Naturex Back on Track As Organic Growth Resumes
17 Sep 2015 --- French ingredients company Naturex is starting to reap the rewards of its new business model with two consecutive quarters of growth and 1H 2015 growth for the first time in two years.
The Group also benefited from a particularly favourable currency effect resulting from the strong contribution of US dollar sales and a consolidation scope effect linked to sales by Vegetable Juices Inc.
On that basis, consolidated revenue for the 2015 first half rose to €202.6 million, with strong growth of 28.0%, compared to last year's same period.
With the Group's key financial ratios in 2014 significantly impacted by exceptional factors in the fourth quarter, through its Conquest, Cash & People plan, Naturex focused efforts on applying cost efficiency measures and operational and financial discipline necessary for regaining a sound and solid footing in the 2015 first half.
For the plan's "Cash" component, specifically adapted management practices were implemented, accompanied by a strong commitment by all teams. These efforts resulted in a very positive impact at the level of inventories, trade receivables management and cash generation.
Inventories now represent 41% of revenue, whereas the DSO (days sales outstanding) decreased on average by 15 days over a one-year period. This contributed to free cash flow generation of €33.1 million compared to €6.3 million at 30 June 2014. Net financial debt also decreased by €22.1 million, further reducing financial leverage and providing the Group with greater flexibility. For the first half, net financial debt thus came to €138.3 million, down from €160.3 million at 31 December 2014. Net gearing (net financial debt/equity) represented 36.3% of consolidated equity compared to 45.6% at 31 December 2014.
At the same time, Naturex continued to focus on its key operating indicators which have not yet benefited fully from the effects of strong organic growth, reflecting the strategy of reducing production volume while actively destocking to reduce inventory levels.
The gross margin amounted to €113.2 million, up by €14.3 million or 14.5% from the 2014 first half, in line with sales growth for the first six months and acceleration in the 2015 second quarter. Conversely, as a percentage of sales the gross margin declined significantly to 55.9% (-6.6 points compared to the 2014 first half), reflecting mainly the effect of destocking (-4.7 points).
External charges, representing 21.5% of revenue compared to 24.2% one year earlier, amounted to €43.6 million. This 13.8% increase was primarily attributable to Vegetable Juices Inc. (€2.8 million) and a translation effect in the period (€3.0 million). Excluding the effects, external expenses declined by 1.3% (€0.5 million) confirming the positive effects of cost control measures implemented, and despite a €2.2 million increase between the first and second quarters linked to the strong increase in organic sales growth.
Current operating income amounted to €12.6 million, compared to €14.4 million in the 2014 first half, with a current operating margin at 6.2%.
Other non-current operating expenses amounted to €1.7 million compared to €1.1 million in the 2014 first half. These concern primarily costs incurred from reorganising manufacturing operations devoted to the Group's pharmaceutical activities within a single production site in Reyssouze, France. The implementation of this industrial plan resulted, on the one hand, in the closure of the Palafolls plant in Spain and, on the other hand, the Milan site's specialisation in nutraceutical applications.
"Operational and financial discipline measures taken over the first six months through the Conquest, Cash & People plan represent a first step in our Group's transition to a model for sustainable, lasting and profitable growth over the medium-term. As previously indicated, our priority in the second half will be improving operating profitability. By pursuing solid and dynamic growth, we will be able to activate the operational drivers necessary for achieving this objective," commented Olivier Rigaud, Chief Executive Officer and Director of Naturex.
"In terms of governance, after reinforcing the Management Committee in the first half by the addition of the Human Resources Director and the Chief Legal Officer, our Senior Management team will be completed in early November by the arrival of a new Chief Financial Officer."
