NATUREX : Results in line with our Bright2020 strategic plan

FY 2016 consolidated results

(1 January to 31 December 2016)

Results in line with our Bright2020 strategic plan

• Quality organic growth from our two strategic platforms


• A significant improvement in the recurring operational EBITDA margin to 15.2%


• A sharp rise in net earnings per share

Press release

Avignon, 29 March 2017 - Naturex, the global leader in speciality plant-based natural ingredients, announces its annual consolidated results for fiscal 2016.

Message of Olivier Rigaud

2016

Results

“2016 was the first year of major progress in executing our Bright2020 strategic plan.

We finalised the regionalisation of our organisation providing greater agility, cross-functionalities and efficiency in order to better seize growth opportunities in our different markets.

At the same time, we continued to simplify our business model through targeted actions across our entire value chain according to the Bright2020 plan's strategic priorities, Care, Execute & Grow.

These initiatives allowed us to deliver quality organic growth from our two strategic platforms by targeting our customer approach in our traditional markets and boosting our presence in emerging countries.

Gains in efficiencies from structural efforts applied to the conduct of all our operations and a better allocation of our resources led to a sharp increase in our current operating margin and a very robust improvement in net income that was multiplied by 30.

Our business model has been reinforced by these measures and is now more resilient and efficient. We have in this way created the optimal conditions to seize the opportunities offered by the market acceleration for natural products.

Building on these sound and solid foundations, Naturex begins a new phase in its development cycle in 2017 to deliver its Bright2020 objectives. Our priorities are clearly focused on top-line growth and profitability, with however a less favourable 2017 first half resulting from the acceleration of simplification measures and comparison base effects for certain product categories.

A pioneer in the universe of nature 25 years ago, Naturex's fundamentals across the entire value chain constitute unique and differentiating strengths that influence its ecosystem: a clearly defined mission and strategy, expert, driven and fully focused teams, an efficient and agile regional organisation, a high level of expertise in science and innovation, a solid entrepreneurial culture and a profound sense of social responsibility.”

Olivier Rigaud, Chief Executive Officer and Director of Naturex

Financial

2016

Results

In €m
FY 2016
FY 2015
Change (%)


Revenue
404.4
397.8
1.6%


Gross margin on COGS
112.6
94.6
19.0%


Gross margin on COGS (%)
27.8%
23.8%
 


Recurring operating EBITDA
61.4
54.2
13.3%


Current operating margin (%)
15.2%
13.6%
 


Current operating income
31.5
26.3
20.0%


Current operating margin (%)
7.8%
6.6%
 


Net operating income
26.7
23.1
15.8%


Operating margin (%)
6.6%
5.8%
 


Net income attributable to Naturex shareholders
17.9
0.6
X 30


Net margin (%)
4.4%
0.1%
 

The separate annual financial statements of Naturex S.A. and the Group's consolidated financial statements (including the notes) were presented to the Audit Committee on 23 March 2017 and approved by the Board of Directors of the Company on 29 March 2017. The consolidated financial statements have been audited by our Statutory Auditors and their report will be issued after completion of the procedures required for filing the registration document no later than 28 April 2017.

The consolidated financial statements for the period ending 31 December 2016 are reproduced at the end of this document.

Analysis of results

2016

Results

On the path to a sustainable and profitable business model

Revenue¹ for FY 2016 amounted to €404.4 million, or organic growth 3.6%, like-for-like and at constant exchange rates. At current exchange rates, revenue was up 1.6% from 2015.

This foundation for sound organic growth was achieved through continuing measures to rationalise the product portfolio and build a higher value-added product mix based on key categories² identified through Bright2020. Driven by strong market trends in favour of natural and functional ingredients, the two strategic platforms achieved quality organic growth: +6.0% for My Natural Food with annual sales of €208.0 million and +4.4% for My Natural Selfcare with €137.5 million in sales. Other activities registered a 14.3% decline in sales mainly attributable to the discontinuation of the krill toll manufacturing business and the reduced number of SKUs identified in 2016.

In geographical terms, the implementation of a regional sales organisation boosted the performances of emerging markets in Latin America and Asia-Pacific with continuing growth. Their combined sales amounted to €83.9 million, with 20.1% in organic growth, and representing 20.7% of Group revenue. The Europe/Africa/Middle East region displayed good momentum with solid organic growth of 4.5% to reach €147.5 million in sales; North America registered 3.6% decline in sales to €172.9 million largely reflecting the volatility of the nutraceutical market in the United States going through a phase of reconstruction as it adapts to new regulatory requirements.

