Second Quarter 2006 Results

Oslo, August 23, 2006

Nutri Pharma (OSE: NUT) today reports a profit of NOK 1.0 million with revenues of NOK 25.7 million for the second quarter of 2006. This compares to revenues of NOK 1.2 million and a loss of NOK 6.0 million in the second quarter of 2005. Operating costs in second quarter were NOK 24.6 million which is a reduction of 4% compared to first quarter with NOK 25.6 million. Amortisation of intangible assets has been charged with NOK 1.5 million in the second quarter (NOK 0.7 million in Q2-2005). Net financial items are recorded with a deficit of TNOK 107 compared to a gain of TNOK 19 in same quarter the previous year.

Total revenues increased by 14% compared to the first quarters sales of MNOK 22.6. Out of the total sales of MNOK 25.7 in the second quarter, MNOK 24.3 were recorded in MIG (Russia/CIS) and MNOK 1.4 in the Nordic region.

Russia/CIS
Compared to first quarter 2006 the revenues in Russia/CIS grew by 13%. Sales of Nutri Pro continue to show a strong growth with 81% in the second quarter. The cosmetics products from Kilda that were launched in Q1-2006, showed decline in the second quarter. MIG achieved a gross margin of 92% from sales in Q2, which is attributable to the Premium priced products offered through the direct sales network. The business segment Russia/CIS delivered a EBITDA of NOK 2.3 million. In Q2-2006 the variable proportion of MIGs costs were 68% of the revenues, covering cost of goods sold, commissions to distributors and strategic partners.

Nordic region
Royalty income in Q2-06 from the Nordic area is showing a strong growth with an increase of 38% compared to Q2 2005 (MNOK 1.0). Total operating costs were NOK 2.5 million which represents a reduction of NOK 3.4 million compared to second quarter 2005. The operating loss was NOK 0.2 million with the inclusion of amortisation of Royalty and Patent rights of NOK 0.4 million. This compares to a loss of NOK 6.0 million in Q2 last year.

As from 1 October 2005 Nutri Pharma operates with two business segments; Nordic, with the existing royalty revenues, and Russia + CIS countries through the direct sales organisation of MIG. For further segment info. see page 8.

 

		INCOME STATEMENT
Q2 2006	Q2 2005	All figures in NOK 1000	H1 2006	H1 2005	FY 2005
25 671	1 182	Total revenue	48 221	2 213	25 345
24 609	7 223	Total operating expenses	50 250	10 867	35 088
1 062	-6 041	Results of operations	-2 029	-8 654	-9 743
-107	19	Net Financial items	-195	75	132
955	-6 022	Profit/(loss) before taxes	-2 224	-8 579	-9 611
–	–	Tax on ordinary results	–	–	–
955	-6 022	Profit/(loss) for the period	-2 224	-8 579	-9 611
0.01	-0.08	EPS (NOK)	-0.03	-0.12	-0.13

 

BALANCE SHEET	30 June 2006	31 Dec 2005	30 June 2005
Total non-current assets	102 841	105 913	7 654
Total current assets	19 126	14 204	13 268
Total assets	121 967	120 117	20 922
Total equity	37 167	18 712	18 552
Total liabilities	84 800	101 405	2 370
Total equity and liabilities	121 967	120 117	20 922

Second Quarter 2006 Results
The consolidated operating profit is MNOK 1.0 in Q2 2006. In the same quarter previous year there was a loss of MNOK -6.0, which was derived in the Nordic business only.

Nutri Pharma had royalty revenues from the Nordic area of MNOK 1.4 in Q2 2006, compared to MNOK 1.0 in the second quarter the previous year. MIG achieved revenues of MNOK 24.3 through its direct sales organization in Russia and the former CIS countries. Sales of Nutri Pro and Cosmetics accounted for 71% and 18% respectively of the MIG revenues in the second quarter.

Total operating expenses increased from MNOK 7.2 in Q2 2005 (only Nordic) to MNOK 24.6 in the second quarter of 2006. Total amortization costs in the second quarter were MNOK 1.5, of which MNOK 1.1 relates to the Software platform in MIG and MNOK 0.4 to royalty assets in Nutri Pharma ASA. The comparable amortization costs in Q2 2005 were MNOK 0.4 relating to royalty assets in Nordic.

Net financial expense was TNOK 107, compared to finance revenue of TNOK 56 in first quarter of 2005.

Cash and other liquid assets were MNOK 6.6 as of June 30 2006, compared to MNOK 6.2 as of March 31 2006. There has been no further financing activities in this quarter.

COMMERCIAL UPDATE
Nordic
Nutrilett, which is distributed through Orkla subsidiary Collett Pharma, as one of their core product lines, is currently showing a growing trend. The market segment for nutrition and weight management is increasing in the Nordic market and Nutrilett is the market leader. The growth is further supported by TV commercials, the introduction of a new Brownie bar and new product packaging from Collet Pharma.

Russia and CIS countries
Nutri Pro has been well received in the network which resulted in a sales growth of over 80% in the second quarter generating revenues of NOK 17 million. The overall revenues increased by 13% this quarter compared to the first quarter.

At the end of June the network has grown to more than 160.000 distributors of which 10-15% is defined as active. The sales network has been growing by 3.500 distributors on an average this quarter. All sales are prepaid leaving MIG without any debtors’ risk.

In Mid July the major annual Premium event was successfully held in Moscow gathering the two thousand most significant distributors. Nutribar™; a new energy bar; was launched, and the Norwegian skipper Knut Frostad shared the positive results from using the product with his crew in the 9 months Volvo Ocean Race. The positive health effects of NutriBar™, which includes preservation of muscle mass, has been documented by Professor Stephan Brandt and co-workers at Uppsala University.

OUTLOOK
The management of MIG is focused on growing the distribution network in order to increase revenues going forward. The Premium 2006 event held in Moscow in July is expected to support this objective. Further the implementation of a new commission plan will increase incentives to distributors. Remuneration is focused on continued sales efforts reducing costs to the less active segment of distributors. Selling costs is expected to be higher in Q3 with the cost incurred from the Premium event in Moscow. Revenue development for Third quarter is expected to be affected by the holiday season and the seasonality effect from weight management products in the Nordic area. Despite this, revenue in third quarter is expected to come in at the same level as in Q2 as the distribution network is steadily growing.

Oslo, 23 August 2006
The Board of Directors of Nutri Pharma ASA

DOWNLOADS: The complete Q2 2006 Word document can be downloaded from the INVESTOR page.

For more information about Meridian International Group (MIG).

Upcoming financial events

Nov 16, 2006  Results 3rd quarter 2006
Feb 22, 2007  Results 4th quarter 2006
 
 
For further information, please contact
Trond Syvertsen, CEO  +47 23 31 08 80
Haakon Ambjørndalen, CFO +47 23 31 08 89