Naturex targets cosmetics and moves towards consolidation

By Jess Halliday and Simon Pitman

- Last updated on GMT

Related tags: Cent, Cosmetics, Naturex

Naturex is targeting an operating margin of 11 per cent in 2008 as
it plans to expand its supply of cosmetic and personal
care ingredients.

Currently the share of its business from cosmetics ingredients is relatively marginal compared to its food and nutraceutical operations, but with the increased focus on the area, the company hopes to achieve 10 per cent of its total turnover from this category by the end of 2010. CEO Jacques Dikansky said in an exclusive interview that its cosmetics operations had been growing steadily, but without the company making any concerted effort to develop this particular category. The French natural ingredients manufacturer yesterday 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 €6.8m (10.3 per cent) the year before impacted the bottom line. The pressure on the company's operating margin meant that net income in 2007 fell to €4.4m, a figure that represented 5.5 per cent of the total income, down from €5.6m the previous year. The increased turnover follows a busy year for the company, which has seen it make three acquisitions in 2007, including Chart and Berkem's Actifs Innovants, which are already yielding profits, together with Hammer Pharma, which the company says willl take longer to turn into a positive contributor. It said that Hammer Pharma exacted a "diluted effect"​ on its operating margin. Dikansky added 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 Berkem's 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. Likewise, the company is hoping to concentrate on areas of the business that could generate higher margins, which explains the planned expansion of its cosmetic and personal care operations. An element of the 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 also 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. 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 TokyoandChinathat will increase in the coming years,"​ said Dikansky - but there will be a time delay and the impact will not be seen in 2008.

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