West looks north for 2006
cent to $700m (€590m) in 2005, boosted by $100m worth of new
business.
The company, which manufacturers components for injectable drug delivery, reported a net income of $45.2m for the year, up 35 per cent from 2004, and a profit jump to $12.9m from $7.3m, due to the boost in sales and higher raw material costs being offset by a lower than expected tax rate.
However, West's 2005 performance was still hit by the significant raw material and energy cost increases and slower sales of its Teflon and B-2 coated closures in the US.
"The year began with a range of open issues, including getting the new Kinston facility back to full capacity, completing the divestiture of our drug delivery business, and the further effect of sales for Teflon and B-2 products," said Donald Morel, West's chairman and CEO.
"However, we finished 2005 on a strong note," he said.
West's newly-formed Tech Group segment sales were boosted to $61.4m in the fourth quarter, up from $19.3 million in the prior year, with the recent acquisition of the Tech Group business and stronger sales of surgical device components, insulin pens and contact lens cases accounting for the increase.
Sales in the pre-existing business were slightly lower, as increased sales of dairy and juice container closures were offset by lost sales associated with the 2004 closing of the segment's UK plastics moulding facility.
Fourth quarter sales included $1.1m of pre-production revenues associated with Pfizer's newly-approved non-injectable insulin product.
Manufacturing of the delivery devices for Exubera has been outsourced by its developers, Nektar Therapeutics, to two contract manufacturing organisations, including West and Bespack in the UK.
The outsourcing contract has the potential to be highly lucrative for West if the product reaches its blockbuster potential.
The company's Pharmaceutical Systems business segment yielded a $3m increase in operating profit for 2005 and the fourth quarter reported a sales growth of 9.5 per cent and a 3.2 per cent improvement in gross margin.
This was a result of production efficiencies, higher margin products and services in the Monarch Labs and Medimop Medical Projects businesses, which were acquired in 2005, and lower workers compensation costs, said the company.
$3.6m of the fourth quarter 2005 sales were from the businesses acquired during 2005 and product line sales improvements were principally in components for pre-filled syringes and IV containers, the company said.
West now expects 2006 sales of $810-$830m, representing approximately 16-19 per cent growth over 2005 sales.
Including the revenues of businesses acquired in 2005, revenue growth is expected to be between 10-12 per cent.
"We expect that our recent acquisitions will be solidly accretive, we see percentage growth in Pharmaceutical Systems sales continuing in the mid to high single digits and we expect increasing sales of pharmaceutical packaging components while disposable device component sales remain relatively flat," said Morel.
"Similarly, we expect more rapid growth and a better mix of business in the Tech Group, including Exubera devices, which should result in gross margin and operating income improvements in the segment," he said.
"While we continue to face challenges in raw material costs, we believe 2006 will be a more stable operating period and that our recent price increases together with our lean manufacturing initiatives will mitigate cost pressures," said Morel.
