EUR 987 mln. During the year, the convertible subordinated bonds 1999 were redeemed with the use of cash and utilisation of the bank loan facility. As a result, the total amount of outstanding convertible subordinated bonds reduced to EUR 977 mln. The cash balance of EUR 223 mln at the end of 2004 and the bank loan facility will be utilised to repay the subordinated convertible bonds of EUR 627 mln in June 2005.
Shareholders' Equity (Capital & Reserves) (at actual rates)
Shareholders' equity amounted to EUR (341) mln at 31 December 2004, compared to EUR (469) mln at 31 December 2003. The substantial improvement was driven by retained earnings of EUR 145 mln, which was slightly offset by a negative currency translation effect of EUR (15) mln. Numico is confident that -- through retained earnings as well as the intended share capital increase related to the acquisition of Mellin, the Italian Baby Food company -- the Company will return to a positive shareholders' equity by the end of 2005.
IFRS (please see appendix 7 - 9)
The 2004 financial statements of Numico are prepared in accordance with Generally Accepted Accounting Principles in the Netherlands (Dutch GAAP). From 1 January 2005 onwards, Numico will prepare its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). A reconciliation between the consolidated accounts based on Dutch GAAP and IFRS is provided for the full year 2004 income statement, opening shareholders' equity on 1 January 2004 as well as for the movements in shareholders' equity in 2004.
A live audio & 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.
(1) Comparable basis is at constant scope and constant exchange rates and also excludes exceptional items.
(2) Comparable basis is at constant exchange rates.
(3) Normalised: based on continued business and excluding exceptional items and result divestments after tax.
*** For the PDF-version of the full press release, please click on the link below: http://hugin.info/130673/R/983006/146261.pdf