Major publicly held analytical instrument and laboratory product companies experienced healthy sales growth in the first quarter of the calendar year—quite a change from a year ago and further evidence that market demand is steadily recovering. Sales to academic, government and applied markets were good, and industrial markets showed signs of life. However, pharmaceutical and biotech demand remained a mixed bag.

For the 10 businesses whose quarterly results are shown in the tables on pages 10–11, combined sales grew 13.6% in US dollars. On a reported basis, seven companies showed double-digit revenue growth. Agilent Chemical Analysis (CA) and Life Sciences (LS), Dionex, and Thermo Fisher Scientific Analytical Technologies (AT) showed double-digit sales growth on a currency-neutral basis.

Combined operating profits for the 10 companies grew 25.4% in US dollars, as firms continued to control costs and increase efficiencies. In reported currency, seven companies reported double-digit increases in operating profits, led by Bio-Rad Laboratories Life Science (LS) and Bruker Scientific Instruments (BSI), which benefited from year-over-year comparisons.

Geographically, Japan was the big story this quarter, as sales to the country boosted revenues for several companies, including Agilent CA and LS, Dionex, Horiba Analytical Instruments and Systems, PerkinElmer and Waters. Japan’s supplementary budget, which was designed to stimulate economic growth, was cited as a contributing factor. Chinese and US stimulus spending also helped grow instrument sales. Bio-Rad LS, BSI and Life Technologies each reported sales related to US stimulus funding. However, companies continued to note the slow flow of these funds. The Indian market continued its comeback from currency-related effects a year ago, according to Bruker and Waters. But Europe remained a challenging region.

Sales of MS and HPLC systems were strong. Agilent and Dionex highlighted their HPLC sales growth. Bruker and Waters emphasized the growth for their MS product lines. Consumables and service also contributed to revenue growth at several companies. Lab Services was a significant contributor to PerkinElmer’s Environmental Health sales. Consumables drove growth for Waters and Thermo Fisher Scientific AT. In the life sciences, Bio-Rad LS and Life Technologies each reported strong PCR and bioproduction-related revenues.

Government and academic markets continued to fuel sales growth, in part due to stimulus funds. In general, companies noted positive signs for the return of industrial sales, but none declared a full-scale return for the market. Bruker and Dionex were among the most positive, while Agilent CA and LS’s petrochemical sales and Waters’s TA division each showed double-digit revenue growth. As for the pharmaceutical market, sales to specialty and generic drug companies were strong, but consolidation activities slowed sales to big pharma, according to some companies. Food safety remained a driver, while both Dionex and PerkinElmer cited the environmental market as ripe for replacement sales.

The information below is based on company financial reports, SEC filings and quarterly conference calls.

Combined fiscal second-quarter revenues for Agilent Technologies Chemical Analysis (CA) and Life Sciences (LS) grew 14.9%, 10.5% on a currency-neutral basis, to $572.0 million (see page 12). Petrochemical, environmental and forensics, and food safety sales jumped 29%, 26%, and 18% to account for 10%, 9%, and 7% of revenues, respectively. Pharmaceutical, and academic and government revenues grew 2% and 5% to represent 13% and 6% of sales, respectively. The Varian acquisition is anticipated to contribute $370 million in revenue in the second half of the year beginning May 15, with 70% of revenue going to CA and 30% to LS. Agilent anticipates $75 million of cost synergies over four to five years.

LS revenue represented 26% of company sales. The divestiture of Hycor (see IBO 3/15/10) reduced LS revenue growth by 3%. Excluding Hycor, sales to academic and government, pharmaceutical and biotech, and applied markets improved 11%, 4% and 25%, respectively. Sales of LCs and SureSelect products rose 28% and 25%, respectively. Sales to the Americas and Europe grew 9% and 4% to account for 36% and 30% of LS sales, respectively. Sales to Japan and the Rest of Asia Pacific rose 27% and 25%, respectively. Asia Pacific sales made up 34% of LS sales. LS adjusted operating income grew 9.1% to $48 million, while gross margins were unchanged at 55% of sales. For the second half of the fiscal year, Agilent anticipates LS revenue growth of 14%–16%, or 17%–19% excluding divestitures.

