Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Perrigo Co PLC (PRGO, Financial) achieved $95 million in gross savings year-to-date through Project Energize, with expectations to deliver $140 million to $170 million in gross pre-tax annualized savings by the end of 2026.
- The company's supply chain reinvention program has delivered $72 million in gross savings, contributing to gross margin expansion and increased service levels in the US OTC segment.
- Perrigo Co PLC (PRGO) reported a 27% year-over-year increase in EPS for the third quarter, reaffirming its 2024 adjusted EPS range of $2.50 to $2.65.
- The infant formula business showed signs of recovery with net sales growth of 3% compared to the prior year quarter and a sequential increase of 58%.
- Perrigo Co PLC (PRGO) has made significant progress in stabilizing its core businesses, including the recovery of its infant formula business and improvements in US store brand market share.
Negative Points
- Third-quarter net sales decreased by 3.2% year-over-year, with organic net sales declining by 2.4%.
- The company faced a minus 2.8 percentage point impact on organic net sales from lost distribution of lower-margin products.
- Perrigo Co PLC (PRGO) experienced lower production volumes, particularly in the US OTC and nutrition segments.
- The company is facing competitive pressures in the marketplace, particularly in the US store brand and branded segments.
- Perrigo Co PLC (PRGO) anticipates a more competitive pricing environment in 2025, which may impact its ability to achieve the same level of pricing benefits as in 2024.
Q & A Highlights
Q: How should we think about the ramp in the infant nutrition business for the fourth quarter and 2025? Will the improvement in margin continue?
A: Eduardo Bezerra, Executive VP & CFO, explained that the infant formula business is on track for recovery, with a focus on regaining share in distributors and expanding to full retailers in the fourth quarter. For 2025, they expect continued recovery in store brand market share. The margin improvement seen this year is expected to continue, although it will depend on the contract business dynamics.
Q: Can you provide an update on Opill's growth and customer acquisition? How is it performing against expectations?
A: Patrick Lockwood-Taylor, President & CEO, stated that Opill is gaining momentum with sequential growth in awareness and trial rates. They are focusing on optimizing in-store visibility and understanding key user groups to drive further growth. While Opill is not expected to be EPS accretive in the first 18 months, it is contributing positively to gross margins.
Q: How are the restructuring programs affecting cash outflows and investment priorities?
A: Eduardo Bezerra noted that cash outflows from restructuring programs are better than expected, allowing for reinvestment in areas like R&D and operational efficiencies. The focus remains on building strength in the business and driving long-term benefits from initiatives like Project Energize and supply chain reinvention.
Q: What are the expectations for the cough and cold season, and how might it impact the US OTC business?
A: Patrick Lockwood-Taylor mentioned that the cough and cold business is about 10% to 15% of their business, and they are relatively insulated from a weak season. Early indications suggest a normal season, and any channel switching by consumers is expected to be neutral or slightly positive for Perrigo.
Q: What is the impact of new players in the infant formula market on Perrigo's market position?
A: Patrick Lockwood-Taylor explained that while new foreign brands have entered the market, Perrigo's store brand share recovery is in line with expectations. They are focusing on high-quality production and packaging, and expect to regain and potentially exceed historical share levels through 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
