2011 1Q Results

Wednesday, 11 May 2011.

Strong recovery in Natra’s net income supported by growth in the Cocoa and Chocolate business and results of the Group's financial investments.


1. Key considerations


  • Natra Group closed the first quarter of 2011 with a recovery of the net result up to € 2.26 M compared to the negative result of € -0.38 M in the first quarter of 2010.
  • The Cocoa and Chocolate business closed March with a sales growth of 4.1% and 10.3% in EBITDA over the same period last year, reaching figures of € 75.65 M and € 4.15 M respectively. The net result of the Natra Group's core business shifted from € -1.56 M in the first quarter of 2010 to € 0.39 M in 2011.
  • Natraceutical increased its net profit by 27.3% to € 2.24 M supported by the excellent results of Naturex and financial income from the investment in the French multinational corporation.



2. Business performance


NATRA – Cocoa & Chocolate 

In the first quarter of the year, Natra Cocoa and Chocolate registered an increase in its turnover of 4.1% compared with the previous year, reaching 75.65 million euros.

The significant recovery in operating margins in the Cocoa Derivatives Division has offset a circumstantial erosion of margins in the Final Product Division, which has resulted in a 10.3% growth in EBITDA for the whole Cocoa and Chocolate business. Thus, the Group’s core business has concluded the month of March with an EBITDA of 4.15 million euros versus 3.76 million euros in the first quarter 2010.


Final Product Division (B2C)

The Final Product business (B2C), which represents around 75% of the Cocoa and Chocolate turnover, includes the production and marketing of tablets, bars, spreads, chocolates and chocolate specialties for the private label brand in Europe.

Sales in this division have grown by 3.5% in the first quarter of 2011 over the previous year, reaching 57.01 million euros (55.08 million euros in 1Q 2010). We highlight the good performance of the spreads unit and Belgian chocolates, the latter by new contracts and the penetration in the Russian and Korean markets.

In regard to the division's operating margins, the company is gradually passing to its final products the cost increase of some key raw materials as sugar, milk fats, nuts and coconut), some of them presenting supply difficulties. The price of cocoa has remained at high levels in the first quarter, over 2,000 pounds the ton. However, even though the slight price decrease in the last weeks, down to 1,900 pounds, resolution of the political conflict in Ivory Coast is not yet having its positive effect on the price of this raw material. All of this in spite of the excellent main crop in October and the good expectations for the intermediate crop of the coming months.

This usual mismatch between any change in the price of raw materials and the review of contracts with clients has circumstantially impacted the Final Product Division margins in the first quarter, which decreased from 7.9% to 5.2%. With the ongoing contract negotiations, the company expects a recovery in margins throughout the year, as it has been the case in the past. Margins in this Divisions are estimated to stand around 8% in the exercise.

As one of the four major references in chocolate products for the private label brand in Europe, Natra has an excellent geographical diversification in terms of sales among European retailers, being its main markets: France (20.4% of turnover), Germany (18.2%), Belgium (14.3%), Spain (10.8%) and Netherlands (10.2%).

The first quarter of the year has highlighted the upturn in sales in France (+4.5%), which was affected in the previous year by strong price competition in the tablets business, as well as the growth in Germany (+11.4%) and the Netherlands (+14.5%). It is also relevant the increased penetration of Natra in U.S. and Canada, representing a combined growth of 47.7%, which confirms the proper conduct of business in developing markets with low penetration of the private label brand.

Geographic distribution of the Final Chocolate Product Division
(1Q 2011)


Cocoa and Chocolate Derivatives Division (B2B)

Representing around 25% of the Cocoa and Chocolate business turnover, the B2B division manufactures and sells cocoa-derivative products (cocoa mass, powder and butter), as well as chocolate coating, to be sold to food companies for the manufacturing of their own products.

Although over 50% of the division’s main volume of sales is traditionally concentrated in Spain, Natra also enjoys international presence for the marketing of its cocoa derivatives. The company is increasing its geographical diversity, especially towards Germany, the USA, France, Italy and the United Kingdom.

Following the strong sales growth of around 35% experienced throughout the year 2010 by this division, in the first quarter of 2011, the Cocoa and Chocolate Derivatives unit has achieved an additional increase of 6,1% in turnover. The division has achieved sales of 18.64 million euros compared to 17.57 million euros in the first quarter of 2010, when sales of the division already grew by 44.4%.

The first quarter of the year emphasizes the maintenance of the sales of this division in Spain, following the strong growth achieved over the previous year in this market, as well as the growth of France, which happens to be the division’s eighth to forth market in terms of turnover, and United Kingdom, with an sales increase of 89% in the country.

Geographic distribution of the Cocoa Derivatives Division
(1Q 2011)

By product range, following the trend begun in the previous year, the first quarter presents again a good performance of the sales of cocoa powder (+34,6%) and chocolate coating (+8,9%), the latter being the highest value added product in the processing chain of this division and a business whose ratios have greater stability.

High demand for cocoa powder in the industry, which is leading to failure of supply in the market, is allowing Natra to supply this product at historical prices and manufacture at full capacity. The increase in demand for this product responds to the many applications available with the cocoa powder and, in particular, its resistance in recipes as a substitute for chocolate.

