Natural Alternatives International’s 2022 Q2 results hampered by supply chain and COVID-19

10 Feb 2022 --- Customized supplements manufacturer and marketer Natural Alternatives International (NAI) is reporting a decrease in sales due to COVID-19 related issues and challenges in the supply chain and labor area.

NAI reported a net income of US$1.8 million, or US$0.30 per diluted share, on net sales of US$37.7 million in the second quarter of the fiscal year 2022. This is in comparison to the net income of US$3.6 million, or US$0.57 per diluted share, in the prior fiscal year’s second quarter.

“Our results for the second quarter and first half of fiscal 2022 were in line with our expectations despite continuing supply chain and labor challenges in addition to a decline in sales to our largest customer,” says Mark Le Doux, chairman and CEO of NAI.

“Our backlog going into the third quarter remains strong and we are working hard to add staff to support our anticipated sales growth in the second half of the year while also maneuvering the daily reality of COVID-19.”

Le Doux explains that the new online blending capacity in NAI’s Vista, California, plant will increase its operational throughput and is necessary to support current demand and future growth expectations.

CarnoSyn beta-alanine sales increase
During the first six months of fiscal 2022, CarnoSyn beta-alanine royalty, license and raw material sales revenue rose 61.8% to US$8.8 million, compared to US$5.4 million in the first six months of fiscal 2021.

During the second quarter of the fiscal year 2022, CarnoSyn beta-alanine royalty, license, and raw material sales earnings grew 46.9% to US$4.1 million, up from US$2.8 million in the second quarter of the fiscal year 2021.NAI expresses that increasing CarnoSyn beta-alanine sales are primarily due to sports activities and gyms reopening.

Increased shipments to existing customers, combined with sales to new customers, and higher average sales prices, accounted for the increase in patent and trademark licensing revenue in the second quarter of fiscal 2022.

NAI expresses that increasing sales are primarily due to sports activities and gyms reopening due to COVID-19 restrictions being removed across the US, as opposed to many restrictions in such activities in the first and second quarters of fiscal 2021.

Enhanced stock repurchase scheme
Previously, NAI’s board of directors approved a US$3 million increase to its stock repurchase plan, bringing the total authorized repurchase amount to US$18 million.

Commenting on this repurchase plan move, Le Doux says: “We believe our balance sheet is still a significant strength for us. We will continue to utilize our recently increased stock buyback program as long as our stock trades at levels we believe are below the true value of our company.”

Private-label manufacturing sales
Net sales fell by US$10.4 million, or 21.5%, to US$37.7 million in the three months ending December 31, 2021, compared to US$48.1 million in the same period the previous year.

Private-label contract manufacturing sales fell 25.7% to US$33.7 million during the same period. Sales of private-label contract manufacturing fell due to a 48% fall in sales to our largest customer, as well as supply chain and labor difficulties that hampered our production capacity throughout the quarter.

Net sales decreased by US$11.7 million(13.4%), in the six months ending December 31, 2021, compared to US$87.8 million in the same period the previous year.Net sales and operating profitability are expected to rise as a result of continued sales growth and improved workforce levels.

Private-label contract manufacturing sales fell by US$15.1 million(18.3%), in the six months ending December 31, 2021, compared to the same period last year.

“While our expected growth in the second half of the year is not as robust as we previously anticipated, we still see significant opportunities with both existing and new customers,” says Le Doux.

“Our team is working hard to navigate these near-term challenges and position the company for long-term growth and profitability.”

Looking ahead
NAI expects fiscal 2022 consolidated net sales to be flat to slightly up from fiscal 2021, based on current sales order quantities and predictions from its clients, as well as the persistent problems with supply chain and workforce shortages, including challenges from COVID-19 absences.

For the fiscal year ending June 30, 2022, NAI expects operating income to range between 8% and 11% percent of net sales.

Additionally, the company expects net sales to increase 10% to 13% in the second half of fiscal 2022, compared to the same period in fiscal 2021. Operating income is predicted to rise to between 8% and 11% of net sales.

Continued growth in sales and improved sales mix and staffing levels are expected to boost net sales and operating profitability.

Edited by Nicole Kerr