Sales growth in developing economies, industrial markets and applied applications offset weakness in US and European academic and government markets in the calendar-year first quarter, according to the financial results of major, publicly held laboratory instrument and lab product businesses. For the eight businesses whose quarterly results are detailed on pages 9–11, total revenues for the quarter ending in March increased 7.6% (see table, page 9). Leading the sales growth were Thermo Fisher Scientific Analytical Technologies and PerkinElmer due to acquisitions. Two companies, Illumina and Waters, recorded revenue declines.

Quarterly adjusted operating profits for the eight businesses rose 10.2%, with four companies posting double-digit percentage increases. However, three companies reported adjusted operating losses. Bruker, Life Technologies, PerkinElmer and Thermo Fisher Scientific noted a continued focus on efficiency efforts during the quarter as part of longer-term operating cost improvements. Illumina and Thermo confirmed quarterly price increases.

Academia and government sales to industrialized economies were a weak spot for the companies this quarter. Agilent Life Sciences (LS) and Waters reported declining sales to academic and government markets, and Bruker reported weak US academic sales. Illumina and Life Technologies, which had been especially impacted by such declines in spending last year, reported a stable sales environment. Sales to applied markets were a highlight for Agilent Chemical Analysis (CA), Life Technologies, Thermo Fisher Scientific and Waters. Biopharmaceutical sales were up for Agilent LS and Thermo Fisher Scientific but declined for Waters. Agilent reported a decline in LC sales, while Waters reported slower Alliance HPLC sales. Strong results for MS sales were reported by Agilent LS, Thermo Fisher Scientific and Waters. Illumina, Life Technologies and PerkinElmer benefited from sequencer-related sales. PerkinElmer and Thermo Fisher Scientific noted good growth for molecular spectroscopy sales. However, both Agilent LS and Bruker reported lower NMR sales.

Despite the European economic environment, most companies reported sales growth in Europe during the quarter, with lower sales in selected segments. Illumina and Life Technologies also noted strong growth in Japan. Developing markets remained strong. Agilent CA, Life Technologies and PerkinElmer each highlighted growth in these regions. However, Waters noted weakness in selected developing countries, especially India. Thermo Fisher Scientific also noted slower growth in India. Demand in China for all companies remained strong.

Firms remained positive for sales growth for this year, despite expectations of continued sales weakness in US and European academic markets and uncertainty for European sales. During the quarter, Thermo raised its annual sales guidance due to currency effects. However, Waters lowered its 2012 revenue guidance, citing lower-than-expected first-quarter sales. The information provided on pages 9–11 is from company financial reports, SEC filings and conference calls.

Agilent Life Sciences and Chemical Analysis

Adjusted for the timing of Varian orders in the previous year, combined fiscal second-quarter sales for Agilent Technologies Chemical Analysis (CA) and Life Sciences (LS) grew 5% organically. Combined, LS and CA sales are expected to grow 7% in the second half of the fiscal year.

LS sales grew 1.1%, 2% excluding currency, to $469 million to account for 27% of company sales. Orders slipped 1%, but were flat excluding currency at $476 million. Pharmaceutical and biotechnology sales grew 4%, led by higher demand for LC and LC/MS. However, total LC sales declined slightly. Demand for pharmaceutical products was good in India and stable in Europe. Academic and government sales fell 6% due to lower Genomics and Research Product sales, especially NMR. Sales to the Americas experienced the strongest growth, accounting for 35% of LS revenue. Sales to Europe and Asia Pacific were modestly higher on a currency-neutral basis to account for 35% and 30%, respectively. Adjusted LS operating profit declined 3% to $59 million.

Agilent CA sales grew 1.8%, 3% organically, to $388 million to account for 22% of company sales due to strong double-digit growth in emerging markets. Orders increased 7.4%, 8% excluding currency, to $408 million. Organically, petrochemical and food revenues each grew 2%, and forensics and environmental sales grew 1%. Sales to Europe and Asia Pacific increased to account for 29% and 42% of CA sales, respectively. Sales to the Americas made up 29%.