Additionally, the growth in sales of chocolate coating enables the company to allocate to their own consumption the cocoa butter resulting in the production process of cocoa powder.

These circumstances, coupled with a higher yield of cocoa bean resulting from a better quality of supply in the first harvest, have favoured the recovery of operating margins in this division, significantly depressed during the year 2010. In this sense, the EBITDA of the Cocoa Derivatives Division has reached a figure of 1.53 million euros versus 0.17 million euros in March 2010. The margin stood at a significant 8.2 % versus 1% in the first quarter last year and similar levels in the remaining months of 2010. The company does not rule out some adjustment of this margin throughout the year, which however should not be placed below 6% levels.

The recovery in operating margins in this division would confirm the successful strategy to boost sales of this unit in view of the market opportunity created last year in Spain after corporate activity among competitors, in spite of the tough circumstances of the time, especially as regards the cost of cocoa, which represented a challenge to the profitability of the division during the year.


Natraceutical Group

At the end of the first quarter of 2011 Natra holds a 46.86% stake in Natraceutical, which is fully consolidated in its financial statements.

  • In the first quarter of 2011, Natraceutical net profit increased by 27.3% up to 2.24 million euros.
  • Important contribution of the Ingredients activity in the income statement of the quarter, compared to a weak start of the year in the Nutritional Supplements Division.
  • The company sales, provided entirely by the Food Supplements Division, stood at 11.76 million euros compared to 14.43 million euros in the first quarter of 2010 and EBITDA of 1.1 million euros compared to 1.83 million euros last year.
  • As for the Ingredients activity, integrated in the investee company Naturex, which is going to disclose its first quarter results on May 30, Natraceutical incorporated in its accounts a closing estimate of 3.7 million euros, of which the Spanish company incorporates in its accounts the proportion to its stake (1.23 million euros). At the time of this results note, the value of Natraceutical’s stake in Naturex stands at 108.8 million euros (90,20 million euros on March 31, 2011).
  • At the end of the first quarter, Natraceutical net debt amounted to 80.08 million euros, with a single maturity in April 2013 for an amount of 78.08 million euros, the rest being working capital financing.

On May 10, Natraceutical published comprehensive information on the evolution of its business during the first quarter of year 2011. This information may be consulted in the company’s website: www.natraceuticalgroup.com.



3. Financial income


The income statement for the first quarter of the year includes 1.48 million euros for the apportion of the premiums paid by Bio Group Brazil for the call options over the stakes Natra holds in Natraceutical and Naturex.

Additionally, over the last few weeks, Natraceutical has executed the placement to institutional investors of 2.29% of its shareholding in Naturex. The share placements held in the first quarter of the year generated a capital gain of 1.02 million euros, as reflected in the income statement for the quarter.



4. Financial structure


On March 31, 2011, the Natra Group's net financial debt amounted to 259.54 million euros, of which 80.08 million euros corresponded to Natraceutical.

In April 2010, the company announced the completion of its financial debt restructuring process. The resulting agreement included the long-term refinancing of all debt, as well as the contribution of new funds, through a syndicated loan with four-, five- and six-year maturities in the case of Natra and a single maturity in 2013 in the case of Natraceutical.



5. Relevant facts alter the close of the first quarter


After the close of the first quarter of the year, Bio Group Brazil has proceeded to execute before maturity the whole of the call option, thus having acquired the 248,275 shares of Naturex owned by Natra. The amount received by Natra for the execution of the call option, together with the premiums paid by Bio Group Brazil for the option contracts, have resulted in a total income before taxes of 11.2 million euros plus 2,65 million euros capital gains.

The divestment of Natra in Naturex after the execution of the option agreement by Bio Group Brazil, along with the sale in recent weeks of 146,795 Naturex titles owned by its subsidiary Natraceutical, S.A. -as Natraceutical reported in its results note for the first quarter of 2011 disclosed yesterday, May 10-, means a 6.15%, decrease in the overall shareholding of Natra Group in Naturex, which the Natra Group shall notify the French regulator (AMF) in due course.

After these transactions, the Natra Group holds 2,021,424 shares in Naturex, representing 31.53% of the share capital, fully owned by Natraceutical, S.A. and its subsidiary companies.



6. Consolidated Profit and Loss Account


The Group’s consolidated profit and loss account of year 2010 is as follows:


About Natra

Natra is a key player in Europe specialising on chocolate products for the private label brand as well as cocoa derivatives for the food industry. Natra is present in over 24 of the 30-top European retailers with a diversified geographical presence, mainly in France (19% of total turnover), Spain (17%), Germany (14%) and Belgium (12%). The company offers one of the most extensive catalogues available in Europe, as well as a constant commitment to the research and innovation of new recipes, packaging and tailor-made solutions. Natra produces candy bars, chocolates and Belgian specialities, tablets and chocolate spreads. The company has five specialised production centres located in Spain, Belgium and France, as well as sales offices in United States and China. Additionally, Natra holds a 46% stake in public company Natraceutical. 

Natra is quoted on the Spanish stock exchange’s market under the ticker NAT. Total outstanding shares: 47,478,280.


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