Perrigo(PRGO) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2021, adjusted EPS was $2.06, down 12% from the previous year due to a weak cough/cold season and supply chain disruptions [10][21] - Fourth quarter net sales grew 5%, adjusted operating income increased 12%, and adjusted diluted EPS rose 28% compared to the previous year [11][20] - Full year net sales increased 1.2%, while organic net sales declined 0.7% primarily due to lower cough/cold product sales [25][26] Business Line Data and Key Metrics Changes - Consumer Self-Care Americas (CSCA) net sales grew 5% in Q4, driven by a rebound in cough/cold products [27] - Consumer Self-Care International (CSCI) net sales increased 4.6% in Q4, with a strong performance in cough/cold products and skincare [29] - Full year net sales for CSCI increased 3.6%, while organic sales were flat due to a weak cough and flu season [30] Market Data and Key Metrics Changes - In the U.S., cough/cold product sales grew 28% in Q4, reflecting a return to strong demand [11][12] - The U.S. OTC market grew 17.5%, Nutrition grew 24.7%, and Oral Care grew 9.1% in Q4 [12] - European demand for essential products increased by 33%, while self-care products grew by 2% [12] Company Strategy and Development Direction - The company aims to focus solely on consumer self-care following the divestiture of its Rx business for$ 1.6 billion [7] - Plans to acquire HRA Pharma for €1.8 billion, expected to add €400 million in revenue and €150 million in operating income by 2023 [7] - The company is focused on executing its self-care strategy, integrating HRA, and stabilizing gross margins through supply chain redesign [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about entering 2022 with strong top-line momentum and consumer demand [12][14] - Gross margin pressure is expected to continue in the first half of 2022, with improvements anticipated in the second half [15] - The company is committed to achieving its original financial objectives and expects adjusted EPS in the range of $2.10 to$ 2.30 for 2022 [15][32] Other Important Information - The company settled a significant Irish tax issue for €266 million, reducing financial overhangs [7][8] - Cash on the balance sheet at year-end was $1.9 billion, down from$ 2.1 billion at the end of Q3 [31] Q&A Session Summary Question: Gross margin dynamics and second half margin improvement - Management discussed factors affecting margin improvement, including the impact of Rx divestiture and pricing actions [34][36] Question: 2023 EPS range and recovery from 2021 impacts - Management maintained a mid-$3 EPS target for 2023, driven by cough/cold recovery and HRA contributions [39][40] Question: G&A management and R&D sustainability - Management indicated ongoing opportunities for G&A management and confirmed R&D levels remain stable [44][47] Question: New product flow and Rx-OTC switches - Management highlighted ongoing opportunities in Rx-OTC switches and a robust pipeline of new products [50][52] Question: Growth outlook for CSCA vs. CSCI - Management noted that both segments are expected to have similar growth rates, with a focus on cough/cold recovery [55][58] Question: Cough/cold inventory and forecast conservatism - Management acknowledged potential conservatism in forecasts regarding inventory replenishment [61][62] Question: Addressing manufacturing inefficiencies - Management outlined plans for improving manufacturing efficiencies without significant facility rationalization [64][66]