CA revenue accounted for 19% of company sales. Sales of GC/MS, ICP-MS and mid-range GC platforms each grew in the double digits. Consumables and service revenues grew 21% and 11%, respectively. Sales to the Americas and Europe grew 10% and 8% to represent 26% and 28% of CA sales, respectively. Japanese sales jumped 46%, and sales to the rest of Asia Pacific grew 28%. Total Asia Pacific revenue accounted for 46% of CA sales. CA adjusted operating profit jumped 26.7% to $57 million, while gross margins improved 100 basis points to 54% of sales. For the second half of the fiscal year, Agilent projects CA revenue growth of 13%–15%.

Combined fiscal second-quarter sales for Analytik Jena Analytical Instrumentation (AI) and Life Science (LS) grew 4.4% to €17.9 million ($24.9 million = €0.72 = $1). In US dollars, combined sales climbed 11.7%. Adjusted operating profit for the segments fell 50.6% to €0.8 million ($1.1 million) due to higher selling and administrative expenses following acquisitions. AI sales declined 9.4% to €12.0 million ($16.7 million) to account for 62% of sales due to two large orders in the previous year. Consequently, AI recorded an operating loss of €0.8 million ($1.1 million), compared to a gain of €0.5 million ($0.7 million) a year ago. LS revenue grew 51.5% to €5.9 million ($8.2 million), and operating profit jumped 47.9% to €1.5 million ($2.1 million). For fiscal 2010, the company anticipates double-digit revenue growth to €80 million ($111 million).

Bio-Rad Laboratories’ first-quarter Life Science (LS) revenue grew 7.9%, 3.4% on a currency-neutral basis, to $151.4 million to make up 33% of sales. Excluding BSE sales, LS revenue improved 9.7%, or 5.3% on a currency-neutral basis. Sales were higher for real-time PCR instruments and reagents, and protein-related product lines. On a currency-neutral basis, LS sales in Asia Pacific and North America increased, but European sales declined. LS operating income soared 93.2% to $11.4 million, and gross profit margins improved 160 basis points. The company reported roughly $2 million in stimulus-related sales.

For the first quarter, Bruker’s Scientific Instruments (BSI) revenue climbed 16.4%, 8.6% on a currency-neutral basis, to $260.3 million to account for 94% of sales. System revenue grew 16.9% to make up 79% of BSI sales, while Aftermarket revenue increased 14.7%. AXS, BioSpin, Daltonics and Optics each reported double-digit sales growth. Sales for magnetic resonance and MS systems were strong. BSI adjusted operating income jumped 72.0% to $27.7 million, and gross profit margins improved 180 basis points to 47.1% of sales due to product mix and costs reductions. The company reported over $10 million in stimulus-related orders.

Revenues for Dionex’s fiscal third quarter climbed 19.5%, 10% organically, to $112.8 million. Currency and acquisitions contributed 5% and 4% to revenue growth, respectively. Sales to the chemical, petrochemical, electronics and power markets each grew over 30%, while environmental, life science, and food and beverage sales showed modest gains. Ion chromatography sales jumped over 20%. HPLC sales grew in the mid-teens, or 10% organically. North American sales rose 17.9% to account for 25% of sales, including 9% and 20% growth from acquisitions and currency, respectively. European sales grew 13.2%, 5.4% in local currency, to represent 35% of sales, while sales to Asia/Pacific jumped 26.6%, 21.6% in local currency, to make up 40%. Demand was particularly strong in China and Japan. Operating profit rose 24.4% to $26.9 million. Gross margins improved 70 basis points to 68.7% of sales due to a favorable product mix. For fiscal 2009, the company increased its revenue guidance by less than 1% to $417–$421 million. Fourth-quarter sales are projected to grow in the mid- to high single digits organically to $104–$108 million.