First visible effects of our measures to improve operating profitability

The gross margin on COGS amounted to €112.6 million, up 19% compared to 2015 after taking into account the cost of goods sold of €291.8 million which includes all costs linked to production, including labour costs.

The gross margin as a percentage of sales on that basis represented 27.8% compared to 23.8% in 2015 or an increase of 400 basis points, largely in response to simplification measures and the optimisation of manufacturing resources.

The presentation of expenses by function illustrates the actions taken and makes it easier to monitor progress of the strategic plan in terms of innovation, market access and execution, and accordingly:

• Selling and marketing expenses amounted to €29.7 million compared to €24.9 million in 2015, reflecting the reinforced commercial structure with the deployment of front-line support for the sales teams and a strengthened regional governance organisation with four Senior Vice Presidents-General Managers. These expenses represented 7.3% of sales, up from 6.3% one year earlier.


• Research and development expenditures amounted to €14.0 million, up from €11.9 million in 2015, taking into account on the one hand the redeployment of staff to the front-line and an acceleration in innovation initiatives within key categories in accordance to the strategic plan. R&D expenditures represented 3.5% of revenue. As a reminder, by 2020 these expenditures should represent 5% of revenue;


• General and administrative expenses amounted to €36.2 million compared to €32.6 million in 2015 and represented 9.0% of revenue compared to 8.2% in 2015 taking into account the increased weight of managerial functions reflecting organisational changes in the year.

Obsolete inventory amounted to €3.1 million compared to €2.8 million one year earlier.

Recurring operating EBITDA³ amounted to €61.4 million, up 13.3% for a margin of 15.2% compared to 13.6% in 2015. This performance illustrates the first effects of the operating levers generated by manufacturing efficiency gains, a higher value added product mix and costs structure optimisation measures started in 2015.

Current operating income rose in consequence 20.0% to €31.5 million, generating a current operating margin of 7.8% compared to 6.6% one year earlier.

Consolidated net operating income amounted to €26.7 million compared to €23.1 million in 2015, after non-current operating expenses mainly associated with rationalisation measures and the optimisation of selected industrial assets of the Group and €2.9 million in capital gain from the disposal of the Palafolls site in Spain that was put on the market in 2015 as part of the reorganisation of the pharmaceutical activity.

Net borrowing costs amounted to €6.3 million (1.6% of revenue) compared to €7.2 million (1.8% of revenue) in 2015.

Other financial income and expenses include €4.6 million in income compared to an expense of €1.2 million in 2015, reflecting in large part a positive foreign exchange effect mainly linked to the pound's depreciation on the translation of intra-Group positions denominated in euros in the UK subsidiary.

Finally, after a tax expense of €7.2 million (at an effective tax rate of 28.6%), net income attributable to Naturex shareholders amounted to €17.9 million multiplied by 30 in relation to 2015, reflecting a more balanced and resilient business model.

On that basis, net earnings per share⁴ registered strong growth, up from €0.0593 in 2015 to 1.9306 in 2016.

Financial position

2016

Results

Actively maintaining discipline for a better use of resources

Significant efforts devoted to simplifying Naturex's operating model combined with preparations for future growth weighed upon the key balance sheet aggregates at 31 December 2016, compared with an exceptional situation in 2015, primarily and intentionally focused on actively reducing inventories.

• The Working Capital Requirement amounted to €196.4 million or 49% of sales, compared to €156.0 million at 31 December 2015. This increase reflects a proactive approach involving:
  
  
  
  • A continuing focus on actively managing customer credit risk, with a decline in days sales outstanding (DSO) to 53 days vs. 55 days at 31 December 2015;
  
  
  • An increase in inventories as a percentage of sales⁵ to 46% from 41% at 31 December 2015 that reflects, on the one hand, the categorisation of inventories including in particular the creation of a catalogue of SKUs as part of the simplification process and the customer quality engagement and, on the other hand, restocking raw materials following the transfer of the pharmaceutical activity to the Reyssouze site (France);
  
  
  • A significant improvement in supplier payment terms reflecting the governance and management procedures that were implemented.
  
