Currency Effects Boost Lab Equipment/Consumables Sales

First-quarter revenues for the IBO Lab Equipment/Consumables Index grew 10.5% to $887.72 million. Operating profits improved 14.8% to $265.8 million, and operating margin climbed 110 basis points to 29.9% of sales. Favorable currency transactions continued to increase revenue growth for a majority of companies in the Index. However, despite positive results from businesses, such as Thermo Fisher Scientific’s Laboratory Products and Services segment, other companies, such as Kewaunee Scientific and Biohit Oyj, showed signs of slowing growth. Two changes were made to the Index this quarter. Gerresheimer’s Life Science Research segment was added to the Index, while Whatman was removed following the company’s acquisition by GE (see IBO 2/15/08). Biohit Oyj’s first-quarter sales declined 1.0% to €8.1 million ($12.1 million = €0.67 = $1), while operating income recorded a loss of €0.1 ($0.2 million) compared to a profit of €0.2 million ($0.3 million) in the previous first quarter. Liquid Handling sales remained unchanged at €7.7 million ($11.5 million) to account for 96% of sales, while segment operating profits declined 37% to €0.5 million ($0.8 million). Segment sales were negatively affected by the strong euro and the slow development of the company’s distribution network in both China and Japan. Diagnostics sales declined 21% to €0.4 million ($0.6 million), and segment operating loss widened by 3% to €0.6 million ($0.9 million). During the quarter, the company encountered regulatory questions by the FDA regarding its GastroPanel Pepsinogen I and II tests, which has slowed the application process. For the fiscal second quarter ended May 31, revenue for Gerresheimer’s Life Science Research segment grew 51.7% to €22.6 million ($35.3 million = €0.64 = $1) from €14.9 million ($20.1 million = €0.74= $1) due to strong sales in China and inclusion of its joint venture with Thermo Fisher Scientific (see IBO 3/31/08). Operating profits jumped 80.0% to €2.7 million ($4.2 million) benefiting from lower manufacturing costs by transferring production from the US to lower-cost locations in Mexico and China. Kewaunee Scientific’s fiscal fourth-quarter sales ended April 30 declined 2.7% to $22.1 million, and operating profit fell 11.4% to $0.8 million due to operating inefficiencies and increased operating costs. Domestic sales for the quarter were flat, while international sales declined. Fiscal year-end revenues grew 9.9% to $89.5 million, and operating profit rose 67.2% to $5.6 million due to strong domestic sales and reduced manufacturing costs. Domestic and international sales climbed 10.8% and 6.0% to account for 82.4% and 17.6% of total sales, respectively. As of April 30, the company’s order backlog had increased 14.9% to $58.7 million from the previous year. First-quarter revenue for Millipore’s Bioscience division grew 13.9% to $179.6 million to account for 45.3% of Millipore’s total sales. Favorable currency transaction contributed 8% to revenue growth. Organic revenue growth benefited from strong sales of laboratory water and drug discovery products and services, as well as the introduction of new consumable products. Sales to Asia/Pacific increased $2.7 million due to strong demand for laboratory water products in Japan, while sales to the America and Europe increased $2.6 million and $3.8 million, respectively. Fiscal-third quarter sales ended April 30 for Pall’s BioPharmaceuticals segment grew 19.9%, or 9.9% on a currency-neutral basis, to $128.4 million, which accounted for 19.4% of total sales. Revenue growth was driven by a 71% climb in system sales due to strong demand in Europe and the Western Hemisphere, while Consumables revenues grew 8%, benefiting from strong demand for vaccines and single-use technologies. However, sales growth for consumables was partially offset by lower sales in the Western Hampshire due to slowing biotechnology spending. For the full fiscal year, BioPharmaceuticals revenue is expected to grow in the double digits. For the fiscal third quarter ended March 31, Techne reported revenue growth of 18.3% to $62.1 million, including 5.7% growth from favorable exchange rates (see page 12). Adjusted operating profit grew 18.8% to $33.2 million. Biotechnology sales rose 17.1%, including 4.8% growth from diagnostic sales, to account for 63.0% of total sales. Revenue for R&D Europe, the company’s European distribution business, improved 24.7%, 18.5% on a currency-neutral basis, to make up 30.6% of total sales. Gross margins for the Biotechnology segment declined 140 basis points to 79.4% of sales due to increased sales of diagnostics, while gross margins for the R&D Europe segment improved 440 basis points to 56.4% of sales due to favorable exchange rates and improved product mix. Target annual sales growth for the Biotechnology segment is 10%–12% and 7%–9% in constant currency for R&D Europe. First-quarter sales for Thermo Fisher Scientific’s Laboratory Products and Services climbed 9.4% to $1,568.4 million to account for 61.4% of the company’s total revenues. Favorable currency translation and acquisitions contributed 2.8% and 2.2% to the segment’s revenue growth, respectively. The company reported strong revenue growth in the research, healthcare and biopharmaceutical markets, but experienced weakness in the safety market, which is dependant on government spending. Adjusted operating income grew 14.9% to $218.4 million, and adjusted operating margin improved 60 basis points to 13.9% of sales. VWR Funding’s first-quarter revenues grew 9.4% to $922.6 million, including 7.9% growth from acquisitions and favorable currency transactions combined. Sales for the North American Lab segment grew 4.4%, 1.7% on a currency-neutral basis, to account for 56.7% of sales. Revenue growth was driven by low-single digit growth in the pharmaceutical and education markets, and mid-single digit growth in the industrial markets. European Lab sales grew 18.8%, including 18.4% growth from foreign currency transactions and acquisitions to make up 40.4% of total revenues. Lower government and export revenues offset strong sales in the education, industrial, and food and beverage markets. Science Education revenue decline 5.7% to account for 2.9% of total sales due to slower product demand in the company’s publisher business. Adjusted operating income for the North American Lab and European Lab segments grew 4.8% and 4.9% to $25.3 and $18.2 million, respectively, while the Science Education segment’s loss widened 11.3% to $3.0 million. Total adjusted operating profits improved 4.5% to $40.5 million, while gross profit margins were unchanged at 28.3% of sales.

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