ALLEGAN — The transformation plan President and CEO Murray Kessler put in place last spring to return Perrigo Co. plc to revenue and earnings growth appears to have gained traction late in 2019, based on preliminary results for the fourth quarter.
Perrigo (Nasdaq: PRGO) recorded strong organic sales growth of 15 percent to $710.5 million in the key Consumer Self-Care Americas division for the fourth quarter, according to preliminary figures. Sales for the Consumer Self-Care International division grew 8 percent organically to $356.4 million.
In an investor presentation this week, Kessler touted the preliminary quarterly sales results as evidence of accelerating revenue and the progress that Perrigo has made since he first detailed the transformation plan to investors back in May.
Perrigo is still early in the transformation process, “but things are going in the right direction,” Kessler said. He called the fourth quarter “outstanding.”
“My confidence a year later as a new CEO is growing. With great people and a lot of energy and some new talent injected and the innovation ramping up, that job number one — my first promise of getting more credible, delivering and getting the revenue growth going — is starting to prove itself out. We’d much rather prove it with the numbers than talk,” he said last week at the annual JPMorgan Healthcare Conference in San Francisco. “Many people talk to us about execution is the key point. We agree. We think that we have a great strategy and we are executing on it.”
Perrigo’s Rx division that produces generic medication grew quarterly sales by 3 percent to $356.4 million. Perrigo still plans to divest the Rx division, Kessler said.
Overall, Perrigo increased net sales 2 percent organically across all divisions to $4.8 billion for 2019, reversing declines in the two previous years.
Full-year sales for Consumer Self-Care Americas grew 3 percent to about $2.5 billion, and annual sales for the Consumer Self-Care International division declined 1 percent to $1.4 billion.
Perrigo, based in Dublin, Ireland, and operated from Allegan in West Michigan, targets sales growth of 3 percent for its two consumer divisions, a growth rate similar to industry peers. The company also seeks to grow adjusted operating income by 4 percent annually and drive a 7-percent increase in adjusted earnings per share, Kessler said.
The targets for operating income and earnings per share growth will take longer to achieve under Perrigo’s transformation plan because of the investments needed to drive change, although “we’re starting to turn that as well,” he said.
“That will be a little bit of a slower turn because of the investments we’re making, but we’re on a two- to three-year journey,” Kessler said. “We are investing to make this a great company and every component of it is great.”
Perrigo will announce final results for the fourth quarter and all of 2019 in late February.
The transformation plan envisions Perrigo becoming a company focused on “self-care,” producing products for consumers to not only treat themselves with store-brand, over-the-counter medications but also to maintain their health and prevent illnesses.
Self-care is a $450 billion market that Kessler said has all of the consumer trends going in its favor.
“Those tailwinds for the growth of the category should remain,” he said.
As part of that plan, Perrigo in 2019 acquired Grand Rapids-based Ranir Global Holdings LLC, a maker of oral care products, for $750 million. Perrigo most recently bought the assets of Steripod, a toothbrush accessory brand, from Culver City, Calif.-based Bonfit America Inc., for an undisclosed amount.
Perrigo as well has changed 40 percent of its leadership team, ramped up R&D and has $500 million in new products in the pipeline, and aims to generate $100 million in cost savings over three years, Kessler said. The company has identified $10 million to $15 million in cost savings this year and expects to drive $30 million annually over the next few years.