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 ratio6 / 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.
Access to the webcast from a computer
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 c.alexandre@naturex.com |
Anne Catherine Bonjour Actus Finance Press Relations Tel.: +33 (0)1 53 67 36 93 acbonjour@actus.fr |
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 |
