SCHIPHOL AIRPORT, Netherlands, Nov. 9, 2005 (PRIMEZONE) -- Royal Numico NV:
Financial Highlights Third Quarter 2005 (on a comparable basis) (a)
-- Total net sales and EBITA up 13.4% and 19.9%
-- 2005 net sales growth target raised to 12% and EBITA growth
of 10% reconfirmed(a)
-- EBITA margin at 18.8%, up 100 bps, despite 18% increase in
marketing spend
-- Nutricia Baby net sales up 14.0%; EBITA margin at 17.5%
-- Nutricia Clinical net sales up 12.2%; EBITA margin at 27.1%
-- Net result up 34.5% and earnings per share up 29.1% (at actual
rates)
-- Mellin integration will generate annualised cost savings of
15 mln in 2006
Total Company Third Quarter 2005 total reported net sales up 20.9% and total reported EBITA up 25.8% (incl. acquisitions)
Financial Highlights First Nine Months 2005 (on a comparable basis)(a)
-- Total net sales up 12.8% and EBITA up 8.2%; EBITA margin at
18.7%, excl. exceptionals
-- Nutricia Baby net sales up 12.9%; EBITA margin at 17.8%
-- Nutricia Clinical net sales up 12.6%; EBITA margin at 27.4%
-- Net result up 35.7% and earnings per share up 33.7% (at actual
rates)
-- Strengthened shareholders' equity at 73 mln compared to (306)
mln at the start of the year (at actual rates)
CEO Statement
"Numico is very pleased to announce the seventh consecutive quarter of record sales growth. We have achieved this new peak performance level of 13.4% growth through strong contributions of both divisions.
Clinical continued its solid growth track, with sales up 12.2%. Babyfood achieved stellar growth of 14%, off a strong growth pace. This growth was achieved across all regions and through excellent performance in the U.K., Ireland, Eastern Europe and Indonesia. Babyfood's sales momentum and strong innovation pipeline create a 'window of opportunity' to build our market share and the category through strong and focussed marketing investments.
We have also made significant progress on several key projects. We have finalised our portfolio rationalisation with the sale of our Brazilian baby food business, we further improved our stewardship in Indonesia by increasing our shareholding to 98% and implementing improved corporate governance and we have begun the integration of our Italian acquisition.
We have achieved EBITA growth of 19.9% in the quarter, coming off a first half with lower growth (+4.8%) mainly due to the phasing of the Babyfood restructuring plan.
With these results, we feel comfortable to raise our net sales growth target for 2005 from 10-12% to approximately 12%, while confirming our EBITA growth at 10%."
First nine
Third quarter % change (mln /eur) months % change
2005 2004 comp.(a)actual 2005 2004 comp.(b)actual
520 430 21.1 20.9 Total net sales 1,454 1,267 15.3 14.8
520 427 13.4 13.2 Net sales cont. 1,454 1,247 12.8 12.2
business
98 78 19.9 25.8 Normalised EBITA(c) 271 246 8.2 10.1
53 40 34.5 Net result attr. 150 111 35.7
to equity holders
55 42 32.2 Normalised net 152 119 27.7
result(c)
0.32 0.25 26.9 Normalised EPS(c) 0.90 0.72 25.8
0.30 0.24 26.5 Fully diluted EPS 0.85 0.66 30.8
(a) Comparable basis is at constant scope of consolidation and constant exchange rates.
(b) Normalised: based on continued business and excluding exceptional items and result divestments after tax.
OUTLOOK 2005
Following the strong performance in the first nine months of 2005, Numico feels confident that net sales growth in 2005 will be at around 12%, despite challenging comparables in the fourth quarter for both divisions. Numico also reconfirms the EBITA growth target of 10% for the year. These targets are based on constant scope of consolidation, constant currencies, excluding one-off items and barring unforeseen circumstances.
STRATEGIC HIGHLIGHTS
First Nine Months 2005
Portfolio Transformation
On 1 November 2005, Numico divested the last part of its portfolio that did not meet the criteria of Numico's strategic mission to be a high-growth, high-margin specialised nutrition company. The company sold its baby cereals business in Brazil, including the manufacturing plant, to Nutrimental S.A. Industria e Comercio de Alimentos -- a privately owned company -- for an undisclosed amount.
