New agreement swells Natural profits
since first listing five years ago, thanks to initial payments from
a major licensing deal last year, which significantly boosted first
half revenue and reduced operating costs.
The company, which was granted six new patents during 2003 giving it 27 in total, is now planning to spin off its sales and marketing activities, largely taken over by Cognis and BASF under recent agreements, to concentrate on gaining further intellectual property for speciality lipids.
It is currently relying heavily on last year's licensing deal with Cognis, which gave the German company rights to a number of Natural's patents on Tonalin brand CLA. The deal ties up most of its property on CLA for human applications and also hands over most of its customers across Europe and the US.
Natural's own sales of Tonalin CLA in the fourth quarter, mainly to the Nordic and European region, amounted to NOK 4.8 million (€0.54m), up 9 per cent from the previous year's quarter, and a third of all revenue during the three-month period. Cognis is expected to take over all the company's sales of CLA in the future.
The licence agreement with Cognis is royalty-based, with payments calculated as a percentage of sales of Tonalin. Cognis is under agreement to make guaranteed minimum payments to Natural over the next three years, in the high double digit range in million Norwegian krone. Thereafter, until the agreement runs out in 2018, royalty rates vary from middle single digit to low double-digit figures depending on the area of application for CLA.
Last year's figures show a signficant drop in operating revenue in the second half, down to NOK 14.6 million in the fourth quarter from NOK 38.3 million the previous year. This was a small proportion of the full year's NOK 104 million (€11.8m), which fell by 40 per cent on the previous year, due to the licensees' takeup of sales. Natural said it received initial licensing payments in the first half, swelling the year's figures.
The company did not comment on whether such a situation will be repeated next year.
A significantly smaller cost base with no cost of goods sold helped Natural treble its operating profit for the year to NOK 13.9 million from NOK 4.5 million and post-tax profit surged to NOK 15.1 million from only NOK 1.9 million in 2002.
The share price has risen to NOK 1.49 per share, from NOK 0.19 per share in 2002.
Natural, along with Cognis, will be hoping that a major marketing campaign for Tonalin CLA in the USA launched last year will boost sales of the product in 2004. A long-term study on the use of Tonalin CLA in humans - the most comprehensive study so far on people - furthers the research on the fat-reducing effect of CLA and its safety and will be cited in the marketing campaign.
BASF has also seen higher sales of its CLA in animal feed and last year launched a CLA-enriched dog food, to be rolled out to new markets with further regulatory approvals.
