Supplements drag down Leiner's 1Q sales
with a 6.7 percent drop in sales attributed to the soft market for
vitamin and mineral supplements and over-the-counter products.
Last fiscal, the Carson, California-based company was affected negatively by media reports about the safety of vitamin E supplements, but the effect was somewhat off-set by the withdrawal of COX-II inhibitor Vioxx, which led to increased sales of joint care supplement products.
This has led to a shift in product mix for Leiner that is not yet fully effected - and was cited as one reason why a net loss of $4.2 million was reported for the quarter.
Net loss for the same three months last year was $67.8 million, but 85.4 million was explained by recapitalization costs and associated tax of $85.4 million.
CEO Robert Kaminski said that progress with the product mix shift has been "solid", but since vitamin E has a higher-margin than joint care the company expects the transition to "continue to result in increased sales but lower gross margins in our fiscal 2006."
Nor was its impact unforeseen. In reporting a "rewarding" full fiscal 2005 in June, Kaminski predicted that the product landscape will continue throughout fiscal 2006, as the dust settles on the two markets.
What is more, joint health raw material costs have been rising - and at a time when the company has been looking to reduce its investment in overall raw material and finished goods inventory, which has resulted in lower plant volumes, higher overall per unit product costs and lower profit margins.
Leider continues to tighten its belt over operating expenses and succeeded in trimming 9 percent off the bill in 1Q 2006, bringing them down to $23.9 million.
"We believe that our discipline in operating expense and working capital management will serve us well in future periods," said Kaminski.
According to Euromonitor, the US supplements industry was worth an estimated $6.4 billion in 2004. It suffered a slump in 2001, sinking to $5.9 billion from $6.2 billion the previous year.
Leiner showed it is not shy of innovation, with the announced agreement with Monosol Rx to use film strip technology for store brand OTC products and its own ShortCuts supplements brand.
Though Leiner is not the first company to use the film delivery technology, MonoSol Rx said that it hopes the deal will speed delivery of this unique technology to the mass market.
