Royal Numico Reports Layoffs, Reorganization, PossibleDivestitures

Royal Numico Reports Layoffs, Reorganization, PossibleDivestitures

ZOETERMEER, The Netherlands--Royal Numico NV, inannouncing its second quarter (2Q02) results, reported that the first half ofthe year was disappointing compared to the strong performance delivered in thesame period last year.

Net sales for the quarter, ended June 30 and reported Aug. 15,were down to US$1.05 billion compared to 2Q01's US$1.11 billion. Raw materialcosts and operating expenses ate away at the company's revenues, leaving thecompany with an EBITDA (earnings before interest, taxes, depreciation andamortization) of US$131 million, almost half of the US$225 million earned in2Q01. In the end, net profit after extraordinary items were deducted came toUS$2 million compared to 2Q01's US$549 million. Royal Numico reported it wouldpay an interim dividend of US$.27 per certificate of share on Sept. 5 toshareholders.

Sales for the company's 5,658 General Nutrition Centers (GNC)were down 5.6 percent to US$395 million due to soft sales in vitamin and herbalproducts, even as sales increases were reported for weight-loss and sportsproducts. Overall comparable sales for company-owned stores were down 1.2percent, and franchise store sales were down 0.4 percent.

GNC's restructuring program, which was announced in March, iscontinuing onward. For the first half of fiscal 2001, 46 unprofitable storeswere closed, and an additional 28 are expected to shut down by the end of theyear. Approximately 250 GNC employees have been laid off, with another 180 jobsstill on the chopping block.

In the meantime, a US$20 million remodeling project thatincludes 4,200 GNC corporate and franchise stores is underway. The four-monthmakeover is expected to be completed by October. Royal Numico reported thatcustomer response to the new look as been positive.

Rexall Sundown sales fell by 23.1 percent to US$130 million,primarily due to underperformance in three key brands: Sundown, Metab-O-LITEand Osteo Bi-flex. According to Royal Numico, lower sales volume was the mainfactor behind the decline in gross margins, as well as higher production costs.In the meantime, Rexall Sundown is working to address these issues, includingreducing SKUs by 20 percent (to 1,457 SKUs) and lowering costs by aligningpersonnel costs with the currently smaller sales volume.