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Gloomy results from Numico


Dutch food group Numico NV is the latest company this week to post a slide in first-half profits well below expectations on Thursday. Hit again by weak US vitamin sales, analysts were also disappointed over the lack of a new strategy.

The company's shares, which have already shed around 18 per cent this year, were expected to dive when the market opened as the results also showed erosion in previously robust baby food and hospital feeding units, partly due to problems in Latin America.

Many investors had hoped that the new chief executive at Numico, the world's biggest vitamin and food supplements manufacturer, would provide give details of how he planned to revive the company, but Jan Bennink said a full strategic review would come in November with third quarter results.

Bennink said the company was considering divestments, an organisational restructuring and an evaluation of its asset base.

"There are two things - the figures are disappointing and there is no clear strategic outlook yet," said SNS Securities analyst Ton van Ooijen.

First-half cash earnings - net profit before goodwill amortisation and extraordinary items - dropped 38.2 per cent to 127 million euros, below the most gloomy forecasts.

Analysts polled by Reuters had predicted first half cash earnings of 163.8 million euros, with forecasts ranging from 151.3 million to 190.1 million euros.

Cash earnings per share tumbled 39.2 per cent to 0.77 euros, versus an average forecast of 1.00 euro.

"It's about 15 per cent below my EBITA (earnings before interest, tax and amortisation) estimate and that's pretty disappointing since I had one of the lowest estimates. You'll see a lot of downward pressure on the shares today," said analyst Mariska Zonneveld at Fortis Bank.

Numico shares, which closed up 2.86 per cent at 21.60 euros on Wednesday, have underperformed the Dow Jones Stoxx food and beverage index (SX3P) by around 13 per cent so far this year. They were indicated at 0615 GMT to open down 7.4 per cent.

The firm, which is also Europe's biggest baby food maker, has been losing market share in the fiercely competitive US food supplement market largely because of internal management problems.

Last year it was hit by a downturn in the sector, but industry data show sales have been recovering recently.

Overall turnover fell 3.2 per cent to 2.13 billion euros, but US sales, comprising most of the food supplement operations, lost 8.0 per cent versus European growth of 4.7 per cent.

One of the worst performing units, mass market vitamin maker Rexall Sundown, saw sales slide by 22 per cent to 261 million euros and EBITA plummet by 71.2 per cent to 19 million euros.

In contrast, US competitor NBTY said last month its wholesale operation Nature's Bounty reported that sales had surged 52 per cent to $80 million in the three months to end-June.

Food supplements account for more than half of Numico's turnover following the takeover of US food supplement retailer General Nutrition Companies in 1999 and Rexall Sundown the following year.

Another contributory factor for the drop in results is linked to baby food and hospital feeding activities, previously the bedrock of the firm, that also faltered in the second quarter.

Second quarter EBITA in infant nutrition fell four per cent to 45 million euros and was flat in clinical nutrition at 29 million euros.

"Argentina and Brazil were held back by the economic crisis in South America," a Numico statement said, referring to infant nutrition activities.

The company said second-half operating results were expected to be in line with those of the first-half before one-off items.The results are the first under Bennink, who formerly headed the dairy division at French food group Danone and took over in May.

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