Numico decline prompts gloomy forecast

A 28 per cent drop in first quarter net profits has prompted Dutch nutritional foods and vitamins producer Numico to warn that full year results for 2002 will not reach the same levels as 2001, surprising most analysts who had predicted that the company would ride out the difficult market conditions.

Numico​'s first quarter net profits fell to €21 million from €30 million in 2001, following a particularly disappointing performance from Rexall Sundown, the group's nutritional supplement operations, where sales were down 20 per cent, and its GNC unit, which saw sales fall 4.7 per cent. A change of focus at GNC will mean more investment in improving store layout rather than opening new outlets, the company said.

Sales during the quarter were roughly in line with those of a year earlier at just over €1 billion. While this was encouraging for Numico, as the first half of 2001 saw the group post record results, group chief executive Pim Oomens said that the outlook for the second quarter "remained challenging compared to the record first half of 2001"​ , adding that a major cost reduction programme in the US should help offset continued problems there, caused by the weak market for vitamins and minerals.

Numico's infant nutrition, clinical nutrition and consumer diets and sports units all improved sales during the quarter, rising 4 per cent, 10 per cent and 6 per cent respectively, but the weakness in the US vitamin market meant that sales there were down 4 per cent compared to the first quarter of 2001. There were some signs of a recovery, however, as US sales grew 6.7 per cent compared to the final quarter of 2001.

Increased personnel and advertising costs meant that earnings before interest, tax and amortization (EBITA) were down from €159 million to €130 million during the quarter.

Despite the difficulties in the US, Numico's European business grew during the quarter, with sales ahead 5 per cent year-on-year helped by a strong performance from Eastern Europe, particularly in Russia, Turkey and Hungary. Most other European countries performed in line with the previous year, although Germany and the UK showed slight improvements.

Sales in Asia slowed compared to the final quarter of 2001, while the economic situation in South America meant that sales there were also adversely affected during the quarter.

The global economic difficulties affected only Numico's vitamin supplement business, which saw a 12 per cent decline in sales to €335 million compared to the strong first quarter of 2001. The clinical nutrition unit, in contrast, posted a 10 per cent rise to €120 million, and Numico said it expected further growth in the rest of the year. Sustained sales growth was also seen in the diet foods business, rising 6 per cent to €323 million.