New Naturex Strategy Yields First Encouraging Results as Nutrition & Health Back on Track

27 May 2015 --- Naturex has reported that consolidated revenue for the 2015 first quarter, as reported on 28 April 2015, was €98.6 million, up 23.9% from one year earlier. This increase reflected both the impact of acquisitions with a contribution from Vegetable Juices Inc. (€9.6 million a constant exchange rates) and a currency effect resulting in particular from the US dollar's rise over the period (€9.4 million).

For the historical Group structure (€79.6 million), targeted commercial initiatives made it possible to halt the decline in organic growth after four consecutive quarters in 2014. Performances by region and business performances were however mixed.

Nutrition & Health is now back on track with positive organic growth attributable in particular to the plan launched in the US at the end of 2014 to recapture growth along with good performances in the Asia-Pacific region. Europe remains a major focus of attention and a plan for re-energizing business development has already been launched.

Food & Beverage is performing well in the United States, benefiting from both the strong contribution by Vegetable Juices Inc. and also the continuing market transition in favour of natural foods. Europe in contrast was adversely impacted by the high base effect in relation to the 2014 first quarter in an environment that is still sluggish.

The Personal Care business has virtually doubled in size, confirming the pertinence of our range's positioning with a targeted customer base of leading cosmetic industry names.

Finally, Toll Manufacturing in the period included krill toll manufacturing sales while the Houston plant (JV with Aker BioMarine) is in a technical test phase.

"The 2015 first quarter confirmed the positive effects resulting from the adoption of our ‘‘Conquest, Cash & People'' plan. This renewed growth and improvement in our operating profitability coming after the heavily impacted previous year, illustrate our responsiveness and the commitment of Group teams to the principles of financial and operational discipline", commented Olivier Rigaud, Chief Executive Officer and Director of Naturex.

"Consolidating organic growth by hard-hitting commercial initiatives, along the lines of our successes in Nutrition & Health in the United States, improving performances by generating value from our investments notably in India and Chile and continuing efforts to control operating expenses and staff costs are necessary conditions for activating the drivers for sustainable profitability beginning in the second half of 2015".

While Group operating margins were impacted significantly in 2014 by exceptional items registered in the fourth quarter, strict discipline applied across all operations has yielded the first encouraging signs in the quarter.

The consolidated gross margin amounted to €56.1 million, up 13.5% from the 2014 first quarter. The gross margin as a percentage of sales was 56.9% compared to 62.1% a year earlier, or down 5.2 points, reflecting:
• A currency effect (-0.2 point) linked in particular to the Swiss francs' rise increasing the production costs of Swiss manufacturing sites when translated in the Group's financial statements. The US dollar's rise since the 2014 fourth quarter should result in a better contribution to the gross margin in the 2015 second quarter.
• A Group structure effect (-1.8 points) reflecting the strong contribution from Vegetable Juices Inc., specialised in fruit and vegetable juice concentrates generating a gross margin lower than the Group average.
• A product mix effect for the historical Group structure (-3.2 points) linked mainly to inventory rationalization.

Staff costs rose 25.9% to €22.7 million from €18 million in the 2014 first quarter. This increase includes in large part the €2.4 million contribution of Vegetable Juices Inc. as well as a €1.1 million currency effect resulting from the rise of selected currencies in the period (USD, CHF, GBP).

Excluding these effects, staff costs increased by €1.2 million, representing a contained increase of 6.7% for the historical Group structure primarily due to:
• €0.4 million from a marginal increase in headcount in light of recruitments for operational posts requiring specific expertise finalised in the quarter; this effect should be limited for the 2015 full year and offset by personnel redeployment pursuant to the cost control commitments for overhead expenses;
• €0.8 million in salary increases linked to compensation for individual employee performance and compensation indexation in certain high inflation countries also including various provision amounts (pensions, paid vacation, bonuses, etc.).

In addition, external charges represented 21% of revenue compared to 24% one year earlier, amounting to €20.4 million. This 8.2% increase was primarily attributable to Vegetable Juices Inc. (€1.6 million) and a currency effect in the period (€1.2 million). At constant currency and structure, external charges decreased by 6.6% (€1.2 million), confirming the positive effects of cost controls and discipline applied in connection with the budget management process implemented in 2015.

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