‘Supply chain disruption was the culprit’ as Perrigo posts quarterly net sales loss
ALLEGAN – Supply chain bottlenecks including a shortage of truck drivers causing problems getting products to market are reduced Perrigo Co. plcof sales in the third quarter and resulted in a net loss.
Perrigo (Nasdaq: PRGO) today reported quarterly revenue of $ 1.04 billion, an increase of 3.8% from the billion in the third quarter of 2020. Perrigo posted a net loss of $ 58.8 million for the third quarter, or 44 cents per diluted share.
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President and CEO Murray Kessler attributed the quarterly results to “massive one-off challenges” and “very significant challenges this quarter related to the disruption to the global supply chain faced by many companies across multiple industries. “. This has resulted in increased overhead and transportation costs and a decline in operational efficiency, Kessler told analysts on a conference call to discuss quarterly results.
Supply chain problem cost Perrigo $ 43 million in sales, including $ 38 million in the United States
The company had “amazing orders” during the quarter “and all of a sudden we couldn’t ship anymore,” Kessler said.
“For net sales, supply chain disruption was the cause. This led to an inability for Perrigo to meet very strong consumer demand during the quarter. Without this supply chain disruption, net sales growth would have been as we expected, ”said Murray. “We wouldn’t have had half of the discussions we’re having right now if we could have just been able to ship the orders that we have. “
Perrigo has since outsourced what Kessler called “very complex product lines to a third-party logistics provider, which leaves more room on our trucks for more profitable (over-the-counter) products.” The company also added regional freight carriers “for difficult waterways” and hired additional staff for the distribution center.
The company is also increasing the purchasing cycle for ingredients and product packaging from 30 to 90 days “to ensure that we have sufficient lead times,” he said. This translated into a 25% increase in daily shipments in October, compared to the third quarter average.
“And not all of the actions have even been fully implemented yet. Some of these changes will stay in place until America’s largest supply chain normalizes. We intend to leave some of these changes in place to protect ourselves from future disruption, ”Kessler said.
While Perrigo expects consumer demand for the products to “remain very strong” in the fourth quarter, “we also expect higher input costs, supply chain disruption and l The impact of under-absorbed overheads continues, ”he said. The company plans to raise prices for retailers and continue to cut costs, Kessler said.
The quarterly loss led Perrigo to reduce its profit forecast for all of 2021, from $ 2.50 to $ 2.70 per diluted share which was expected three months ago to $ 2 to $ 2.10 per diluted share. .
Year-to-date sales totaled $ 3.03 billion, a largely stable figure from the first nine months of 2020. Perrigo recorded a nine-month loss of $ 78.5 million, or 59 cents per diluted share.
The cumulative results for the year were affected by a weak cough, cold and flu season last winter that reduced drug sales and stemmed from efforts during the pandemic, such as social distancing and wearing face masks which reduced disease.
The results came despite Perrigo’s “major accomplishments” during the quarter, Kessler said. These include the sale of the company’s generic drug business for $ 1.6 billion, the planned $ 2.1 billion acquisition of Paris-based HRA Pharma, a maker of auto-products. over-the-counter care, and settling a tax case in Ireland for far less than the Irish. The government initially sought to collect, noted Kessler, who three years ago launched a plan to turn Perrigo into a personal care business.
“And while COVID-19 has created many unforeseen challenges in 2020 and 2021, great challenges, we are overcoming them as they occur, and we will not let them stop us from delivering on our vision, nor to achieve the ultimate growth plans that we initially set out, ”said Kessler. “I fully understand that it was a bit of a punch in the stomach here compared to the cost situation. I don’t think it’s specific to Perrigo. I think this is the macroeconomic trend the world is facing and it is real. The teams reacted and we will be able to ship more products.
Today’s sales and earnings report lowered Perrigo’s stock price by more than 12% in the early afternoon.