Reinvigorated nutritional product sales boost Abbott's earnings
Abbott, which is based in Lake Bluff, IL, markets drugs, medical devices, diagnostics and functional foods. In nutrition, it specializes in infant formula and adult nutrition beverages aimed at sarcopenia and blood sugar management.
Abbott reported $7.8 billion in revenue for the second quarter, which represented 17% year-over-year growth. The “organic” sales figure excluded the gains from the sale of some business units and the revenue from some others that came on board recently. These events contributed significantly to the top line revenue number but cloud the picture of how the company is actually performing on a year-to-year basis, the company’s management said. The sales number also excludes the effects of currency fluctuations.
Nutrition recovers to be strong contributor
The company’s nutrition segment was a significant contributor to the overall result. Interestingly, though, the best results came from operations outside the US. Abbott is strong in infant formula, and foreign formula brands continue to perform well in China. Domestic brands in that country still struggle with a bad reputation left over from the melamine scandal.
“In nutrition, sales increased 6.5% in the quarter, led by strong performance across our international business. We have now achieved several consecutive quarters of improving performance for this business. In adult nutrition, growth was led by our market leading Ensure and Glucerna brands, most notably internationally, where we saw double-digit growth. In pediatric nutrition, strong performance was led by balanced growth across several countries in Asia, including Greater China and Latin America,” CEO Miles White told analysts in an earnings call. The call has been posted in transcript form on the site seekingalpha.com.
Improvements in basic operations
White said the improvement in nutrition revenues, which had been lagging in previous quarters, was a result of consistent overall improvement, not any one big initiative.
“It's small things and a lot of them in coordination, blocking and tackling and just doing a better job with marketing, our positioning of products and so forth. So as far as sustainability goes, I feel like this business ought to be able to perform in a, call it, low to mid single-digit range on a fairly sustainable basis,” he said.
Among the ‘blocking and tackling’ that Abbott continues to do is to launch, new innovative products. Earlier this year the company launched a ‘Max Protein’ version of its Ensure product to help over-50 consumers meet protein intake targets.
Evolving channels
White said the company has also paid more attention to how the marketplace has been evolving in the many countries in which it operates.
“We have seen a lot of channel change. We have seen a huge impact of online or digital marketing, digital shipment, et cetera. As channels, we have seen specialized channels evolve, baby stores and so forth. So I think we were slow to adjust and adapt to that. I think others did it faster than we did and we got left behind. We now understand what we missed,” he said.
