Perrigo(PRGO) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported GAAP income of $9 million for Q2 2023, translating to GAAP earnings of $0.06 per diluted share, while adjusted net income was $87 million, resulting in adjusted diluted earnings per share of $0.63, up from $0.43 in the prior year quarter [24] - Total Perrigo reported net sales grew by 6.4%, with organic growth at 80 basis points, impacted by SKU prioritization actions [25] - Gross profit increased by $52 million or 13%, driven by strategic pricing, acquisitions, and favorable mix, while operating income rose by $21 million or 80% [26] - The company ended the quarter with a solid cash position of $555 million, reflecting an increase of $70 million from the previous year [27] Business Line Data and Key Metrics Changes - In the Consumer Self-Care Americas (CSCA) segment, organic sales declined by 2.7%, impacted by SKU prioritization and a light allergy season [25] - The Consumer Self-Care International (CSCI) segment saw robust organic growth of 7.1%, indicating strong brand resonance with consumers [25] - The nutrition category contributed $44 million in net sales from the recent acquisition, partially offset by lower sales from discontinued product lines [18] Market Data and Key Metrics Changes - In the US, store brand volume share grew by 70 basis points over the last 13 weeks, indicating a shift towards store brands [15] - The international business experienced strong organic net sales growth of 7%, with broad-based growth across various categories including cough cold and skincare [15] Company Strategy and Development Direction - The company aims to refine its focus on branded self-care, leveraging its manufacturing scale and strong customer relationships to drive growth [11] - Key initiatives include supply chain reinvention, optimizing production of higher-margin SKUs, and enhancing operational efficiency [14][13] - The approval of Opill, the first OTC daily oral contraceptive, is seen as a significant opportunity for long-term growth in the women's health space [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2025 growth algorithm and emphasized the importance of operational discipline, particularly in the US business [36] - The company is focused on sustainable growth, identifying attractive categories and brands for future investment [34] - Management acknowledged the challenges in the infant formula market due to regulatory changes but remains committed to meeting consumer demand [20] Other Important Information - The company is confirming its 2023 reported and organic net sales growth guidance, with expectations for a normal cough and cold season in the second half of the year [28] - The company plans to invest in pre-launch activities for Opill, with expectations for the product to be on shelves in early 2024 [17] Q&A Session Summary Question: What are the top priorities for sustained growth? - Management highlighted the importance of supply chain reinvention and operational discipline as key focus areas for growth [32] Question: Are the 2025 targets still comfortable? - Management confirmed comfort with the 2025 targets, emphasizing the need for effective governance to ensure delivery [36] Question: What is the expected impact of Opill on earnings? - Management indicated that Opill is not expected to be accretive in the first 12 to 24 months, focusing instead on building the brand [39] Question: What are the current inventory levels at retail? - Management noted that inventory levels are normalizing, with expectations for a pickup in sales during the third and fourth quarters [41] Question: How is pricing expected to evolve? - Management stated that pricing actions are on track to offset inflation and maintain value propositions for brands [44] Question: What is the outlook for the European market? - Management reported strong performance in Europe, with expectations for continued growth in various categories [46]