SOURCE: Royal Numico NV

February 21, 2007 01:45 ET

Numico: Fourth Quarter and Full Year Results 2006


Second Year of Double-Digit Organic Sales Growth at Improved Margins

For the full version of this release, including all the tables, please click on this link:

Financial Highlights Full Year 2006 (on a comparable basis) [ 1 ]

* Total sales up 11.9%; EBITA margin at 18.8%

* Nutricia Baby sales up 10.4%; EBITA margin at 19.1%

* Dumex sales up 20.2%; EBITA margin at 16.3%

* Nutricia Clinical sales up 10.9%; EBITA margin at 26.1%

* Normalised profit up 28.7% and normalised basic EPS up 15.9% [ 2 ] (at reported rates)

* Trade working capital improved 390 bps to 7.3% of sales

* Cash generated from operations at EUR 568 mln, up 50%

Financial Highlights Fourth Quarter 2006 (on a comparable basis) [ 1 ]

* Total sales up 12.6%; EBITA margin at 17.8%

* Nutricia Baby sales up 9.9%; EBITA margin at 17.5%

* Dumex sales up 24.0%; EBITA margin at 15.2%

* Nutricia Clinical sales up 13.0%; EBITA margin at 25.7%

CEO Statement

"I am very pleased to announce Numico's second year of double-digit growth - - at improved margins and with record free cash flow. Both divisions contributed to the excellent 11.9% growth performance, with Baby Food up by 12.2% and Clinical by 10.9%. Within Baby Food, Dumex enjoyed a smooth integration and excellent sales growth of 20.2% in 2006, with margins increased by 170 bps and a trade working capital reduction of EUR 35 mln. The strategically important Milks category contributed strongly to Baby Food's growth, with a 15% increase in sales. This was supported by the good performance of Growing Up Milks and of higher margin specialty products, as well as the roll-out of the immunity claim. Clinical, with its new management in place, shows signs of regained momentum, with 13% growth in the fourth quarter. The clear signs of recovery of Germany, a key market, is one example of the dynamism of the Clinical organisation. Based on the good results of 2006 and the successful integration of Dumex, we feel confident to give a sales growth guidance for 2007 of between 10-12%, with an EBITA margin improvement of 10-20 bps."


Numico will propose to the Annual General Meeting of Shareholders on 25 April 2007 to pay a dividend related to 2006 of EUR 0.20 per ordinary share. The dividend will be paid out fully in ordinary shares or fully in cash (after deduction of withholding tax) at the shareholder's option. The stock dividend will be equal to the value of the cash dividend, barring any rounding effects. The ex-dividend date will be Friday 27 April 2007 and the payment date will be Tuesday 22 May 2007.


Based on the strong potential of the markets in which Numico operates, the company expects total sales to grow organically between 10 - 12% and the EBITA margin to improve between 10 and 20 bps in 2007. The margin improvement reflects the current expectations on the impact of raw material price developments.

These targets are all based on constant scope of consolidation, constant exchange rates, excluding exceptionals and barring unforeseen circumstances.

FINANCIAL REVIEW (on a comparable basis [ 4 ])

Full Year 2006

Reported sales increased 31.9% to EUR 2,623 mln in 2006. This growth consisted of 11.9% organic growth, driven by 10.4% organic growth for Nutricia Baby, 20.2% for Dumex and 10.9% for Nutricia Clinical. Growth through acquisitions amounted to 19.4% and currency translation effects added 0.7% to the growth. The impact of the earthquake in Indonesia and the jar recall in Q4 05 was limited to (10) bps. Organic sales growth was driven by 8.8% in volume and 3.1% in price/mix.

The gross margin improved across all three reporting units in 2006 compared to 2005. This was mainly due to favourable product mix, cost savings from various efficiency initiatives and pricing.

Numico's overall EBITA margin was 18.8%, an improvement of 20 bps compared to 2005 despite an increase in A&P and R&D spend of 22% and 21%, respectively. Normalised profit and normalised basic earnings per share amounted to EUR 274 mln and EUR 1.43, up 28.7% and 15.9%, respectively.

Fourth Quarter 2006

Reported sales increased 28.0% to EUR 690 mln in the fourth quarter of 2006. This growth consisted of 12.6% organic growth, driven by 9.9% organic growth for Nutricia Baby, 24.0% for Dumex and 13.0% for Nutricia Clinical. Growth through acquisitions (primarily Dumex) amounted to 15.8% and currency translation effects negatively impacted growth by (1.2)%.

Numico's overall EBITA margin was 17.8% or 80 bps lower which can mainly be attributed to phasing of investments in A&P and R&D which were up 25% and 36%, respectively.

Normalised net profit and normalised earnings per share amounted to EUR 70 mln and EUR 0.36, up 18.5% and 12.0%, respectively.

REVIEW BY ACTIVITY (on a comparable basis) [ 7 ]

Baby Food

Nutricia Baby sales increased 10.4% organically to EUR 1,506 mln in 2006. This growth was driven by 7.5% in volume and 2.9% in price/mix. Western Europe grew by 3%, driven by continued growth in the UK and improving performances in Italy, Ireland and Belgium primarily offset by a disappointing performance in France. Eastern Europe and the Rest of the World grew by 22% and 20%, respectively, with particularly strong growth in Turkey and Indonesia.

The EBITA margin was 19.1% or 50 bps higher than in 2005, despite an increase in A&P and R&D spend of 20% and 22%, respectively. A favourable shift in product mix and various cost savings initiatives contributed to this margin improvement.

These figures exclude EUR 7 mln of lost sales and EUR 3 mln of margin loss due to the Indonesian earthquake in May 2006.