First-quarter revenue for Horiba Analytical Instruments and Systems improved 2.3% to ¥8,370 million ($92.3 million = ¥90.73 = $1) to account for 31% of sales. In US dollars, revenue grew 5.6%. Orders jumped 20.9% to ¥8,213 million ($90.5 million). Japanese sales were strong, driven by demand from universities and research institutions. However, revenue growth was partially offset by lower sales to Europe and the US. Segment operating profit fell 16.9% to ¥567 million ($6.2 million) primarily due to lower US sales of higher-margin analytical instruments. Second-quarter Analytical revenue is expected to increase 3.2% to ¥7,629 million ($84.1 million). Full-year Analytical revenue is projected to grow 7%–8% to ¥35,000 million ($386 million).

First-quarter sales for Life Technologies grew 13.0%, 10% organically, to $887.0 million. Currency contributed 4% to revenue growth, but acquisitions and divestitures reduced growth by 1%. GAAP revenues climbed 14.1% to $884.9 million. Revenue growth benefited from a $8 million payment for a Japanese police order, $10 million in NIH-related stimulus and $4 million in Japanese government stimulus funding, which combined to add 3% to growth. Organically, sales to the Americas rose 8%, including 3% growth from stimulus spending. Sales to Asia-Pacific, Japan and Europe grew 25%, 23% and 5%, respectively. Adjusted operating profits rose 27.5% to $262.0 million due to operating efficiencies and pricing. Adjusted gross profit margins climbed 160 basis points to 68.3% of sales. The consolidation of two manufacturing sites and other cost-savings initiatives are expected to add an additional $20 million in annualized synergies.

Revenue for Molecular Biology Systems included 3.6% and 0.6% revenue growth from currency and acquisitions, respectively. The PCR business grew in the teens, led by instrument sales in the Americas and Asia. Genomic Assays sales each grew in the double digits in the Americas, Asia-Pacific and Japan. The Cell Systems division benefited from a recovery in pharmaceutical and biotech. As a result, the Bioproduction and Dynal beads businesses grew double digits, and the Stem Cell business grew in the high double digits. Roughly $50 million in revenue from the product line associated with the Pharma Analytics business for pharmaceutical and biological production was moved from Genetic Systems to Cell Systems. In Genetic Systems, the CE Research business grew in the mid-single digits. Sales of next-generation sequencing and DNA testing each grew double digits.

Mettler-Toledo’s Laboratory sales grew 14%, 6% organically, to represent 46% of sales, or $191.7 million (see page 12). Currency and acquisitions contributed 5% and 3% to revenue growth, respectively. Sales were driven by analytical instruments, pipettes and process analytics, but were partially offset by lower automated chemistry and balance sales.

Despite several extra selling days last year, PerkinElmer’s first-quarter revenues grew 6.9%, 2% organically, to $465.1 million. Currency and acquisitions boosted revenue growth by 4% and 1%, respectively. Organically, sales to the Americas were flat, European sales grew in the low single digits and sales to Asia grew in the low double digits, including growth in the high teens in China. Adjusted operating income climbed 15.8% to $55.6 million due to cost-savings initiatives and geographic mix. Gross profit margins slipped 60 basis points to 42.7% of sales due to product mix. The company revised its full-year organic revenue guidance to mid-single digit growth, which was in the upper range of its previous forecast.

Human Health sales rose 6.4%, 2% organically, to $188.6 million, including 3% and 2% growth from currency and acquisitions, respectively. Diagnostic sales grew 7%, or mid-single digits organically, due to medical-imaging and prenatal-screening sales, which were partially offset by lower neonatal-screening revenue. Research product revenue rose 4%, but was flat organically as strong demand for reagent products were offset by delayed stimulus spending and lower capital investment for high-end instruments. The additional business days reduced sales growth for the Screening and Research businesses by 4%–5%. Adjusted operating profits for the segment grew 17.5% to $33.0 million.

Environmental Health revenue climbed 7.2% to $276.5 million, including 4% growth from currency. Within Environmental Health, Lab Services revenue grew 6%, low single digits organically, due to One Source. Environmental product sales grew in the mid-single digits organically, led by demand for water testing and renewable energy–related technologies, but sales were impacted by capital constraints by smaller customers. Safety and Security revenue grew in the mid-single digits, driven by food and consumer safety. Segment revenue also benefited from demand for thermal power sensors in response to the H1N1 virus. Sales to the industrial markets grew in the low single digits organically, led by higher demand for chemical and material characterization–related products. Adjusted operating profits for Environmental Health climbed 11.5% to $31.9 million.