Bio-Rad Laboratories Life Science

First-quarter revenue for Bio-Rad Laboratories’ Life Science (LS) segment declined 0.4% organically to account for 32% of company sales. The acquisition of QuantaLife (see IBO 10/15/11) boosted revenue growth by 1.1%. The company reported increased demand for new electrophoresis and imaging products, as well as higher PCR and related reagent sales. On a currency-neutral basis, LS sales to Europe and the Pacific Rim increased, while US and Latin American sales contracted. Excluding the $7.7 million operating loss from QuantaLife, LS operating profit grew 20%. LS gross margins rose 0.7% due to product mix and higher service revenue.

Bruker Scientific Instruments

Bruker’s first-quarter Scientific Instruments (BSI) revenue was driven by strong sales of X-ray and MS products to industrial markets, partially offset by lower NMR sales. Acquisitions contributed 1.1% to sales growth but were mostly offset by currency. BSI orders grew in double digits to further increase the company’s significant backlog. Academic and government sales increased with the exception of the US, which recorded flat academic sales. Demand for semiconductor and data storage products, which account for roughly $100 million in annual sales, were better than expected. Applied markets also showed strength. Bruker Nano Surfaces recorded sales of $44.4 million, with adjusted gross margin in the 55% of sales range. The Chemical & Applied Markets (CAM) division had sales of $22.2 million, with an operating loss of roughly $6 million. Overall, System and Aftermarket revenues grew 12.6% and 12.7% to make up 80% and 20% of BSI sales, respectively. The strongest geographic territories included China, Turkey, India and Japan, while parts of Southern Europe experienced weakness. BSI adjusted gross profit margin improved 80 basis points to 50.1% of sales due to higher sales of new products. For 2012, BSI adjusted operating profit is projected to grow 15%–18% to $230–$240 million, driven by improved operating efficiencies for the CAM division and lower cost structures for new products.

Ilumina

Despite lower first-quarter sales, Illumina recorded 9.1% sequential revenue growth due to strong demand for sequencing and microarray consumables, as well higher shipments of the MiSeq, which benefited from significant backlog orders. Sequencing consumables sales grew 20%, led by strong sales of HiSeq and GA consumables and higher average pull-through rates. The average consumable utilization rates for HiSeq increased to $299,000 from $273,000 in the fourth quarter 2011. In addition, sales of TruSeq sample prep systems increased 35% year over year and 17% sequentially. Sequencing consumables orders grew 33% sequentially due to several bulk orders. Within the array business, the company experienced record shipments of Infinium samples, primarily for exome arrays. Exome-array sample orders reached roughly 300,000 during the quarter, for a running total of 1.3 million orders. Sales and orders for the Infinium CytoSNP array and methylation arrays were also strong. However, total array revenue declined due to lower instrument shipments. Asia-Pacific sales, which surpassed European sales for the first time, grew more than 20% sequentially. Japanese sales were particularly strong due to increased funding. European sales also increased sequentially. Adjusted operating profit fell 5.9% to $72.7 million. Gross profit margins slipped 20 basis points to 66.4% of sales due to a shift in product mix. The company reaffirmed its full-year guidance for sales growth of 8% to $1,100–$1,175 million, including single-digit Consumables growth and flat to slightly lower Instrument sales.

Life Technologies

First-quarter sales for Life Technologies were slightly above company expectations due to sustained demand for next-generation sequencing systems and strength in emerging markets. Genetic Analysis sales grew 4.3% excluding currency due to strong demand for Ion Torrent and capillary electrophoresis sequencers, which was partially offset by weaker sales of SOLiD products and lower qPCR royalty revenue. Research Consumables sales grew 1.5% excluding currency due to higher sales of cell culture products, endpoint PCR products, and molecular and cell biology consumables. Applied Science revenue grew 1.2% excluding currency, led by mid-single digit growth for the BioProduction business and higher demand for the Forensics, and the Animal Health and Food Safety units.

