Abbott Aims To Get Nutritionals Back On Track In Wake Of Similac Recall
This article was originally published in The Tan Sheet
Executive Summary
Abbott says its nutrition business is on track for a return to full-scale production and growth after absorbing an expected $100 million hit to third-quarter sales from its September Similac recall
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Abbott says its nutrition business is on track for a return to full-scale production and growth after absorbing an expected $100 million hit to third-quarter sales from its September Similac recall. U.S. nutritional sales in the July-September period declined 5.3 percent to $626 million, hurt primarily by pediatric sales - off 19.1 percent at $261 million. The Abbott Park, Ill., health care firm announced Sept. 22 a voluntary recall of more than 2,200 lots of Similac and Isomil powdered formula products potentially contaminated by beetles or larvae (1 (Also see "Abbott's Similac Recall Triggers Overflow Demand For Answers" - Pink Sheet, 27 Sep, 2010.)). Executives said during an Oct. 20 earnings call Abbott Nutrition has seen consumer sentiment stabilize since the recall was announced and the company has ongoing initiatives to further restore confidence in its products. John Thomas, VP of investor relations, said the recall caused a temporary shortage of SimplePac containers for powdered formula, but Abbott has "done a number of things in our liquid business to increase production and stimulate demand there." The affected production line at Abbott's Sturgis, Mich., plant has been restarted and Similac Advance powder products are shipping again. The recall will continue hurting Abbott's financials in the fourth quarter - the firm expects a high single-digit decline in U.S. nutritional sales. There could be legal implications as well. A lawsuit filed Oct. 18 in federal court in Chicago alleges Abbott delayed the recall for six days and "sat on information while babies got sick," according to law firm Edelson McGuire. Abbott has said its recall response was quick and comprehensive. Abbott Nutrition sales slipped 1.5 percent to $1.37 billion globally, as international performance suffered in comparison to year-ago figures bolstered by product launches. Overall, the company reported 11.8 percent sales growth to $8.68 billion, though net earnings dropped 39.8 percent to $891 million. - Dan Schiff ( 2 [email protected] ) |