Tough times for Isostar maker

Leading pharmaceutical group Novartis said last week that sales at its Medical Nutrition and Nutrition & Santé unit grew 4 per cent in local currencies (-1 per cent in SF) to SF1.1 billion (€0.75bn).

Nutrition & Santé is the new name for the Health Food & Slimming and Sports Nutrition businesses which have been reorganised into the stand-alone unit to optimise their business potential for future divestment, according to the Swiss company. The division includes brands such as Cereal and Gerble and the Isostar sports drink.

Medical Nutrition saw double-digit sales growth in Europe but this was offset by the decrease in wholesaler inventory levels in the US. Sales continue to be led by the strong performance of Enteral Nutrition (Isosource and Novasource), said Novartis. Additional sales impetus came from the Medical Food franchise (Resource), which continued to benefit from the expansion of the home-care channel.

Full-year operating income at the unit amounted to SF6 million (€4m) compared with SF87 million in 2001, impacted by divestment-related restructuring charges of SF40 million and a one-time provision for potential value-added, tax charges in Germany. Excluding the exceptional items, which came to SF66 million, the operating income would have been SF72 million, leading to an operating margin of 6.5 per cent, according to the company.

In November, the Food & Beverage business (including the Ovaltine, Caotina and Lacovo brands) was sold to Associated British Foods for SF402 million (€274m). Sales up to divestment totalled SF325 million.

Infant & Baby sales grew 3 per cent in local currencies (-7 per cent in SF) to SF2.1 billion, above the industry average according to Novartis. The main contributor was Gerber, which increased market share in the US by almost 3 percentage points compared with 2001. Sales growth was also spurred by innovations in the Juice, Graduates, and Tender Harvest lines and the success of Lil' Entrées, a new line of microwavable convenience trays targeted at the rapidly-growing toddler segment. Gerber's revenues from this segment were up 5 per cent, said the company.

Operating income, however, dropped 9 per cent to SF355 million, owing to one-off goodwill impairment charges of SF39 million. As a result, the operating margin fell 0.3 percentage points to 17.1 per cent. Excluding these exceptional charges, operating margin would have been 19.0 per cent.

The operating income comprises a divestment gain of SF205 million arising on the divestment of the Food & Beverage business and the normal operating income from these activities of SF40 million, offset by SF29 million of goodwill impairment charges in connection with this divestment.

In the group overall, a good performance from the core pharmaceutical business produced an increase in sales of 11 per cent in local currencies. Group operating income climbed 8 per cent, and net income was up 4 per cent due to the strong operating performance.