Indonesia
Numico has increased its shareholding in Sari Husada -- the listed Indonesian baby food company of which the company owned 84.5% at the start of the year -- to 98% for a total consideration of 92 mln. Various organisational changes were made to strengthen the overall management team and improve the governance structure of Sari Husada. Total one-off costs related to the strategic changes amounted to 4 mln which have been accounted for under "Acquisition and integration costs" in the third quarter.
Mellin Integration
The integration of Mellin -- the Italian baby food business that was acquired on 23 June 2005 -- is well underway and will lead to annualised cost savings of 15 mln in 2006. Variable cost savings will arise from improved supplier contracts, distribution network savings and, importantly, from insourcing part of the production of Mellin's portfolio from mid-next year onwards. The fixed cost base of the combined businesses will also be lowered through a 25% reduction of the workforce, resulting in a headcount of 270 employees. These redundancies mainly result from the integration of the two respective retail sales forces.
These savings will be used to i) absorb the impact of the 25% price reduction in IMF that Numico initiated in Italy at the start of October ii) reinvest in marketing, people and IT required to reverse the declining growth performance of the combined businesses driven by Milupa and iii) ensure that margins in Italy will continue to improve. This gives the confidence that Numico will approach 7-9% net sales growth for the combined Italian businesses by 2007 at higher margins that will be accretive to the overall Baby Food division from next year onwards.
The integration has incurred one-off restructuring costs of 14 mln of which 11 mln has been accounted for under "Acquisition and integration costs" in the third quarter. The remaining 3 mln will be charged in the fourth quarter of 2005.
FINANCIAL REVIEW
Third Quarter 2005
This is the seventh consecutive quarter that Numico posts a record organic sales growth. Organic growth reached a record-high level of 13.4%, driven by 10.4% in volume, and 3.0% in price/mix. Both divisions contributed to this growth through a record-high sales growth in Baby Food at 14.0% and continued strong growth performance of 12.2% in Clinical Nutrition. Total reported net sales increased 20.9% to 520 mln, driven by 13.4% organic growth, 7.7% growth mainly related to the acquisition of Mellin and (0.2)% due to currency translations.
EBITA increased organically by 19.9% and the EBITA margin was at 18.8% excluding exceptionals, representing a margin improvement of 100 bps compared to the same period last year. This increase was driven by a strong margin improvement in the Baby Food division and stable non-allocated costs, which was partly offset by a slightly lower EBITA margin in the Clinical Nutrition division. Total reported EBITA increased 25.8% to 98 mln, including the Mellin acquisition and excluding an exceptional of (2) mln related to the Italian price fixing fine.
Net result attributable to shareholders increased 34.5% to 53 mln, driven by strong organic growth, high margins and the consolidation of Mellin. Normalised net result attributable to shareholders -- excluding one-off items and result divestments after tax -- increased 32.2% to 55 mln, supported by substantially lower net financial expenses. Earnings per share and fully diluted earnings per share amounted to 0.31 and 0.30, respectively, up 29.1% and 26.5%.
First Nine Months 2005
Net sales increased organically by 12.8%, driven by 9.9% in volume and 2.9% in price/mix. This growth was almost equally driven by Baby Food (+12.9%) and Clinical Nutrition (+12.6%). Total reported net sales grew by 14.8% to 1,454 mln, driven by 12.8% organic growth, 2.6% growth related to the consolidation of Valio and Mellin and (0.6)% due to currency translations.
EBITA increased organically by 8.2%, and the EBITA margin was at 18.7% excluding exceptionals, representing a margin decline of 80 bps. Total reported EBITA increased by 10.1% to 271 mln, including the Mellin acquisition and excluding exceptionals. These exceptionals consist of a total of (4) mln related to both the restructuring charge in China and the Italian price fixing fine in 2005 and an IAS 37 provision of (9) mln in 2004.