  


• Net financial debt at 31 December 2016 amounted to €173.9 million compared to €130.1 million at 31 December 2015, an increase of €43.8 million, primarily impacted by the €36.1 million decrease in cash resulting from the active phase of the global inventory strategy deployed over the year. The Debt-to-EBITDA leverage ratio^{6 / is 2.83 x compared to 2.40 x at 31 December 2015 and gearing7 46.7% compared to 35.4% at 31 December 2015.}

2017 trends and outlook

2016

Results

Tipping Point: Natural products are becoming the new standard for consumers

As consumer interest for more natural, healthier, more functional and more responsible products gains momentum, what was previously only a trend has become the new standard. With the tipping point now reached, in response to this transformation in demand and increasing regulatory pressure, manufacturers must imagine alternatives to their traditional products that are still too frequently synthetic in origin.

Naturex: Deep expertise inspired by nature

A pioneer 25 years ago in the universe of nature, Naturex has successfully developed a unique expertise based on a market differentiation, solid strengths and a clearly defined mission: actively encouraging the shift from the synthetic to the natural by sustainably revealing and magnifying the treasures of the botanical world in order to assist its customers create natural and genuine products for the nutrition, pleasure, well-being and health.

Ambitious challenges ahead in line with Bright2020

In a difficult global macroeconomic environment that remains under pressure and despite cyclical or regulatory pressures that could create volatility for certain businesses, Naturex remains confident in its ability to seize upon growth opportunities in its different markets, increase profitability and maintain a sound financial position by driving cash flow generation.

It should be noted that in the 2017 first half, the acceleration of simplification measures and the comparison base effects for certain categories of products launched in the same period in 2016 will have an adverse impact at the level of sales.

With a talented workforce of 1,700 fully focused on an ambitious and responsible corporate project, Bright2020, Naturex anticipates a new cycle of lasting and profitable growth, by putting proximity with its partners and customers, innovation, ethics and sustainable development at the heart of its strategy.

You can receive all financial information of Naturex free of charge by signing up at: www.naturex.com

• SFAF analysts meeting of 30 March 2017
  
  Naturex will present its 2016 consolidated results at the analysts meeting (SFAF - French Society of Financial Analysts) of 30 March 2017 at 10 a.m. (admissions as from 9:30 a.m) at the offices of Orrick, 31 Avenue Pierre 1er de Serbie, 75016 Paris.). A webcast of the presentation will be available live and by retransmission from the following link.

ACCESS TO THE WEBCAST

Analysts meeting (SFAF - French Society of Financial Analysts) of 30 March 2017 at 10:00 a.m.

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To access the live or replay version of this webcast from a computer, click on: http://edge.media-server.com/m/p/bw9k9gri

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• Financial schedule

  
  
  - 2017 first-quarter revenue and financial information
  12 May 2017
  
  
  



• Upcoming events

  
  
  - Analysts meeting (SFAF - French Society of Financial Analysts), Paris
  30 March 2017
  
  
  - AGM
  20 June 2017
  
  
  

About Naturex

Naturex sources, manufactures and markets natural speciality ingredients for the food, health and cosmetic industries. As the Natural Maker, the company actively supports the global shift from synthetic to natural through an offer built on two main focus areas: My Natural Food and My Natural Selfcare. Naturex's portfolio includes colours, antioxidants, speciality fruits & vegetables, phytoactives, and numerous other plant-based natural ingredients, designed to create healthy, authentic and effective products.

The Group's strong commitment to quality, sustainability, continuous innovation process, and the talent of its people are at the heart of its success.

Headquartered in Avignon, France, Naturex has experienced steadily-increasing growth throughout the last 25 years. The Group had revenue of €404.4 million in 2016 and employs 1,700 people worldwide.

The Group is listed on Euronext Paris, Compartment B – Index: Euronext Next 150, Enternext CAC PEA-PME 150, CAC Small & Mid, CAC Small, Gaïa - Ticker: NRX - Reuters: NATU.PA - Bloomberg: NRX:FP - DR SYMBOL: NTUXY

 NATUREX, From Nature to You

• Contacts

Carole Alexandre

Head of Investor Relations

Tel.: +33 (0)4 90 23 78 28

[email protected]
Anne Catherine Bonjour

Actus Finance Press Relations

Tel.: +33 (0)1 53 67 36 93

[email protected]

¹ Detailed information on 2016 revenue is provided in the press release published on 6 February 2017.

