Another Quarter of Sales Declines

In what a number of publicly traded analytical instrument companies called their toughest quarter ever, the first quarter of calendar-year 2009 was a challenging environment for sales of analytical and laboratory instruments and even, in some cases, laboratory consumables.

Revenues in reported currencies for 10 of the 11 companies profiled on pages 9–11 declined during the quarter. Sales declined in double digits in native currencies for four businesses: Varian Scientific Instruments (SI) (-16.4%), Thermo Fisher Scientific Analytical Technologies (AT) (-13.6%), Horiba Analytical Instruments and Systems (-10.6%), and Waters (-10.4%). However, sales for Thermo Fisher AT Scientific and Waters were down in single digits excluding currency effects. Analytik Jena was the only company to report quarterly sales growth, which include sales from recently acquired businesses. In total, sales for the eight companies in the table on page 10 declined 9.7% on average.

The decline in quarterly sales also impacted profitability for the most part, as five businesses in the table on page 10 reported operating losses, with double-digit losses for three firms. However, European and Asian manufacturing benefited a number of companies due to a stronger dollar. Actions taken during the quarter to reduce costs included head count reductions at Mettler-Toledo (see IBO 5/15/09), PerkinElmer, Thermo Fisher Scientific AT and Varian. All 11 companies emphasized reductions in discretionary spending. For the nine companies in the table, total average operating profits declined 12.8% in the calendar-year first quarter.

In general, sales of lower-end or mid-range instruments suffered the most, as end-users prolonged replacement cycles. Sales of systems used in industrial markets were hardest hit, including atomic spectroscopy and GC and LC for routine applications, affecting Agilent Bio-Analytical Measurement (BAM), Bruker BioScience, Thermo Fisher Scientific AT, Varian SI and Waters. Sales of higher-end MS systems held up, according to Agilent BAM, Bruker BioScience, Thermo AT and Waters. Life science research sales were resilient for Agilent BAM’s microarrays and PerkinElmer’s new reagents and cellular analysis systems. However, Bio-Rad Laboratories reported that softer demand for higher priced life science research instruments continued. Agilent BAM and Thermo Fisher Scientific AT reported some destocking of consumables.

End markets reflected the same situation as the calendar-year fourth quarter of 2008. Academic and government markets showed the strongest growth. Industrial markets including the chemical and petrochemical sectors, remained dismal. Agilent BAM, Bruker BioScience, Thermo AT, Varian SI and Waters all reported weak industrial sales and indicated that they expect such weakness to continue through the year. In contrast, food safety spending remained strong for all companies.

Stimulus spending by the academic market was a focus. Companies noted increased quote activity directly related to US stimulus spending and discussed targeted marketing efforts. The technologies that stimulus awards are most likely to fund include LC, MS, LC/MS and NMRs, according to companies. Most firms estimate that sales related to US stimulus spending are not expected until the calendar-year fourth quarter or 2010. Companies also noted purchases related to stimulus spending in Europe and China.

In fact, China was a bright spot for all companies, including Agilent BAM, PerkinElmer and Thermo AT. North America was the weakest region, while Europe was mixed. The sudden shifts in currency that affected buying power last quarter in countries such as Korea and India (see IBO 2/28/09) eased, according to Varian and Waters.

Company summaries are based on earnings reports, SEC filings and quarterly conference calls.

Fiscal second-quarter revenues for Agilent Technologies’ Bio-Analytical Measurement (BAM) declined 6.0% to $498 million to account for 46% of company sales. Excluding currency, BAM sales were flat. Orders slipped 16.2% to $481 million. Adjusted operating profits grew 4.7% to $89 million as a result of lower corporate expenses, while operating margins improved over 100 basis points to 54% of BAM sales. Sales to the Americas and Europe declined 10% and 16%, while sales to Japan and other Asian regions grew 7% and 12%, respectively. Sales to China jumped 29%. The Americas, Asia-Pacific and Europe made up 34%, 34% and 32% of sales, respectively. The company anticipates BAM revenues to decline 10% in the second-half of the year.

