Abbott sounds off on second quarter

Abbott sounds off on second quarter

Were headwinds from foreign exchange and a mixed global economy enough to slow the nutrition giant?

Abbott announced financial results for the second quarter ended June 30, 2013.

  • Second-quarter adjusted diluted EPS was $0.46, above the previous guidance range; reported diluted EPS from continuing operations under GAAP was $0.30.
  • Abbott is confirming its full-year 2013 EPS guidance, representing double-digit growth.
  • Excluding foreign exchange, worldwide sales increased 4.2 percent. Reported sales increased 2.5 percent, including an unfavorable 1.7 percent effect of foreign exchange. Sales were driven by 8.4 percent operational sales growth in Nutrition, including 18.4 percent international growth, and 7.6 percent operational sales growth in Diagnostics.
  • Abbott continued to expand its presence in emerging markets across all business segments. Emerging market sales were $2.3 billion in the second quarter, an increase of 13.4 percent on an operational basis.
  • Second-quarter adjusted gross margin ratio of 55.0 percent exceeded previous expectations, driven by strong momentum in Nutrition and Diagnostics. The gross margin ratio under GAAP was 49.7 percent.
  • Abbott launched several new products and initiated new clinical trials in the second quarter. Highlights include 24 new product launches in Nutrition; the first FDA-approved hepatitis C virus (HCV) genotyping test; the initiation of a randomized clinical trial in Japan for Abbott's bioresorbable vascular scaffold, Absorb™; the approval of XIENCE Xpedition™ in Japan; and the U.S. approval and launch of the TECNIS® Toric 1-Piece Intraocular Lens (IOL) for cataract patients with astigmatism.
  • On July 15, Abbott announced two acquisitions in its Medical Devices business: IDEV Technologies, which expands Abbott's endovascular portfolio, and OptiMedica, which provides an immediate entry point into the laser cataract surgery market.

"All things considered, including headwinds from foreign exchange and a mixed global economy, this was a good quarter," said Miles D. White, chairman and chief executive officer, Abbott.

Second-quarter business overview
Second-quarter 2013 worldwide sales of $5.4 billion increased 4.2 percent on an operational basis, consistent with previous guidance, driven by 8.4 percent operational sales growth in Nutrition, including 18.4 percent international growth, and 7.6 percent operational sales growth in Diagnostics, including 9.1 percent international growth. On a reported basis, sales increased 2.5 percent, including an unfavorable 1.7 percent effect of foreign exchange. Unfavorable exchange was primarily driven by the further weakening of the Japanese yen versus the U.S. dollar.

Sales in emerging markets in the second quarter were $2.3 billion, representing more than 40 percent of Abbott's total sales, increasing 13.4 percent on an operational basis and 12.7 percent on a reported basis.

Nutrition
Worldwide Nutrition sales increased 8.4 percent in the second quarter on an operational basis and 7.9 percent on a reported basis, including an unfavorable 0.5 percent impact of foreign exchange. Total emerging market sales, which represent more than 45 percent of total Nutrition sales, increased strong double digits in the quarter. Abbott's broad and diverse nutritional product portfolio is comprised of approximately 55 percent of sales in Pediatric Nutrition and 45 percent of sales in Adult Nutrition.

Worldwide Pediatric Nutrition sales increased 9.3 percent on an operational basis and 9.6 percent on a reported basis in the quarter, including a favorable 0.3 percent impact of foreign exchange. International Pediatric Nutrition sales grew 19.4 percent on an operational basis, driven by strong performance in emerging markets as this business continues to execute on geographic expansion initiatives and launch new product innovations. This growth was partially offset by a modest decline in U.S. Pediatric Nutrition largely driven by lower infant formula share in the WIC market segment.

Worldwide Adult Nutrition sales increased 7.2 percent on an operational basis and 5.7 percent on a reported basis in the quarter, including an unfavorable 1.5 percent effect of foreign exchange. Sales growth in the quarter was led by global growth of Ensure® and continued expansion of the adult nutrition market where Abbott is the global leader. International Adult Nutrition sales grew 17.1 percent on an operational basis, driven by strong growth in emerging markets. U.S. Adult Nutrition sales growth was negatively impacted by Abbott's exit from certain non-core business lines as part of the division's margin improvement initiative.

Nutrition operating margin improved significantly versus the second quarter of 2012 and is ahead of schedule to reach its initial target of 20 percent of sales by 2015.

Abbott expects continued strong sales growth in worldwide Nutrition over the course of the year, driven primarily by geographic expansion initiatives in emerging markets and new product launches in both Pediatric and Adult Nutrition.

 

 

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