Net revenues for the nutraceuticals division for the three months ended October 31, 2003 rose 8 per cent to $7 million compared to $6.5 million for the same period in 2002.
Growth in the division was largely due to a 15 per cent increase in Ester-C sales for the quarter, although knocked by $400,000 in lower sales of saw palmetto oil products 'as we have exited that commodity business'.
Sales of Ester-C as a bulk ingredient rose 39 per cent during the quarter. According to the company the steep rise was mainly driven by new Ester-C brand development programs - advertisements - which started late in the quarter.
'We expect even stronger growth of Ester-C in the second quarter as our new advertising takes hold,' predicted the company this week.
Cost of products sold as a percentage of net revenues for the Nutraceuticals unit increased to a considerable 41 per cent for the quarter, compared to 33 per cent for the same period in 2002.
'This increase dramatically affected Zila's overall EBITDA for the quarter and was caused primarily by higher costs of ascorbic acid,' said Zila in a statement this week.
In a bid to satisfy the market, the nutraceuticals unit said that it had obtained stable sources at 'lower prices than it is currently paying for a portion of its ascorbic acid needs' for 2004 and part of fiscal year 2005 and 'continues to actively pursue lower cost extended supply arrangements for its remaining needs'.
The company is hoping that the lower costs could start to have a knock-on effect on margins in the third and fourth fiscal quarters.
For the company as a whole - the pharmaceutical, biotechnology and nutraceutical groups combined - Zila reported a loss for the quarter of $1.57 million compared with a loss of $1.61 million for the same period in 2003.