Demand for LC/MS and microarrays climbed in double digits, while GC/MS sales were stable and sales of both GCs and LCs declined in double digits. Life Sciences revenue declined 7% to $241 million as pharmaceutical and biotech sales dropped 11%. However, sales to academic and government markets grew 10%. Chemical Analysis revenue fell 6% to $257 million due to lower demand from industrial markets. Petrochemical and environmental sales fell 14% and 12%, respectively. Conversely, food safety revenue jumped 30%.

Based on continuing operations, Analytik Jena’s fiscal second-quarter sales grew 47.2% to €18.4 million ($23.9 million = €0.77 = $1) including Cybio (see IBO 3/15/09). In US dollars, sales climbed 28.5%. Analytical and Bio Solutions sales jumped 34.2% and 316.3% to €13.3 million ($17.2 million) and €3.9 million ($5.1 million), respectively, while Optical Solutions sales declined 27.4% to €1.2 million ($1.6 million). Excluding Cybio, Analytical and Bio Solutions sales improved 34.2% and 25.1%, respectively. Adjusted operating profit soared over 650% to €1.9 million ($2.5 million). The company anticipates full-year revenues to grow 22%–30% to €65–€69 million ($84–$90 million), including acquisitions.

Bio-Rad Laboratories’ first-quarter Life Science (LS) revenue declined 9.2%, 3.0% on a currency-neutral basis, to $140.3 million to make up 35% of total sales. Excluding BSE sales, LS revenue was flat on a currency-neutral basis. Segment growth benefited from higher sales of protein-related product lines and gene amplification products, including BioPlex and PCR products. However, slower demand for research products in the US and Europe, and the timing of certain process chromatography deliveries in the previous year adversely impacted LS revenue growth. Instrument sales were down sequentially. US and European sales declined, while sales to Asia-Pacific and Latin American each grew in double digits. Operating income for the segment dropped 39.2% to $5.9 million due to a shift in product mix, while gross profit margins declined 200 basis points.

For the first quarter, Bruker’s revenues declined 3.3% to $230.5 million, but climbed 4.5% on a currency-neutral basis. Product and Service revenues fell 2.9% and 6.3% to make up 88% and 12% of total sales, respectively, while Other revenue climbed 7.7%. Adjusted operating income fell 34.2% to $14.3 million, while gross profit margins declined 320 basis points to 44.6% of sales due to pricing competition and unfavorable product mix.

Sales for Bruker BioScience contracted by 11.2%, 2.4% on a currency-neutral basis, to $126.6 million due to lower demand from industrial and pharmaceutical customers, primarily for CBRN detection systems and X-ray and OES-spark spectrometer products. However, academic and government sales increased, and orders for life science MS systems grew in double digits. BioSpin revenue improved 2.2%, 7.6% on a currency-neutral basis, to $114.6 million, driven by strong sales of system and wire products, as well as higher sales volume of magnetic resonance systems.

Revenues for Dionex’s fiscal third quarter fell 4.0% to $94.4 million, but grew 1% on a currency-neutral basis. Sales in the environmental, life sciences, food and beverage, and power markets increased, but were offset by a sharp decline in chemical and petrochemical sales and slightly lower demand from the electronics industry. On a currency-neutral basis, HPLC sales grew in the low single digits, led by strong demand for Ultimate 3000 products. IC sales declined in the mid single digits, but were slightly positive on a currency-neutral basis. Overall, demand was particularly strong in China and Japan, which accounted for an order for 51 systems, while India and Korea ended the quarter with strong sales after a slow beginning. Operating profit rose 8.0% to $21.6 million, while gross margins improved 240 basis points to 68.0% of sales due to cost reduction initiatives and favorable geographic mix. For fiscal 2009, the company anticipates revenues will grow 1.0% to $380–$383 million, led by the academic and specialized pharmaceutical markets. Fourth-quarter sales are projected to decline 7% to $90–$92 million and to be flat on a currency-neutral basis.

