On October 24, 2019 West Pharmaceutical Services, Inc. (NYSE: WST) reported its financial results for the third-quarter 2019 and updated full-year 2019 financial guidance (Press release, West Pharmaceutical Services, OCT 24, 2019, View Source [SID1234542478]).
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Third-Quarter 2019 Summary (comparisons to prior-year period)
Net sales of $456.1 million grew 5.7%; organic sales growth was 7.9%; sales from a recent acquisition contributed an additional 20 basis points of growth; currency translation reduced sales by 240 basis points.
Reported-diluted EPS of $0.75 increased 3%.
Adjusted-diluted EPS of $0.79 increased 4%.
Company is raising its full-year 2019 net sales guidance to a new range of between $1.815 billion and $1.825 billion.
Company is raising full-year 2019 adjusted-diluted EPS guidance to a new range of between $3.10 and $3.15.
"Adjusted-diluted EPS" and "organic sales growth" are Non-U.S. GAAP measurements. See discussion under the heading "Non-U.S. GAAP Financial Measures" in this release.
"Our third-quarter results demonstrate the forward momentum we have seen throughout 2019. In line with our expectations, we are seeing strong customer uptake of our high-value products (HVPs), especially in the Biologics market unit," said Eric M. Green, President and Chief Executive Officer. "With the anticipated growing demand for our HVPs and positive trends in the marketplace, we expect our performance to continue to be strong for the remainder of the year and are raising our outlook for the full-year 2019."
Mr. Green continued, "Earlier this month, we announced an increase in our minority equity stake to 49 percent in Daikyo Seiko, Ltd. The expansion of our long-standing relationship, on an exclusive basis, will ensure our continued success and strengthen our partnership with Daikyo."
Proprietary Products Segment
Net sales grew by 6.2% to $345.2 million. Organic sales growth was 8.5%, with incremental sales from a recent acquisition contributing 30 basis points of Proprietary Products growth and currency translation decreasing sales by 260 basis points. HVPs (components and devices) represented 63% of segment sales and generated double-digit organic sales growth.
Our Biologics market unit had strong double-digit organic sales growth, led by customer purchases of NovaPure, Daikyo and Flurotec components as well as products incorporating Daikyo’s Crystal Zenith technology. Our Generics market unit posted mid-single digit organic sales growth, led by sales of Daikyo components, products incorporating Crystal Zenith technology, self-injection platforms and Westar RU. Our Pharma market unit saw a mid-single digit organic decline due to the impact of a previously reported voluntary recall of our Vial2Bag product.
Contract-Manufactured Products Segment
Net sales grew by 4.2% to $111.1 million. Organic sales growth was 6.0% with currency translation decreasing sales by 180 basis points. Segment performance was led by sales of healthcare-related injection and diagnostic devices.
Financial Highlights (first nine months of 2019)
Operating cash flow was $260.8 million, an increase of 21%. Capital expenditures were $88.8 million, compared to $74.7 million over the same period last year. Free cash flow (operating cash flow minus capital expenditures) was $172.0 million, an increase of 22%.
The Company recorded $3.8 million of restructuring and related charges through the first nine months of 2019 from actions we have taken that are intended to streamline our manufacturing network. This restructuring plan is expected to be completed by the end of 2019 and result in $7.0 million of restructuring and related charges in 2019. Implemented in first-quarter 2018, the Company expects cumulative expenses over the plan period to be approximately $16.0 million. Once fully completed, the Company anticipates that the plan will provide annualized savings of approximately $14.0 million.
Full-Year 2019 Financial Guidance
The Company is raising its full-year 2019 net sales guidance to a new range of between $1.815 billion and $1.825 billion, compared to the prior guidance range of between $1.810 billion and $1.825 billion.
Organic sales growth is expected to be approximately 8%.
Net sales guidance includes a headwind of $54 million for the full-year 2019 based on current foreign exchange rates, compared to prior guidance of a full-year negative impact of $42 million.
The Company is raising full-year adjusted-diluted EPS guidance to a new range of between $3.10 and $3.15, compared to the prior guidance range of between $3.00 and $3.10.
This includes an estimated headwind of approximately $0.13 based on current foreign currency exchange rates, compared to prior guidance of a headwind of $0.10.
The acquisition of an incremental minority stake in Daikyo Seiko, Ltd., is not expected to have a material impact to West’s full-year 2019 financial outlook.
Third-Quarter 2019 Conference Call
The Company will host a conference call to discuss the results and business expectations at 9:00 a.m. Eastern Time today. To participate on the call please dial 877-930-8295 (U.S.) or 253-336-8738 (International). The conference ID is 9278868.
A live broadcast of the conference call will be available at the Company’s website, www.westpharma.com, in the "Investors" section. Management will refer to a slide presentation during the call, which will be made available on the day of the call. To view the presentation, select "Presentations" in the "Investors" section of the Company’s website.
An online archive of the broadcast will be available at the website three hours after the live call and will be available through Thursday, October 31, 2019, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 9278868.