Zoetermeer-based food group Royal Numico has posted Q1 sales of €1.05bn, flat over the same period last year.
The Infant Nutrition, Clinical Nutrition and Consumer Diets and Sports categories posted sales growth during the Q1 of 4%, 10% and 6%, respectively. This performance followed a particularly strong Q4 for these product groups. In the US, the market for Vitamins and Herbs remains weak, contributing to an overall sales decline in the US of 4% from Q1 2001 although US sales show an improvement of 6.7% from Q4 2001, to reach €625m.
Gross margins in the quarter increased marginally to 62.1 %, reflecting benefits of price increases and lower raw material costs in Infant Nutrition and Clinical Nutrition. Margins in the US have stabilised at Q4 levels.
Total costs during the quarter increased by 6% largely due to increased personnel costs, together with increased advertising spend in the USA. Excluding currency impact the cost increase would have been held to 3%. As a result, EBITA for the quarter fell from €159 to €130m with the EBITA margin in the quarter falling to 12.3%.
A cost-restructuring programme in the US was announced in March 2002 with the aim of reducing the cost base of our US business by US$40m on an annualised basis. The cost for this restructuring will be incurred upon commitment and charged against operating profits. The fall in cash earnings of 11% to €74m was less marked than the decline in EBITA, reflecting the benefit of lower financing costs and lower tax.
Net cash flow from operations was €161m, down from €197m in Q1 2001, reflecting the fall in EBITA during the period. Investments during the quarter were €33m. The net cash position has improved by €132m during the quarter. During Q2 the company intends to refinance its €1bn multi-currency €-US$ loan by repaying €500m and refinancing the remainder.
Further progress was made in improving working capital during the quarter with improved management of both debtors and creditors. Inventory levels remained flat. The company intends to make further improvements in the management of working capital during the remainder of the year.
CFO Pim Oomens commented: “As we expected, Q1 sales matched the strong Q1 2001.
“In the US sales performance has stabilised around the level of Q4 2001. The outlook for the Q2 remains challenging compared to the record H1 2001. We have started a significant cost reduction programme in the US. The non-US businesses are expected to continue to deliver growth in line with expectations”.
Review of sales by region
Sales by Region* (€m) Q12002 Q12001 %change
Northern Europe 157 152 3
Central Europe 61 59 3
Southern Europe 83 80 4
Eastern Europe 51 43 19
Total Europe 352 334 5
USA 625 649 (4)
Asia-Americas-Africa 77 76 1
Total 1,054 1,059 0
* net sales from continuing business
The final dividend proposed is €0.48, with €0.40 having been paid as an interim dividend. Shareholders can elect to have the dividend paid in cash, or may elect to take the stock dividend alternative. The exchange ratio for the stock dividend will be 1:64. The payment date is 21 May 2002.
Q1 sales matched the strong Q1 2001. US sales have stabilised around the level achieved in the Q4 2001. The H1 2002 will be challenging compared to the strong H1 2001. Numico expects the H2 to show improvement over the comparable period of 2001, but the shortfall in the H1 is such that cash earnings for the year will not match those achieved in 2001.