² Key product categories identified within the Bright2020 strategic plan: natural colours, natural antioxidants, fruit and vegetable-based ingredients, and phytoactives.

³ To better reflect the annual performance without the impact of inventory management measures that were not generated over the period, Naturex adopted a new alternative performance indicator. The destruction of stock and inventory provisions for more than two years are now eliminated from EBITDA under the term of recurring operational EBITDA. The previously used indicator of Recurring EBITDA took into account only the restatement of amortisation, depreciation and impairment, whether for tangible or intangible fixed assets.

⁴ Basic earnings per share (in euros)

⁵ The Inventory-to-Sales ratio based on sales over a rolling 12-month period excluding Toll Manufacturing.

⁶ Net financial debt / Recurring operating EBITDA

⁷ Net financial debt / equity

APPENDICES

Income statement by function

In €m
FY

2016
FY

2015


Revenue
404.4
397.8


Cost of goods sold
(291.8)
(303.2)


Gross margin on COGS
112.6
94.6


Gross margin on COGS (%)
27.8%
23.8%


Other operating income
2.2
3.9


Selling and marketing expenses
(29.7)
(24.9)


Research and development expenses
(14.0)
(11.9)


General and administrative expenses
(36.2)
(32.6)


Other operating expenses
(0.3)
0.3


Obsolete inventories
(3.1)
(2.8)


Current operating income
31.5
26.3


Current operating margin (%)
7.8%
6.6%


Other non-current operating expenses
(7.6)
(3.2)


Other non-current operating income
2.9
-


Net operating income
26.7
23.1


Operating margin (%)
6.6%
5.8%


Net borrowing costs
(6.3)
(7.2)


Other financial income and expenses
4.6
(1.2)


Profit before tax
25.1
14.7


Tax expense
(7.2)
(11.3)


Net income from continuing operations
17.9
3.3


Net income from discontinued operations
-
(2.8)


Net income attributable to Naturex shareholders
17.9
0.6


Net margin (%)
4.4%
0.1%

Recurring operating EBITDA

€ millions

IFRS
FY

2016
FY

2015


Current operating income
31.5
26.3


Current operating margin (%)
7.8%
6.6%


Amortisation, depreciation and impairment
26.8
25.1


Obsolete inventories
3.1
2.8


Recurring operating EBITDA
61.4
54.2


Recurring operating EBITDA margin (%)
15.2%
13.6%

Consolidated income statement

In €000s
Notes
2016
2015


Revenue
9
404 355
397 812


Change in finished goods and in-progress inventory
 
19 381
(20 047)


Operating grants
 
1 702
2 167


Other operating income
 
4 089
4 896


Purchases
 
(179 417)
(148 038)


Staff costs
 
(94 441)
(90 001)


External charges
13
(93 520)
(92 050)


Taxes other than on income
 
(3 017)
(2 530)


Allowances for depreciation, amortisation and impairment
17 and 18
(26 990)
(25 131)


Other current operating income and expenses
 
(634)
(827)


INCOME FROM OPERATIONS
 
31 507
26 251


Other non-current operating expenses
14
(7 629)
(3 152)


Other non-current operating income
14
2 866
-


NET OPERATING INCOME
 
26 745
23 099


Share of net income (loss) of equity-accounted investees
 
-
-


OPERATING INCOME AFTER EQUITY-ACCOUNTED INVESTEES
 
26 745
23 099


Net borrowing costs
23
(6 252)
(7 210)


Other financial income and expenses
23
4 617
(1 228)


INCOME BEFORE TAX
 
25 110
14 661


Tax expense
15
(7 185)
(11 316)


NET INCOME FROM CONTINUING OPERATIONS
 
17 925
3 345


NET INCOME FROM DISCONTINUED OPERATIONS
7
(57)
(2 772)


NET INCOME FOR THE PERIOD
 
17 868
573


 
 
 
 


Income for the period attributable to:
 
 
 


Company shareholders
 
17 841
546


Net income from continuing operations
 
17 898
3 318


Net income from discontinued operations
 
(57)
 (2 772)