Sales for Life Technologies were highlighted by strength in emerging markets, including double-digit growth in Latin America, high teens growth in China, and strong demand in Eastern Europe and Russia. Overall, currency-neutral sales to Asia Pacific, Japan and Europe grew 8%, 7% and 2%, respectively. Japanese sales benefited from fiscal-year end budget spending. Sales to the Americas were flat. Adjusted gross profit margin improved 30 basis points to 66.3% of sales as a result of products mix, higher pricing and increased productivity. Lower stimulus funding offset first-quarter revenue growth by 1% and is expected to have a similar effect for the full year. The company reaffirmed its 2012 revenue guidance of 2%–4% organic growth to the midpoint of $3.7 billion. Excluding currency, second-quarter sales are expected to be flat at $945 million. Life Technologies aims to increase operating margin by 50 to 100 basis points this year.

PerkinElmer

PerkinElmer’s first-quarter revenues were boosted by the acquisition of Caliper Life Sciences (see IBO 9/15/11). Caliper revenue grew in the mid- to high teens to roughly $40 million, led by robust automation sales for next-generation sequencing, low double-digit sales growth for the IVIS imaging systems, and 20%–25% sales growth for microfluidics. Overall, acquisitions contributed 10% to PerkinElmer’s revenue growth, while currency reduced sales by 1%. Recurring revenue grew in the mid-single digits. Instrument and component revenues grew in the high single digits, but benefited slightly from the timing of sales. Organic sales to the Americas grew in the low single digits, sales to Europe grew in the mid-single digits and Asian sales rose in the low double digits. Sales to emerging markets grew more than 20% organically. Adjusted gross profit margin improved 230 basis points to 49.7% of sales. Despite lowered expectations for Europe, the firm maintained its full-year revenue growth outlook of 10%–12%, or mid-single digit organic growth. Second-quarter sales are projected to grow in the mid-single digits organically to $530–$540 million. PerkinElmer is targeting an operating margin in the high teens by 2014.

PerkinElmer Human Health (HH) revenue expanded due to the acquisition of Caliper and strong organic growth from the Diagnostics and Medical Imaging businesses. Diagnostics sales grew roughly 12% organically to account for 27% of company sales, driven by strong demand for prenatal, newborn and infectious disease screening in China and other emerging markets. Newborn-screening revenues grew in the mid-single digits in the US and in the high single to low double digits outside the US. The Life Sciences and Technology business, which includes the Research and Caliper businesses, grew in the mid-single digits organically to account for 23% of sales. Sales of radiometric detection systems increased due to demand from Japan.

PerkinElmer Environmental Health (EH) sales benefited from higher demand for molecular spectroscopy, informatics products, and environmental, food and consumer safety and testing products. Sales of inorganic analysis solutions, especially the NexION MS, were also strong due to heightened regulations for contaminant testing. The Laboratory Services business grew roughly 9% to make up 23% of company sales. Environment and Safety revenue accounted for 18% of segment sales, and the Industrial business made up 9%.

Thermo Fisher Scientific Analytical Technologies

First-quarter Thermo Fisher Scientific Analytical Technologies (AT) sales accounted for 33% of company sales. AT sales grew 21.2%, including 15.2% growth from acquisitions and a decline of 1.2% growth from currency. Revenue growth was elevated by strong demand for molecular spectroscopy, MS and process instruments from industrial and applied markets. Sales and orders for the new Q Exactive MS and iCAP Q inductively coupled plasma–MS systems were also very strong. Bioprocess production products sales increased, led by strong demand for sera, media and single-use systems. Academic and government revenues declined due to slower sales of lower-end systems. AT adjusted operating income margin improved 190 basis points to 18.4% of sales due to improved productivity and acquisitions. The company readjusted its currency outlook and, as a result, raised its full-year revenue guidance by 1% to $12.27–$12.43 billion for growth of 5%–6%.

Waters

With flat organic sales, Waters’s first-quarter results were below company expectations. The company experienced slower demand in developed regions and a sharp decline in Alliance HPLC sales in India as a result of delayed capital spending by generic drug companies and CROs, partially attributed to the rupee’s devaluation. Total Instrument sales fell 7.9% to account for 50% of revenues. However, sales of the ACQUITY UPLC H-Class and Xevo MS/MS systems grew in double digits. Xevo TQ-S MS sales grew due to strong demand from industrial markets. The company also reported strong shipments of Discovery differential scanning calorimeters and thermogravimetic analyzers, and hybrid rheometer thermal analysis systems. With increased demand for high-temperature applications, TA sales grew by double digits each in the US, Japan and China. Overall, industrial and environmental sales improved 4%. Pharmaceutical sales fell 4%. Combined government and university sales contracted 7% mainly due to lower government spending in Europe and Japan. However, academic sales were slightly higher.

