Cambrex profit rises despite flat sales

Net revenue in the second quarter of 2007 was stagnant - $62.9m (€45.6m) - compared to the same quarter last year. The company which provides contract manufacturing services for active pharmaceutical ingredients (APIs), advanced intermediates and other products for branded and generic pharmaceuticals, said that without the effect of foreign currency, sales would have declined by 3.5 per cent. Cambrex said that this lack of performance was due to price declines (the majority of which were contractual) and lower custom development sales, which "more than offset" the volume increases in several APIs. The company was also hit by a $1.9m restructuring charge in the quarter incurred as part of downsizing the corporate headquarters following the divestiture of the Bio Businesses. In February, the firm completed the sale of its two Bio units - Research Bioproducts and Microbial Biopharmaceuticals - to Swiss contract manufacturer Lonza for $460m. In addition, Cambrex also took a $4m charge in costs for the settlement of a lawsuit related to the sale of its Rutherford Chemicals business. Cambrex sold the unit to Rutherford in 2003, but a year later Rutherford said it discovered that much of the infrastructure and equipment were defective, and also alleged that several of the facilities contained environmental hazards caused by Cambrex. In March 2005, Rutherford first contacted Cambrex about indemnifying it for the alleged warranty breaches and in April 2006,​ the firm filed a lawsuit against Cambrex. On 30 July the two companies finally entered into a settlement deal under which they both released each other from all claims asserted in the litigation. ​Meanwhile, Cambrex operating profit for the second quarter rose 19 per cent to $4.0m, from $3.3m in the comparable quarter last year. This improvement was partly due to a decrease in sales, general and administrative expenses which fell 30 per cent from $15.0m in the second quarter 2006 to $10.6m in the same period this year. "The reduction is due to lower personnel-related expenses including salaries, bonus, pension and medical benefits in addition to reductions in audit fees, depreciation, and environmental remediation expenses compared to the second quarter 2006,"​ said Cambrex. Research and Development expense for the period was $3.0m, effectively flat compared to $3.1m in the year-ago quarter. "Coming off of a very strong first quarter, we expected the middle part of the year to be a bit soft,"​ said James Mack, Cambrex CEO. "We believe the long-term prospects for our business remain positive and will continue to focus on cost reduction, growing our proprietary products and technologies, implementation of key capital investments, and the evaluation of strategic M&A opportunities."​ Looking forward, the company warned that its third quarter results may be "weaker than normal due to current order patterns",​ although said its fourth quarter results "may be stronger than usual". ​ In addition, sales growth for the full-year 2007 is expected to be within the range of 5 to 10 per cent and operating profit is expected to be between $50 and $55m.