Good start for newly focused Numico

The sale of its supplements business GNC late last year and a new focus on baby food and clinical nutrition is already paying off for Dutch group Numico, which this week announced better-than-expected first quarter results. While total sales were some 53 per cent lower than in the previous first quarter because of the supplement unit sale, the underlying sales performance showed an encouraging 8 per cent improvement to €402 million, confirming a trend already seen at the end of last year. Analysts Goldman Sachs had predicted a 6 per cent increase in like-for-like sales.

EBITA was also boosted by the disposal, rising by 8.5 per cent in underlying terms and by 7.8 per cent in actual terms to €80 million. Analysts had predicted a 7 per cent like-for-like improvement.

Numico, which is the leading infant nutrition maker in Europe, said that the baby food unit's performance was particularly encouraging. Sales from the Nutricia unit were up 6.5 per cent to €257 million, while EBITA was up 11 per cent to €52 million, helped by a cost-cutting programme and a 20 per cent increase in marketing expenditure.

Particular growth came from countries outside of western Europe, with Russia, Turkey and Indonesia leading the way, but most encouraging of all was a return to sales growth in core western European markets, such as the UK, Ireland, the Netherlands and Belgium, where the company has concentrated its restructuring efforts.

GS said that there was every chance that this steady recovery in the baby food sector could be maintained, with the Numico management confident that rising raw material costs could be coped with and the impact of CAP reform overcome. The Project Focus cost-cutting programme will see the group cut the number of baby food factories from 16 to eight by the end of 2005, in turn generating €35 million in savings by 2006.

In the clinical nutrition division, sales growth was even higher, at 12 per cent, leaving total revenues at €138 million, with strong performances from both traditionally important markets such as Germany, the UK and the Netherlands and from new markets like France and Spain.

An increased focus on the home care and pharmacy channels, as well as disease-specific products, was highlighted as a key driver of growth. ."The numbers re-affirm that management has Numico nicely on track in its phoenix-like re-birth as a high revenue growth and high EPS growth rate company,"​ said GS. "Management remains confident on its targets for the year which depend, in part, on delivery of cost savings initiatives and new product introductions. We remain positive on the longer term prospects for the group, believing that the company has the ability to deliver above sector average top line growth and earnings growth."​