Naturex Annual Earnings Fall Sharply, New Chairman Appointed
01 Apr 2015 --- Naturex, the global natural ingredients specialists, has announced a sharp fall in full year 2014 earnings on the same day as its Chairman is replaced by Paul Lippens. It has also reinforced its turnaround plans, entitled Conquest, Cash and People, led by its new chief executive Olivier Rigaud.
The earnings drop, attributed to difficult market conditions and higher fixed costs was combined with lowered profitability as a result of significant exceptional write-downs of inventories and industrial assets in Poland and Spain.
Naturex reported that performances in 2014 were adversely affected by several macroeconomic and geopolitical factors, further exacerbated by highly volatile foreign exchange trends over the first nine months. In addition, Group results were impacted by difficult market conditions for some of its historic positions (the Food & Beverage business in Europe and Nutrition & Health in the United States) as well as a negative comparison base from Svetol sales in the US (-€7.6 million) and krill extraction sales (-€8.8 million).
In this context, Naturex nevertheless benefited from the positive effects of its choices to develop in markets with strong growth potential. These included the United States for Food & Beverage, particularly through the successful integration of Vegetable Juices Inc. in June 2014, and emerging countries that have provided good growth drivers for both Food & Beverage and Nutrition & Health.
Naturex had annual sales of €327.4 million, up 2% (2.2% at constant exchange rates). This included a sharp improvement in the fourth quarter in response to a more favourable foreign exchange environment (primarily the US dollar's rise versus the euro) and a very good contribution from Vegetable Juices Inc.
Recurring EBITDA amounted to €36.8 million, a sharp decline of 30.6%, whereas revenue had grown 2%. Current operating income came to €14.8 million, representing a margin of 4.5%, compared to 35.3 million in 2013.
Group operating margins were severely impacted in 2014, with a further deterioration in the fourth quarter. The consolidated gross margin came to €194.1 million compared to €196 million in 2013, declining 1% or 1.8 points as a percentage of sales to 59.3%.
For the first nine months the weakness of selected currencies (mainly the USD) relative to European currencies (EUR, GBP, CHF…) weighed on Naturex's margins, as its products originating from production sites in Europe and Switzerland are exported worldwide throughout its sales network. Furthermore, the translation effects for selected currencies limited contributions to earnings from international operations. The gradual strengthening of the dollar starting in the last quarter of 2014 will positively impact profitability in the coming months.
Staff costs rose 11.8% to €77.3 million from €69.1 million in 2013. This increase is largely due to the integration of Vegetable Juices Inc. and Chile Botanics (139 employees), payroll increases, in particular in high inflation countries (€2.1 million) and the full-year effect of Group organisational changes (€1.9 million).
External charges rose €3.6 million (+4.6%) to €83.2 million. This increase is largely the result of changes in the Group structure (€3.6 million). Excluding changes in structure and exchange rates, this increase included €0.2 million for R&D expenditures necessary for the strategy for market growth, in part offset by tighter controls over other expenditures.
This resulted in a margin squeeze from the combined effect of a reduced gross margin and increased committed fixed costs.
A net loss attributable to Group shareholders of €4.1 million was recorded for the period compared to a profit of €16.8 in 2013, after a €2.1 million tax charge from the non-recognition of a portion of deferred tax assets from results in Spain and Poland
Since arriving in October 2014 to head up the Group's executive management, Olivier Rigaud has sought to meet with Naturex's driving forces, visit all manufacturing sites and exchange views with Group customers to better understand the specific characteristics of Naturex business lines and acquire an understanding of the key challenges of its markets.
After this initial phase of observation, an action plan ("Conquest, Cash & People") setting priorities for producing the necessary drivers for lasting and profitable growth was implemented and presented in January 2015.
This plan is focused on three major lines of action:
• Returning to growth and conquering new markets;
• Applying rigorous financial discipline;
• Rallying and promoting the emergence of new talent.
Robust actions to promote a culture of rigour and discipline across all our operations have already been launched: a corporate governance organisation, engagement by operational and finance teams on common projects, adoption of growth-generating procedures, the alignment of individual performance targets and a decision steering process by key indicators.
These measures will lay solid foundations for the launch of our 2020 strategic plan to achieve Naturex's ambitions over the next five years and that will be presented to the financial community on 30 June 2015.
"2014 was particularly difficult due to a combination of factors that adversely affected our markets and businesses. The necessary strategic decisions that we took moreover had significant adverse non-recurring effects on our profitability" commented Olivier Rigaud, Naturex's Chief Executive Officer.
"And in a macroeconomic environment that still appears unstable, starting in January 2015 we implemented targeted action plans combined with a rigorous and disciplined approach across operations, while maintaining our momentum and agility for conquering new growth markets that is essential for generating sustainable and profitable growth. Finally, we will finalise and apply our 2020 strategic plan to create value and position Naturex as a major industry player of tomorrow."