Net result attributable to shareholders increased 35.7% to 150 mln, driven by strong organic performance and the consolidation of Mellin. Normalised net result -- excluding exceptionals -- increased 27.7% to 152 mln supported by a continued reduction of net financial expenses. Earnings per share and fully diluted earnings per share amounted to 0.89 and 0.85, respectively, up 33.7% and 30.8%.
REVIEW BY SEGMENT (on a comparable basis)
Baby Food
Third First
Quarter (eur mln) nine months
2005 2004 change(d) 2005 2004 change(d)
311 273 14.0% Sales 904 805 12.9%
54 45 23.9% EBITA (excl 161 154 7.5%
exceptionals)
17.5 16.8 140 bps EBITA as a % 17.8 19.1 (90) bps
of sales
38 3 Sales acquisitions/ 50 15
divestitures
7 1 EBITA acquisitions/ 9 (1)
divestitures
(2) -- Exceptionals (4) (5)
349 276 26.4% Total sales 954 820 16.4%
60 46 30.6% Total EBITA 166 148 12.4%
17.1 16.6 50 bps Total EBITA 17.4 18.0 (60) bps
as a % of sales
(d) Comparable basis is at constant scope of consolidation and constant exchange rates.
The Baby Food division continued its accelerating growth trend in the third quarter of 2005, delivering the third consecutive quarter of double digit organic growth. The record organic growth of 14.0% was driven by 10.0% in volume and 4.0% in price/mix and all regions contributed to this growth. Western Europe grew by 4.8%, supported by strong performance from the U.K., Ireland and France. Eastern Europe and the Rest of the World continued the strong growth performance of the first half year with a growth of 33% and 20%, respectively, with particularly strong growth coming from Turkey, Russia, Indonesia, and Poland. Reported net sales increased 26.4% to 349 mln in the third quarter of 2005, driven by 14.0% organic growth, 12.8% growth mainly related to the consolidation of Mellin, and (0.4)% due to currency translations.
EBITA grew organically by 23.9% in the third quarter of 2005 excluding a one-off cost of (2) mln related to the Italian price fixing fine and notwithstanding a 19% increase in marketing spend. Total reported EBITA increased by 34.6% to 62 mln, excluding this one-off cost. This growth is driven by 23.9% organic growth, 14.5% growth mainly related to the consolidation of Mellin, and (3.8)% due to currency translations. The EBITA margin was at 17.5% excluding consolidation effects and exceptionals; an increase of 140 bps compared to the same period last year and a relatively stable performance compared to the first half of the year. This margin performance is a reflection of the continued and intended reinvestment of Focus savings in marketing spend, additional investments in innovation and the effects of changes in country mix.
Net sales increased organically by 12.9% in the first nine months of 2005, driven by 9.7% in volume and 3.2% by price/mix. Reported net sales in Baby Food grew by 16.4% in the first nine months of 2005, driven by 12.9% organic growth, 4.3% mainly related to the consolidation of Mellin and Valio and (0.8)% due to currency translations. EBITA increased organically by 7.5% in the first nine months of 2005, resulting in an EBITA margin of 17.8% which is 90 bps lower than the same period last year.
Clinical Nutrition
Third First
Quarter (eur mln) Nine Months
2005 2004 change(e) 2005 2004 change(e)
170 152 12.2% Sales 494 440 12.6%
46 42 10.9% EBITA (excl 135 124 10.5%
exceptionals)
27.1 27.8 (30) bps EBITA as a % 27.4 28.2 (50) bps
of sales
1 1 Sales other/ 6 2
divestitures
-- -- Exceptionals -- (2)
171 153 12.1% Total sales 500 442 13.0
46 43 8.2% Total EBITA 135 122 10.7
26.9 27.9 (100) bps Total EBITA 27.0 27.6 (60) bps
as a % of sales
(a) Comparable basis is at constant scope of consolidation and constant exchange rates.