Attributable to non-controlling interests
 
26
26


Net income from continuing operations
 
26
26


Net income from discontinued operations
 
-
-


Basic earnings per share (in euros)
26
1,9306
0,0593


Diluted earnings per share (in euros)
26
1,9128
0,0589


Basic earnings per share from continuing operations (in euros)
26
1,9367
0,3602


Diluted earnings per share from continuing operations (in euros)
26
1,9189
0,3577

Consolidated balance sheet

In €000s
Notes
31/12/2016
31/12/2015


NON-CURRENT ASSETS
 
370 660
355 262


Goodwill
16
174 397
173 621


Other intangible assets
17
18 723
21 693


Property, plant and equipment
18
154 059
151 872


Non-current financial assets
19
13 998
2 000


Deferred tax assets
15
9 483
6 075


CURRENT ASSETS
 
300 819
309 234


Inventories 
10
184 524
159 041


Current derivatives
23
33
-


Tax receivables
 
7 737
3 409


Trade and other receivables
 
79 821
79 559


Current financial assets
19
2 928
-


Cash and cash equivalents
22
22 437
57 938


Non-current assets held for sale
21
3 339
9 287


TOTAL ASSETS
 
671 479
664 496


 
 
 
 


In €000s
 
31/12/2016
31/12/2015


Capital
25
13 871
13 858


Additional paid-in capital
 
235 747
235 397


Reserves
 
105 201
117 265


Income for the period
 
17 868
573


SHAREHOLDERS' EQUITY
 
372 686
367 093


Attributable to owners of the parent
 
372 185
366 632


Attributable to non-controlling interests
 
500
461


NON-CURRENT LIABILITIES
 
169 194
182 105


Long-term financial debt
22
143 811
158 993


Non-current derivatives
23
2 452
1 527


Employee benefits
12
12 450
10 405


Deferred tax liabilities
15
10 480
11 180


CURRENT LIABILITIES
 
129 599
115 298


Current financial debt
22
51 842
28 994


Current derivatives
23
617
676


Current provisions
11
3 866
1 107


Current tax liabilities
 
4 676
1 898


Trade and other payables
 
67 920
82 590


Short-term bank facilities and overdrafts
22
677
33


TOTAL EQUITY AND LIABILITIES
 
671 479
664 496

Consolidated statement of cash flows

In €000s
 
2016
2015


Net income from continuing operations
 
17 925
3 345


Adjustments for non-cash items:
 
 
 


Net amortisation/depreciation allowances, impairment charges and current provisions
 
29 950
25 869


Other non-cash non-current operating expenses and income
 
3 466
941


Expenses and income related to stock options and restricted share units (bonus shares)
 
337
255


Current capital gains / (losses) on disposals
 
(93)
(66)


Net borrowing costs
 
6 252
7 210


Other financial income and expenses
 
(4 617)
1 228


Tax expense
 
7 185
11 316


Cash flow
 
60 404
50 098


Taxes paid
 
(10 570)
(3 938)


Change in inventories
 
(23 052)
14 041


Change in trade receivables and related accounts
 
(2 888)
4 606


Change in trade payables and related accounts
 
(12 206)
15 184


Net cash flow from operating activities
A
11 688
79 991


Acquisition of equity interests, net of cash acquired
 
(601)
 


Intangible investments
 
(1 915)
(2 589)


Capital expenditures
 
(17 824)
(21 791)


Financial investments
 
(710)
(322)


Disposals of fixed assets
 
1 725
464


Repayment of long-term investments
 
778
255


Net cash used in investing activities
B
(18 547)
(23 982)


Proceeds from share issues
 
350
1 638


Dividends paid to shareholders
 
(1 030)
(282)


Inflows from new borrowings
 
5 912
1 354


Loan reimbursements, net of derivatives
 
(21 108)
(20 722)


Debt reimbursements resulting from finance leases
 
(733)
(216)


Changes in other financial assets and liabilities
 
(371)
(368)


Interest payments
 
(4 685)
(5 748)


Net cash provided by (used in) financing activities
C
(21 664)
(24 343)


Net cash provided by (used in) discontinued operations
D
(7 337)
(3 592)


Net change in cash and cash equivalents
A+B+C+D
(35 860)
28 074


Closing cash and cash equivalents
 
21 759
57 906


Opening cash and cash equivalents
 
57 906
29 140


Effect of exchange rate changes on cash
 
286
(691)


Net change in cash and cash equivalents
 
(35 860)
28 074

Source: Actusnews