Naturex targets margin growth after year of consolidation

By Jess Halliday

- Last updated on GMT

Related tags: Cent, Naturex

Naturex is targeting an operating margin of 11 per cent in 2008 as
its acquisitions of Chart and Berkem's Actifs Innovants yield
profits, but it will take longer to turn loss-making Hammer Pharma
into a positive contributor.

The French natural ingredients manufacturer today reported sales of €79.6m in full year 2007, up from €66.2m in 2006, but an operating margin of €6.7m (8.4 per cent of revenues), compared to €6.8 per cent (10.3 per cent) the year before. It said that Hammer Pharma exacted a "diluted effect"​ on its operating margin. President and CEO Jacques Dikansky told FoodNavigator.com that the business should deliver neither loss nor profit in 2008, but will start contributing to profits in 2009. He said the acquisition was an important one since it marks Naturex's entry into the pharmaceutical market, and it also brought with it a high quality extraction plant near Milan. Chart and Actifs Innovants, on the other hand, were both profitable businesses when Naturex acquired them in December 2007 and January 2008 respectively, and will "clearly improve margins"​ in 2008, Dikansky said. Naturex's other recent acquisition, HP Botanicals, already contributed positively in 2007, but with only €2.8m in sales the effect is relatively small. Consolidation and cost control ​ No new acquisitions are on the horizon for Naturex in the immediate future, according to Dikansy, as the company looks more towards consolidation. An element of this consolidation - and one that will also help improve margins - is cost reduction. In the immediate period after making an acquisition, he said, Naturex's priority is to protect the customer base. This was the case with the Pure World plant in New Jersey which Naturex acquired in 2005. Now, however, it is secure enough in that area to be able to look at production, energy and labour costs, and implement measures that will bring savings where possible. The balance of business ​ Of the 2007 sales, 54.2 per cent came from the nutraceuticals market, and 34 per cent from flavour, food and beverage ingredients. Pharmaceutical ingredients from Hammer made up 5.8 per cent, cosmetics 2.1 per cent, and extracts and others 3.9 per cent. However Dikansky said the Chart acquisition is expected to grow the contribution from food, flavours and beverages. Growth from pharma is also expected, but that will not occur in 2008 as it will take time. "It should be around 10 per cent in two years from now,"​ said Dikansky. In addition, this year and next Naturex will work to increase its penetration in cosmetics, aiming to generate a 5 to 7 per cent share of sales in a few years. Geographical growth ​In 2007, the US remained Naturex's biggest market, generating 60 per cent of sales. Europe, including the domestic French market accounted for 45 per cent, and Asia 4 per cent. The remaining one per cent of sales hailed from South America. This year, though, geographical expansion is on the horizon for Naturex, with the opening of new offices in China, Japan, and Germany. The China and Japan locations will certainly contribute to Naturex's presence in Asia. The company already has an office in Singapore, and it has seen tremendous growth just out of that - 75 per cent in 2007. "We expect with the addition of Tokyo and China that will increase in the coming years,"​ said Dikansky - but there will be a lead time to this, so the impact will not be seen in 2008.

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