Natraceutical Reports Positive Sales Development in Q1

The gradual recovery in sales did not counteract the results of the first quarter, which concentrates 40% of the turnover for the first nine months of the year, and the company ended September with a turnover of 23.59 million euro, 6.4% less than the same period last year.

23 Oct 2012 --- After a decline in turnover of 19.5% in the first quarter, the positive development of sales in the following quarters (+3.4% in 2Q and +8.8% in 3Q stand) placed Natraceutical's turnover at 23.59 M€ (-6.4% compared to September 2011).

Between July and September, Natraceutical, through its industrial subsidiary Forté Pharma, showed a significant recovery in turnover, both in France, its main market, as well as in the exporting countries. Natraceutical's sales closed the third stand quarter with a growth of 8.8% over the months of July to September 2011, a clear improvement compared to the 19.5% decline in the first quarter of the year and the growth of 3.4% in the months of April to June. However, the gradual recovery in sales did not counteract the results of the first quarter, which concentrates 40% of the turnover for the first nine months of the year, and the company ended September with a turnover of 23.59 million euro, 6.4% less than the same period last year.

As mentioned in the results note for the first quarter of the year, the decline in sales in that quarter was mainly due to the fall in sales of a specific product in the Weight Control range. Regardless of this fact, the company's sales had remained at similar levels of last year.

By geographical markets, France -bringing 66.6% of the turnover (69.0% in September 2011)- presented a clear improvement in Forté Pharma's activity between July and September, with a 11.2% increase in its turnover, after declines of 23.9% and 1.2% in the first two stand quarters of the year, respectively. Meanwhile, export markets evolved more lineal, showing growth of 8.6% in the third stand quarter, with a similar evolution to that recorded in the months of April to June (+8.7%), after a decrease of 7.3% in the first quarter of 2012.

As usual, when looking into detail to each market, their behaviour is heterogeneous. Benelux, Forté Pharma's second target market, which accounts for around 13% of sales, had a flat evolution in the first nine months of the year (+0.3%), while Spain, third market, with around 10% of the turnover, accumulated a 4.9% decline. The negative sales trend in Spain is explained by the effect of an extraordinary withdrawal of low-rotation products at some distribution agents, which the company carried out in September. Regardless of this action, sales in the Spanish market increased by 6.0% in the first nine months of the year.

Among the rest of export markets, with a weight around the 1.5-2.0% each, it is worth highlighting the evolution of UK, a country where Forté Pharma started its business in 2011 with presence in the two leading pharmacy and parapharmacy chains, and which at the end of the third quarter of 2012 showed an increase of 23.1%.

By product categories, Weight Control closed the first nine months with a drop of 11.8% in revenues, primarily driven by the negative performance of the business in the first quarter. Meanwhile, Health and Beauty segments, representing together 34.4% of Forte Pharma's turnover closed September with a growth of 7.7% and 8.4% respectively, compared to the first nine months of the previous year.

The performance of the Health range in July-September’s presales campaign led to a growth of 32.8% in this stand quarter. Forté Pharma is developing the Health range to increase its presence in the largest and most dynamic segment in Europe, as it stands for 50% of the food supplements industry in this market. Additionally, the positive performance of this segment over the past years has driven the growth of the whole industry, despite the sharp contraction of other segments such as Weight Control. On top of that, the strategy around the Health segment allows Forté Pharma to balance its sales seasonality throughout the year, which is traditionally concentrated in the first half for the effect of weight loss campaigns.

According to the latest market data, the food supplements industry in France grew by 6% between January and July 2012. The Weight Control sector remained stable in this period, after a fall of 14% in the same period last year. Meanwhile, the Health sector remained in positive progression, with an increase of 8.7% in the first seven months of 2012. Finally, the Beauty sector reduced the negative performance to a negative 1.3% at the end of July, by the good performance of the Solar range during the months of June (+7.7%) and July (+3.7%). Together with the sales recovery, operational optimization policies implemented throughout the year by Natraceutical enabled the company to bring its EBITDA to 1.78 million euro to September 2012, compared to a negative 0.64 million euro in the third quarter of 2011. Forté Pharma allocates most advertising budget in the second and fourth quarters of the year, in order to support the campaigns of Weight Control, in spring, and Health in fall-winter. However, the add spending optimization during the year, together with the aforementioned operational recovery measures, suggests a return to the path of positive results in 2012, after the losses due to sharp falls in the last three years of the weight control food supplement industry in France.