Excluding currency, Waters’s European sales were flat. Japanese sales fell 3%, US sales rose 2% and sales to Asia improved 5%. Sales to China grew by double digits, led by strong demand from industrial and government customers. Sales to the Rest of the World fell 21% excluding currency. Gross profit margin slipped 10 basis points to 60.2% of sales. Sales are expected to grow 5%–7% before currency for the next three quarters. The company lowered its full-year revenue growth outlook by two percentage points to 4%–6% excluding currency. Currency is expected to lower sales growth by 2%.

 Column Graph:  Adjusted Operating Profit Margin 

               CY1Q 2012       CY1Q 2011

 Waters            26.9%           28.0%

 Thermo (AT)       18.4%           16.5%

 PerkinElmer       15.5%           13.7%

 Life Tech.        30.2%           28.2%

 Illumina          26.7%           27.4%

 Bruker (BSI)      11.6%           11.2%

 A (LS+CA)         15.4%           15.7%

 Table: CY1Q 2012 Results

                                            Revenues                    Rev. Growth Summary             Adj.Operating Profit

                                    ($M) %of Co.Rev. %Growth    %Org.Growth  %Acq.Effect %Curr.Effect     ($M)    % Growth

 Agilent Tech. (LS + CA)          $857.0     49%       1.4%          2%          0%          -1%         $132.0     -0.8%

 Bio-Rad Laboratories (LS)        $154.8     32%       0.2%          0%          1%          -1%          -$3.9        NM

 Bruker (BSI)                     $378.1     93%      12.6%         12%          1%          -1%          $43.7     15.9%

 Illumina                         $272.8    100%      -3.4%         -3%          0%           0%          $72.7     -5.9%

 Life Technologies                $939.1    100%       4.8%          2%          0%           2%         $283.2     12.0%

 PerkinElmer                      $510.9    100%      14.2%          6%         10%          -1%          $79.0     29.2%

 Thermo Fisher Scientific (AT)  $1,006.2     33%      21.2%          7%         15%          -1%         $185.3     35.3%

 Waters                           $420.5    100%      -1.7%          0%          0%          -2%         $113.2     -5.3%

                                $4,539.3    7.6%                     4%          4%           0%         $905.2     10.2%

  

 


 Pie Chart: Agilent CA & LS    2Q FY12 

 LSG Pharma & Biotech LSG         28%

 LSG Academic & Govern. LSG       14%

 CAG Chemical & Energy CAG        26%

 CAG Forensics/ Environ. CAG      20%

 CAG Food CAG                     12%

  

 


 Illumina 1Q FY12

                   Revenue ($M)        % Rev. Grow.      % of Rev.

 Consumables        $172.9               16.7%             63%

 Instrument          $79.6              -30.4%             29%

 Other Products       $3.1              -27.4%              1%

 Service & Other     $17.1                8.5%              6%

 


 Pie Chart: Life Technologies 1Q FY12

 Research Consumables    45%

 Genetic Analysis        38%

 Applied Sciences        17%

 


 PerkinElmer 1Q FY12

                  Rev. ($M)    % Grow.   % Acq. Effect    % Curr. Effect    % Org. Grow.

 Human Health    

 Sales               $254.0      26.1%        18%               -1%               9%

 Adj. Op. Profit      $52.21     41.0%   

 Envir. Health     

 Sales                $256.9      4.5%         3%               -1%               3%

 Adj. Op. Profit       $37.5     12.0%

 


 Waters 1Q FY12 

 Waters Div.            % Rev. Growth        %  Segment Rev.

 Instrument Systems        -10.6%                   47%

 Chemistry Consum.           1.7%                   20%

 Service                     7.3%                   33%

 TA   

 Instrument Systems          8.7%                   74%

 Service                    13.3%                   26%