Sigma-Aldrich Group (SIAL) reported fourth quarter earnings of 75 cents, compared to the Zacks Consensus Estimate of 73 cents and prior-year EPS of
68 cents.
Quarterly sales of $572.5 million were up 12.3% from the fourth quarter of 2008. Excluding currency translation impact, the company posted organic growth of 5.6%. Organic sales for the Research business grew 3.1%, while organic sales for SAFC (Sigma Aldrich Fine Chemicals) increased by 11.6%.
SAFC’s strong organic growth was driven by sales of H1N1 vaccine adjuvants to pharma companies and shipments of industrial media and other previously booked orders. SAFC’s booked orders for future delivery as of December 31, 2009 were 16% higher from the year-ago period.
The operating margin in the reported quarter, excluding restructuring costs was 22.3% compared to 22.5% in the fourth quarter of 2009. The current year quarter includes a restructuring expense of $9.2 million related consolidation of SAFC’s Biosciences manufacturing facilities.
Excluding this cost, the operating margin in the fourth quarter of 2009 would have been 23.9%. The company continued to realize benefits from its global supply chain activities as well as its efforts to lower its fixed cost structure.
For the full year 2009, Sigma reported earnings of $2.80 per share on revenues of $2.1 billion compared to earnings of $2.65 per share on revenues of $2.2 billion in 2008. The company generated operating cash flow of $515.7 million and free cash flow of $395.8 million in 2009.
During 2009, Sigma repaid $142 million of its debt and returned $138 million to shareholders in the form of share repurchases and dividends. The company’s debt-to-capitalization ratio at the end of the year stood at 25.5%, compared to 34.6% as of December 31, 2008.
For 2010, the company anticipates organic sales growth in the mid-single-digit percentage range. This growth is expected to be driven by modest improvement in market conditions, the ongoing implementation of programs already in place and the addition of new growth initiatives. Sigma plans to invest in strengthening the e-commerce channel, expanding presence in emerging markets and selective technology partnerships.
The company forecasts earnings in the range of $3.00-$3.15 per share for 2010. In addition, Sigma expects to generate operating cash flow of $480 million and free cash flow of $350 million for the year.
We have a Neutral recommendation on the stock.
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