Zoetis Reports Third Quarter Revenue Up Eight Per Cent07 November 2013
US - Zoetis Inc. reported its financial results for the third quarter of 2013. The company reported revenue of $1.1 billion for the third quarter of 2013, an increase of 8 per cent from the third quarter of 2012. Revenue reflected an operational increase of 9 per cent, with foreign currency having a negative impact of 1 percentage point.
Net income for the third quarter of 2013 was $131 million, or $0.26 per diluted share, a decrease of 19 per cent , compared to the third quarter of 2012. Adjusted net income1 for the third quarter of 2013 was $172 million, or $0.34 per diluted share, an increase of 12 per cent and 10 per cent , respectively, compared to the adjusted third quarter of 2012.
Adjusted net income for the third quarter of 2013 excludes the net impact of $41 million, or $0.08 per diluted share, for purchase accounting adjustments, acquisition-related costs and certain significant items.
“With three quarters now reported in our first year, I am pleased with how we are meeting our commitments to customers, delivering financial results and setting a solid foundation for our future,” said Zoetis Chief Executive Officer Juan Ramón Alaix. “We continue to build on the commercial performance, innovative R&D and reliable supply chain that have been critical to our success, while managing through all the changes that come with standing up a new company.”
“This quarter, our diverse portfolio of products was once again a key factor in delivering revenue growth across all of our regions, while our scope and scale helped us grow our adjusted earnings faster than sales,” said Alaix.
“We saw significant growth in the U.S., our largest market, which reflects strong sales in both companion animal and livestock products. And, as expected, the growth in U.S. livestock products reflects the impact of drought conditions that were experienced in the year-ago quarter. We also saw balanced performance across our other regions based on continued market acceptance of new products, growth in emerging markets, and steady performance of our core product lines.”
“Through the first nine months of the year, we’ve made significant progress toward completing the build-out of our own infrastructure and meeting our full-year financial objectives,” said Rick Passov, Executive Vice President and Chief Financial Officer of Zoetis. “In light of our year-to-date financial performance, we are narrowing the range of components of our 2013 financial guidance.”
Zoetis organizes and manages its business across four regional operating segments: the United States (U.S.); Europe/Africa/Middle East (EuAfME); Canada/Latin America (CLAR); and Asia/Pacific (APAC). Within each of these regional segments, the company delivers a diverse portfolio of products for livestock and companion animals tailored to local trends and customer needs.
In the third quarter of 2013:
Revenue in the U.S. was $495 million, an increase of 10 per cent over the third quarter of 2012. Sales of livestock products grew 11 per cent , driven by cattle, poultry and swine. Sales of cattle products increased, benefiting from a weak year-ago quarter when the impact of the drought was most evident. Sales of poultry and swine products increased as well, driven primarily by medicated feed additives and continued customer acceptance of new products. Sales of companion animal products grew 10 per cent, showing positive performance across our key products.
Revenue in EuAfME was $270 million, an increase of 9 per cent operationally over the third quarter of 2012. Sales of livestock products grew 7 per cent operationally. This growth reflects an increase in cattle product sales across many emerging markets, partially offset by a continued decline in cattle product sales in Western Europe.
Sales of swine products continued to benefit from customer acceptance of a new vaccine across many markets. Sales of companion animal products grew 15 per cent operationally, and benefited again this quarter from increased sales associated with third-party manufacturing agreements. Excluding these sales, companion animal product sales grew 5 per cent operationally, driven by sales of anti-infective and parasiticide products.
Revenue in CLAR was $171 million, an increase of 9 per cent operationally over the third quarter of 2012. Sales of livestock products grew 6 per cent operationally, driven by poultry products, primarily in Brazil. Sales of cattle products also increased based on growth in Venezuela, Mexico and Canada.
Sales of companion animal products grew 19 per cent operationally, largely due to a later start in 2013 of the parasiticide season in Canada as well as increased demand in Brazil.
Revenue in APAC was $167 million, an increase of 7 per cent operationally over the third quarter of 2012. Sales of livestock products grew 8 per cent operationally, driven by the launch of new products for swine. Increased poultry product sales benefited from sales to emerging markets as well as the resolution of a license registration issue in India.
Sales of cattle products grew, driven by performance in New Zealand, which was partially offset by the negative impact of the drought in Australia. Sales of companion animal products grew 3 per cent operationally, based on increases in developed markets such as Taiwan and Japan and in emerging markets such as China.
Zoetis continues to drive demand and strengthen its diverse portfolio of products through brand lifecycle management, strong customer relationships and access to new markets and technologies. With its product portfolio, the company focuses on improving the performance and delivery of its current product lines; expanding product indications across species; and pursuing approvals across new geographies. Some recent highlights include:
Regulatory approvals -- FACTREL® (gonadorelin injection) was approved in the U.S. with LUTALYSE® for fixed-time artificial insemination for dairy cattle, one of only two products in the U.S. approved for use in this way; the approval of FACTREL allows producers to improve the reproductive performance of their herds in a manner that is compliant with FDA regulations. EXCENEL® RTU EZ (ceftiofur hydrochloride), an antibiotic for cattle and swine, was approved for use in the U.S.; this reformulation makes the product easier to use.
Expanding our portfolio’s reach – Building on approvals announced last quarter, APOQUEL® (oclacitinib tablet) has now also been approved by the European Commission, joining New Zealand and the U.S. as markets granting approval of the product for the control of pruritus associated with allergic dermatitis and the control of atopic dermatitis in dogs at least 12 months of age. Similarly, BOVI-SHIELD GOLD ONE SHOT™ was approved for use in cattle in Canada, joining the U.S. as markets for this vaccine to help prevent certain bovine respiratory diseases.
Branching into beta-agonists – Zoetis also received approval in the U.S. for two branded generic ractopamine products that add to our strong portfolio for swine and cattle. Ractopamine is a feed additive that helps cattle and pigs direct their food energy toward producing high-quality lean meat rather than fat, and it is part of the beta-agonist class of drugs. ENGAIN™ (ractopamine hydrochloride) for swine and ACTOGAIN™ (ractopamine hydrochloride) for cattle were approved in the U.S. Zoetis plans to launch ENGAIN by the first quarter of 2014 and ACTOGAIN later in 2014.
FINANCIAL GUIDANCE AND COMMENTARY
Zoetis's guidance for full-year 2013 reflects the company's confidence in the diversity of its portfolio, the strength of its business model, and its view of the evolving market conditions for animal health products this year.
Zoetis narrowed the ranges of its financial guidance for full-year 2013 to reflect its performance year-to-date. The company now expects to achieve revenue of between $4.475 billion to $4.525 billion, reflecting current views on foreign exchange impact for the year.
The company also expects to achieve reported diluted EPS for the full year of between $0.98 to $1.02 per share. This guidance includes the impact of nonrecurring costs of $220 million to $240 million, primarily associated with becoming a standalone public company.
Adjusted diluted EPS1 for the full year is expected to be between $1.38 to $1.42 per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items such as costs associated with becoming a standalone public company. Additional guidance on other items such as tax rate and expenses are included in the financial tables and will be discussed on the company's conference call.
Webcast and Conference Call Details
Zoetis will host a webcast and conference call at 8:30 a.m. (EST) today, during which company executives will review third quarter financial results, discuss 2013 financial guidance, and respond to questions from financial analysts. Investors and the public may access the live webcast by visiting the Zoetis website at http://www.zoetis.com/events-and-presentations. A replay of the webcast will be archived and made available on Nov. 5, 2013.
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