For the first quarter, revenue for Horiba’s Analytical Instruments and Systems declined 10.6% to ¥8,182 million ($87.3 million = ¥93.68 = $1) to account for 32% of company sales. Reported in US dollars, revenue slipped 0.4%. Segment operating profit jumped 151.6% to ¥682 million ($7.3 million) due in part due to lower manufacturing costs for Jobin Yvon products, which are made in France. Operating margins soared over five percentage points to 8.3% of sales. Horiba noted a rapid decrease in capital expenditures by the private sector. The company revised its six-month sales forecast for the segment downward to ¥16,000 million ($170 million). The company also lowered its full-year 2009 Analytical Instrument and Systems revenue outlook by 1.4% to ¥35,000 million ($375 million), for a decline of 9%.

Mettler-Toledo’s first-quarter sales fell 14.8%, or 8% in local currency, to $374.1 million. Sales of laboratory products declined 9% in local currencies to account for approximately 40% of total sales. Demand was lower for laboratory balances, analytical instruments and process analytics, primarily in Europe and the Americas due to softer end-markets as well as tough year over year comparisons. Sales of pipettes and automated chemistry products remained stable.

PerkinElmer’s first-quarter revenues fell 5.9% to $431.6 million, but were flat on a currency-neutral basis. An additional week in the quarter compared to the previous year added approximately 2% to revenue growth. Adjusted operating income was relatively unchanged at $48.4 million, while gross profit margins climbed 167 basis points to 43.6% of sales. Sales to the Americas grew in the low-single digits, European sales declined in the mid-single digits, and sales to Asia grew in the mid-single digits. Demand from China, India and Japan were particularly strong. For the second quarter, the company anticipates organic revenue growth to decline in the low to mid-single digits.

Human Health sales slipped 1.6% to represent 41% of sales, including a 7% decline in revenue growth from currency transactions and 1% sales growth from acquisitions. Within Human Health, Diagnostic sales declined in low single digits due to a double-digit drop in sales of Medical Imaging products, which was partially offset by mid-single digit growth for Genetic Screening revenue. Research product sales grew in the low double digits due to strong demand for reagents and cellular imaging and analysis products, primarily from academic and clinical labs. Demand from pharmaceutical and biotech markets was flat. Adjusted operating profits for the segment grew 19.8% to $27.6 million due to improved productivity and favorable product mix.

Environmental Health revenue declined 8.7% to account for 59% of sales, including a 7% decline in revenue growth from currency transactions and 2% revenue growth from acquisitions. Within the Environmental Health segment, Lab Service revenue grew in the low double digits driven by the One Source program. Environmental product sales declined in the mid-single digits, as did sales of Safety and Security products. Sales for Pharmaceutical QA/QC fell, while Industrial sales dropped 20%. However, sales for consumer products and food testing grew. Adjusted operating profits for Environmental Health dropped 19.8% to $28.4 million due to increased operating expenses.

Revenue for Thermo Fisher Scientific Analytical Technologies (AT) declined 13.6% in the first quarter to $938.8 million to account for 42% of total sales. Currency transactions reduced revenue growth by 5.7%, while acquisitions contributed 0.4% growth. The company estimates that a shorter quarter adversely affected organic sales growth by 3%. Demand across all key segments was lower, particularly for environmental and process control instruments used in industrial markets. However, demand for new products, especially scientific instruments and life science research products, remained strong. AT operating income fell 24.1% to $173.5 million, and adjusted operating margin slipped 250 basis points to 18.5% of sales. As a whole, the company reported weakness in consumables sales due to de-stocking and a double-digit decline in sales to pharmaceutical and biotech markets. Sales were up for food testing products and in China. For 2009, the company lowered its revenue outlook by roughly 4% to $9.6–$9.9 billion for a decline of 6%–9%.

Fiscal second-quarter revenue for Varian’s Scientific Instruments division (SI) declined 17.2% to $170.9 million to make up 83% of total sales. Acquisitions contributed 1% to revenue growth, while currency transactions lowered revenue growth by roughly 6%. Revenue growth was adversely affected by lower analytical instrument sales due to slower capital spending from industrial markets. Demand for environmental, food and safety products was also lower. Government and academic markets improved slightly and the company reported strong interest in NMR products. Consumables and services revenue, which accounted for approximately 30%–35% of total sales, were higher, led by increased demand for sample preparation products. SI operating profits fell 18.5% to $20.4 million, despite benefiting from lower manufacturing costs for facilities in Australia and the UK on account of favorable exchange rates. Adjusted gross profit margins slipped 30 basis points to 12.0% of sales. Total company sales to North America, Europe, Asia-Pacific and Latin America declined 8.6%, 25.8%, 10.0% and 23.8% to account for 32%, 38%, 24% and 6% of sales, respectively. Going forward, the company anticipates a challenging third quarter due to order delays and the Easter holiday in Europe.