The Clinical Nutrition division grew organically by 12.2% in the third quarter of 2005, driven by 11.1% in volume, and 1.1% in price/mix and supported across all channels and product segments. Organic growth was driven by Southern Europe (+13.8%) and the Rest of the World (+25.5%) and to a lesser extent by Northern Europe (+7.9%). Particularly strong performances were made in the U.K., France, Italy and Brazil. Reported net sales in Clinical Nutrition increased by 12.1% to 171 mln in the third quarter of 2005. This growth was driven by 12.2% organic growth, (0.4)% due to change in scope and 0.3% due to currency translations.
EBITA increased organically by 10.9% to 46 mln in the third quarter, notwithstanding 16% higher marketing and sales spend, 27% higher R&D spend and incremental costs related to the introduction of the plastic bottle. The EBITA margin decreased 30 bps to 27.1%.
Net sales increased organically by 12.6% in the first nine months of 2005, driven by 10.4% in volume and 2.2% in price/mix. Reported net sales in Clinical Nutrition grew by 13.0% driven by 12.6% organic growth, 0.6% due to change in scope and (0.2)% due to currency translations. EBITA increased organically by 10.5% in the first nine months resulting in an EBITA margin of 27.4% which is 50 bps lower compared to the same period last year.
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. The Dutch government has proposed to further reduce the Dutch corporate income tax rate from 31.5% to 29.6% as per 1 January 2006. The proposed tax rate reduction, if ratified, will have a (non-cash) impact of approximately (10) mln on the deferred tax asset in the fourth quarter of 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 130 bps to 13.6% compared to a year ago. The reduction was driven by a decrease in receivables of 90 bps and an increase in payables of 130 bps which was partly offset by an increase in inventory of 80 bps. Numico is confident that working capital as a percentage of sales will further improve in the remainder of the year and that the level at the end of the year will be lower than last year.
Cash Flow
Net cash flow from operations amounted to 112 mln and free cash flow was at 104 mln. This excludes the cash used to increase the shareholding in Sari Husada to 98% in the third quarter.
Capital expenditure amounted to 68 mln, or 4.7% of total reported net sales in the first nine months of 2005, in line with full year expectations. Project Focus, the plastic bottle project and initiatives to further improve the quality and safety levels of our plants continue to be important components of the capital expenditure.
Net cash flow from operational activities increased 39.4% to 177 mln in the first nine months of 2005, supported by the continuous effort to reduce trade working capital. Free cash flow amounted to 142 mln, excluding the net cash payment related to the Mellin transaction of 198 mln and 92 mln mainly related to the increase of the shareholding in Sari Husada.
Net Debt
The net debt level remained stable compared to the preceding quarter, notwithstanding the cash used to increase the shareholding in Sari Husada. Numico swapped 93 mln of its bank loan facility into commercial paper in the third quarter of 2005 to further diversify the company's capital structure.
Net debt increased by 183 mln to 1,122 mln in the first nine months of 2005, despite the cash required for the Mellin acquisition and the increase in the shareholding of Sari Husada; a reflection of Numico's strong underlying free cash flow. Numico has drawn 535 mln of the bank loan facility of 1,000 mln as at 30 September 2005.
Shareholders' Equity
Shareholders' equity improved by 379 mln to 73 mln in the first nine months of 2005. The significant improvement was mainly driven by retained earnings of 150 mln and the share capital increase of 216 mln related to the acquisition of Mellin.
UPDATE ON EPHEDRA
The number of ephedra claims filed per month continues to reflect a downward trend. Only 3 new cases were filed during the months of August through October, while 18 cases were either dismissed or settled, bringing the total amount of active cases down to 174. 53% 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 legal and administrative costs.
A live audio web cast of the analyst conference call and the related presentation slides will be available on our website (www.numico.com) as of 10:30 hrs CET.
(a) Comparable basis is at constant scope of consolidation and constant exchange rates.
(b) Comparable basis is at constant scope of consolidation and constant exchange rates.
(c) Normalised: based on continued business and excluding exceptional items and result divestments after tax.
(d) Comparable basis is at constant scope of consolidation and constant exchange rates.
(e) Comparable basis is at constant scope of consolidation and constant exchange rates.
For the full version of this release, including all the tables, please click on the link below:http://hugin.info/130673/R/1020169/160628.pdf