Sigma-Aldrich Corp. (SIAL) delivered second quarter earnings of 81 cents, which surpassed both the Zacks Consensus Estimate of 77 cents and prior year EPS of 79 cents.
Revenues rose 6% year-over-year to $554 million and were in line with the Zacks Consensus Estimate. Excluding a 1% negative impact from foreign currency rates, organic growth was 7%. In the international arena, Asia Pacific and Latin America reported strong results with reported and organic growth of 22% and 14%, respectively. In the company’s focus markets of China, India and Brazil, sales collectively grew 35% and 29% on a reported and organic basis, respectively.
Specialty Fine Chemicals (“SAFC”) led the revenue growth posting an increase of 10% to $143 million. On an organic basis, sales grew 11% driven by strong demand of its Supply Solutions, Bioscience and Hitech products. Specialty Fine Chemicals’ booked orders for future delivery were flat compared with the year ago quarter and increased 5% sequentially.
Revenues in the Research business grew 5% to $397 million and also rose 5% on an organic basis as a result of increase in unit volumes. In addition, Sigma’s award winning website also contributed to the improvement in sales of research products and led to a 48% year-over-year increase in the second quarter of 2010.
Sigma-Aldrich’s operating margin jumped 170 basis points to 25.6%, led by higher volumes, currency benefits, favorable product mix and effective management of SG&A costs. The current year quarter includes a restructuring cost of $3 million. Sigma has a longer term goal to improve operating margins to a 26% to 27% range and the restructuring costs incurred were in line with the company’s plans.
For the first half of 2010, net cash provided by operating activities was $247 million versus $215 million in the first half of the corresponding previous year. The increase is attributable to higher net income and lower capital expenditure. Capital expenditure in the reported quarter reduced 34% to $37 million.
During the first half of 2010, Sigma repaid $34 million of its debt and returned $95 million to shareholders in the form of share repurchases and dividends. The company’s debt-to-capitalization ratio at the end of Jun 30, 2010 stood at 24.0%, compared with 26.0% as of Dec 31, 2009.
Outlook
For the full year 2010, the company reaffirms its guidance for organic sales to increase in a mid-single digit range. At current exchange rates, currency is expected to reduce otherwise reportable sales by 1% – 2%. The company also reiterates its earnings outlook for 2010 (excluding restructuring charges) of $3.05 – $3.20, representing a 9% – 14% increase compared with 2009.
Sigma expects net cash provided by operating activities and free cash flow to exceed $480 million and $350 million, respectively, for 2010. Capital expenditure is expected to be approximately $120 million.
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