Nutricia Baby sales grew by 9.9% in the fourth quarter of 2006. The EBITA margin was 17.5% or 80 bps lower than in the fourth quarter of 2005 due to phasing of A&P and R&D spend which were up 22% and 58%, respectively.


Sales in Dumex grew by 20.2% to EUR 374 mln in 2006, supported by all countries and with particularly strong growth in China and Vietnam. Growth was driven by 11.6% in volume and 8.6% in price/mix.

The EBITA margin increased 170 bps to 16.3% despite an increase in A&P spend of 34%. This can mainly be attributed to premiumisation of the product portfolio, integration savings and good cost management.

Sales in Dumex increased by 24.0% in the fourth quarter of 2006 and the EBITA margin was 15.2% or 570 bps higher than in the fourth quarter of 2005, despite an increase in A&P spend of 29%.

The integration of Dumex was successfully completed in the course of 2006. The various efficiency initiatives have generated the anticipated annualised cost savings of EUR 5 mln in 2006 and Dumex is on track to generate EUR 10 mln of annualised cost savings in 2007 and beyond. The remaining EUR 8 mln of acquisition and integration costs were charged in the fourth quarter thereby bringing the total amount to EUR 35 mln, in line with initial expectations.

Clinical Nutrition

Sales in Clinical Nutrition grew by 10.9% to EUR 743 mln in 2006. Growth was driven by Southern Europe (+12%) and Rest of the World (+22%) which was partly offset by Northern Europe (+6%), specifically impacted by the changes in German reimbursement. The UK, US, France and Brazil delivered particularly strong performances. Growth was driven by 9.7% in volume and 1.2% in price/mix.

The EBITA margin was 26.1%, representing a decrease of 150 bps compared to 2005 as a result of an increase in R&D and A&P spend of 19% and 17%, respectively.

The acceleration of sales continued in the fourth quarter with an increase of 13.0%, reflecting an improved performance in Germany. As part of the efforts to bolster the German business, Numico sold a stake in a German home care organisation in return for a long term supply agreement. The EBITA margin decreased 360 bps to 25.7% driven by an increase in R&D and A&P spend of 19% and 34%, respectively, also driven by the phasing of other investments to support future growth.

In the fourth quarter of 2006, Numico sold its Coeliac business to Dr. Schär Srl., an Italian family-owned company that is the leading European player in the gluten-free food products sector.



The Dutch government reduced the Dutch corporate income tax rate to 25.5% as per 1 January 2007. As a consequence, the deferred tax asset was lowered by EUR (36) mln (non-cash) in the fourth quarter of 2006.

The underlying effective tax charge (P&L) and cash tax rate were 29.5% and 25%, respectively, in 2006. The effective tax charge is expected to range between 25% - 27% going forward, mainly due to the lowering of the Dutch corporate tax rate to 25.5%. The cash tax rate is expected to be around 20% for the next seven years due to the utilisation of the aforementioned deferred tax asset which has now been formally approved by the Dutch tax authorities.

Cash Flow

Total trade working capital improved 390bps to 7.3% of sales compared to December 2005. This was driven by a substantial improvement in trade payables (up 250 bps) and trade receivables (down 150 bps) while inventory levels remained stable.

Cash generated from operations increased by 50% to EUR 568 mln in 2006, driven by the strong increase in operating profit and supported by the strong trade working capital improvements. Capital expenditure amounted to EUR 132 mln, or 5.0% of sales in 2006, primarily spent on quality, innovation and systems. Free cash flow amounted to EUR 294 mln in 2006 compared to EUR 100 mln in 2005, excluding the net cash payment related to the acquisition of EAC Nutrition and Golden Circle of EUR 1,207 mln in 2006.

Net Debt

Net debt improved to EUR 1,418 mln in 2006 due to strong free cash flow. The stated net debt of EUR 515 mln at the end of 2005 included the cash on balance that was used on 2 January 2006 to pay the purchase price of EUR 1.2 billion related to the Dumex acquisition. Net finance costs amounted to EUR 90 mln in 2006. More detailed information can be found in appendix 5.

Shareholders' Equity

Shareholders' equity improved by EUR 189 mln to EUR 869 mln in 2006. This was driven by retained earnings of EUR 202 mln, partly offset by negative currency translation effects on intangible assets primarily related to the Chinese renminbi. Further details can be found in appendix 4.


Out of the total of 392 ephedra cases that were filed against GNC and Rexall Sundown over the last years, 95% had been resolved by the end of 2006. Only 18 cases remained outstanding by year-end 2006.

All settlement payments and related legal and administrative costs related to the ephedra litigation risk are covered by Numico's product liability insurance which is occurrence-based.

A live and on-demand video web cast of the analyst & investor presentation on Wednesday 21 February 2007 will be available as of 16.30 hrs CET today. The related presentation slides will be available on our website ( as of 07.30 hrs CET on 21 February 2007.

[ 1 ] 'Normalised' excludes discontinued businesses, acquisition and integration costs and exceptionals after tax(appendix 4)

[ 2 ] For reconciliation of pro forma Q4 & FY 05 sales and EBITA, please refer to appendix 6

[ 3 ] 'Comparable basis' is at constant scope of consolidation and constant exchange rates and excl. exceptionals

[ 4 ] For reconciliation of pro forma Q4 & FY 05 numbers, please refer to appendix 6

[ 5 ] For reconciliation of pro forma Q4 & FY 05 numbers, please refer to appendix 6

[ 6 ] 'Comparable basis' is at constant scope of consolidation and constant exchange rates and excl. exceptionals

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