First-quarter revenue for Thermo Fisher Scientific Analytical Technologies (AT) climbed 17.9%, 9.7% organically, to $1,107.0 million to account for 41% of sales. Currency and acquisitions boosted revenue growth by 3.2% and 5.0%, respectively. Four additional selling days contributed 4%–5% to company sales growth. MS sales were robust due to demand from government and academic markets, as well as stimulus spending, primarily in Japan. Bioscience sales were strong, but the Microbiology business grew below the AT average due to a weak flu season. Demand for environmental and process-control equipment stabilized, but sales to the metals and mining sector declined. For 2010, the company raised the low end of its revenue guidance by $50 million to $10.7–$10.8 billion for growth of 5%-7%, including 2% growth from acquisitions and divestitures.

Waters’s first-quarter revenues increased 10.4%, 6.4% on a currency-neutral basis, to $367.7 million. Waters Division sales grew at the same rate. TA revenue improved 10.2%, or 8.2% excluding currency. Pharmaceutical sales climbed 11%, and government and academic sales increased 19%. Sales to industrial, food safety and environmental markets rose 8%. Sales to Europe, Asia and the rest of the world declined 9%, 21% and 10%, but, excluding currency, grew 6%, 5% and 8%, respectively. US sales fell 2%. Adjusted operating profits grew 8.9% to $97.0 million. Gross profit margins slipped 142 basis points to 60.3% of sales due to currency, partially offset by cost reductions. Second-quarter revenues are expected to grow 8% to $392 million, including 1% growth from currency. Full-year revenues are expected to grow 5%–7% to $1,574–$1,604 million.

Chart: Q1 CY10 Reported Growth vs. Currency-Neutral Growth

Reported Currency Effect

Agilent (LS & CA) 14.9% 4.4%

Bruker (SI) 16.4% 7.8%

Life Technologies 13.0% 3.7%

Agilent FY10 Q2

Rev. ($M) % Rev. Grow. % Rev. Grow. Ex. Cur.

LS

Sales $334 12.1% 8%

Orders $331 15.3% 11%

CA

Sales $238 19.1% 14%

Orders $231 19.0% 14%

Chart: Q1 CY10 Revenue Growth (Rpt. Currency)

Horiba (Analytical) 2.3%

Analytik Jena (AI & LS) 4.4%

PerkinElmer 6.9%

Bio-Rad (LS) 7.9%

Waters 10.4%

Life Technologies 13.0%

Agilent (LS & CA) 14.9%

Bruker (SI) 16.4%

Thermo Fisher Scientific (AT) 17.9%

Dionex 19.5%

Horiba Analy. Instruments and Systems FY10 Q1

Sales (¥M) Sales ($M) % Growth (¥)

Japan ¥4,531 $49.9 4.6%

Europe ¥1,498 $16.5 -7.5%

Americas ¥1,198 $13.2 -12.9%

Asia ¥1,142 $12.6 34.1%

Life Technologies FY10 Q1

Rev. ($M) % Rev. Grow. % Org. Grow.

Molecular Bio. Sys. $432.0 13% 10%

Genetic Systems $238.0 14% 12%

Cell Systems $214.0 11% 8%

PerkinElmer FY10 Q1

% Total Rev.

Human Health

Diagnostics 24%

Research 17%

Environmental Health

Lab Services 20%

Environmental 17%

Safety & Security 15%

Industrial 7%

Waters FY10 Q1

% Rev. Growth % Segment Rev.

Waters Div.

Instrument Systems 11.0% 48%

Chemistry Consum. 12.6% 20%

Service 8.2% 32%

TA

Instrument Systems 9.3% 74%

Service 12.9% 26%

Chart: Q1 CY10 Adj. Op. Profit Growth (Rpt. Currency)

Analytik Jena (AI & LS) -50.6%

Horiba (Analytical) -16.9%

Waters 8.9%

PerkinElmer 15.8%

Agilent (LS & CA) 18.0%

Dionex 24.4%

Life Technologies 27.5%

Thermo Fisher Scientific (AT) 33.9%

Bruker (SI) 72.0%

Bio-Rad (LS) 93.2%