Charles River Laboratories (CRL) has raised its earnings guidance for 2012 despite seeing net sales dip by 1.2% year on year in the second quarter.
The US-based provider of drug discovery and development services blamed unfavourable currency translation for the decline and has pared back its full-year sales forecast accordingly.
Foreign exchange hit hardest in the company’s Research Models and Services (RMS) business while the Preclinical Services (PCS) segment – which has tended to be a sore spot in CRL’s quarterly reports over recent years, prompting a string of cost-cutting and other initiatives – delivered sales growth of nearly 1% versus Q2 2011.
The US-based provider of drug discovery and development services blamed unfavourable currency translation for the decline and has pared back its full-year sales forecast accordingly.
Foreign exchange hit hardest in the company’s Research Models and Services (RMS) business while the Preclinical Services (PCS) segment – which has tended to be a sore spot in CRL’s quarterly reports over recent years, prompting a string of cost-cutting and other initiatives – delivered sales growth of nearly 1% versus Q2 2011.
Overall, net sales from continuing operations, which exclude the Phase I clinical business divested during the second quarter of 2011, were US$284.7 million in the latest quarter, compared with US$288.3 million in the second quarter of 2011.
Analysts polled by Thomson Reuters were expecting net sales of US$286.2 million. Without the impact of currency translation, which diluted sales by 3.1% in the quarter, Q2 2012 sales would have risen by 1.9% year on year, CRL noted.
Lower income
Operating income for the quarter ended 30 June 2012 was US$49.3 million, down by 7.6% on the year-before period. Earnings per diluted share (EPS) came in at US$0.63 against US$0.66 in the second quarter of 2011.
Stripping out any special items, diluted EPS for the latest quarter were US$0.75 on a non-Generally Accepted Accounting Principles (GAAP) basis, up from US$0.70 in the corresponding 2011 period and comfortably ahead of the analyst consensus of US$0.66 cited by Thomson Reuters.
The non-GAAP figure benefited primarily from stock repurchases, CRL said. The company bought back around 458,000 shares for US$15.3 million during the second quarter and had US$88.5 million remaining on its US$750 million stock repurchase authorisation as of 30 June 2012.
RMS, PCS
Net sales in the RMS segment were $173.6 million for Q2 2012, 2.6% below the second quarter of 2011. RMS sales would have been 1.2% higher year on year without the foreign exchange effect, CRL noted.
Operating income from the RMS business slipped by 0.3% year on year to US$55.5 million in the latest quarter.
Net sales from continuing operations were US$111.1 million in the PCS segment, an increase of 0.9% over Q2 2011. At constant currency rates, PCS sales growth was 3.0%, driven primarily by increased demand for non-Good Laboratory Practice discovery services.
Operating income showed a distinct improvement in the PCS business, jumping 37.3% year on year to US$10.8 million.
According to James Foster, chairman, president and chief executive officer of Charles River Laboratories, the PCS segment was lifted by a strategic partnership initiated in the fourth quarter of 2011 with an unnamed “global pharmaceutical company” and by improved demand for regulated safety assessment.
2012 guidance
CRL has updated its sales guidance for continuing operations in 2012 to reflect a more significant impact than expected from foreign currency translation. Exchange rates are now forecast to cut sales by around 2% in the full year, while the constant-currency sales outlook remains unchanged.
The net sales-growth range for 2012 was adjusted to anything between a 1% decline and a 1% increase, compared with the growth of 0%-2% forecast previously. At constant exchange rates, full-year growth is projected at 1%-3%.
The GAAP earnings per share estimate was revised upward to US$2.12-US$2.22, from US$2.10-US$2.20 previously.
The more bullish forecast reflects CRL’s strong first-half performance and an expectation of “relatively stable trends” in the second half of the year, partially offset by the impact of foreign exchange, the company said.