First-quarter revenues for Waters declined 10.4%, 5% on a currency-neutral basis, to $333.1 million. Acquisitions contributed 1% to sales growth, and three additional selling days in the quarter boosted revenue growth by 1%-2%. Product sales fell 15.9% to $227.4 million due to a mid-teens decline in instrument sales. Service revenue grew 4.3% to $101.2 million. Sales to the pharmaceutical and industrial markets fell 11% and 17%, respectively, while government and academic sales increased 13%. Sales to the US, Europe, Asia (including Japan) and the rest of the world declined 6%, 17%, 6% and 16%, respectively. On a currency-neutral basis, sale to Europe and the rest of the world fell 4% and 2%, respectively. Adjusted operating profits slipped 2.8% to $88.1 million, while gross profit margins climbed 355 basis points higher to 61.7% of sales.

Revenue for the Waters Division declined 10.6%, 5% on a currency-neutral basis, to account for 90% of sales. Acquisitions contributed 1% to revenue growth. Within in the Division instrument sales declined 16%, and reoccurring revenue rose 9%. Thermal Analysis (TA) sales declined 8.3%, 6% on a currency-neutral basis to represent 10% of total sales. Acquisitions contributed 3% to TA revenue growth. Segment growth was negatively impacted by lower instrument sales to the chemicals and plastic industries, while service revenue increased primarily for life science products. For the second quarter, Waters anticipates revenue growth to decline 5% to roughly $379 million. Full-year revenues are expected to decline 3%–8% to $1,449–$1,527 million, including a mid-single to low-double-digit decline in instrument sales and mid single digit growth for recurring revenues.

Bruker FY09 Q1

BioSciences % Rev. Growth % Segment Rev.

System -12.6% 80%

Other System 5.6% 2%

Aftermarket -6.3% 19%


System and Wire 3.5% 89%

Other System -9.1% 1%

Aftermarket -6.3% 10%

Chart: Q1 CY09 Revenue Growth ($US)

US Dollars

Varian (SI) -16.4%

Thermo Fisher Scientific (AT) -13.6%

Waters -10.4%

Bio-Rad (LS) -9.2%

Agilent (BAM) -6.0%

PerkinElmer -5.9%

Dionex -4.0%

Bruker -3.3%

Dionex FY09 Q3

% Rev. Growth % Total Rev.

North America -12.8% 25%

Europe -11.2% 37%

Asia/Pacific 12.2% 38%

Horiba Analy. Instruments and Systems FY09 Q1

Sales (¥M) Sales ($M) % Growth (¥)

Japan ¥4,333 $46.3 -10.9%

Asia ¥851 $9.1 -23.5%

Americas ¥1,376 $14.7 16.5%

Europe ¥1,621 $17.3 -18.7%

PerkinElmer FY09 Q1

Human Health % Total Rev.

Diagnostics 23%

Research 18%

Environmental Health

Lab Services 21%

Environmental 17%

Safety & Security 14%

Industrial 8%

Chart: Q1 CY09 Adj. Operating Profit Growth ($US)

US Dollars

Bio-Rad (LS) -39.2%

Bruker -34.2%

Thermo Fisher Scientific (AT) -24.1%

Varian (SI) -18.5%

Waters -2.8%

PerkinElmer 0.0%

Agilent (BAM) 4.7%

Dionex 8.0%

Waters FY09 Q1

Waters Div. % Rev. Growth % Segment Rev.

Instrument Systems -21% 48%

Chemistry Consum 0% 20%

Service 3% 32%


Instrument Systems -15% 75%

Service 18% 25%

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