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FULL YEAR: ZOETIS' SALES UP 3%, NET INCOME NEARLY TRIPLES
Source: Zoetis news release

To read the entire report click here.

Zoetis Inc. (NYSE:ZTS) today reported its financial results for the fourth quarter and full year 2016 and updated its guidance for the full year 2017.

The company reported revenue of $1.3 billion for the fourth quarter of 2016, which was flat compared with the fourth quarter of 2015. Net income for the fourth quarter of 2016 was $154 million, or $0.31 per diluted share compared with $22 million and $0.04 per diluted share in the fourth quarter of 2015.

Adjusted net income for the fourth quarter of 2016 was $232 million, or $0.47 per diluted share, an increase of 8% and 9%, respectively. Adjusted net income for the fourth quarter of 2016 excludes the net impact of $78 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational basis, revenue for the fourth quarter of 2016, excluding the impact of foreign exchange, was flat compared with the fourth quarter of 2015. This performance reflects the impact of fewer calendar days in the quarter, product rationalizations and business changes in certain markets as part of the company's operational efficiency initiative, and acquisitions. Adjusted net income for the fourth quarter of 2016 increased 13% operationally, excluding the impact of foreign exchange.

For full year 2016, the company reported revenue of $4.9 billion, an increase of 3% compared with full year 2015. Net income for full year 2016 was $821 million, or $1.65 per diluted share compared with $339 million and $0.68 per diluted share for full year 2015.

Adjusted net income for full year 2016 was $975 million, or $1.96 per diluted share, an increase of 10% and 11%, respectively. Adjusted net income for full year 2016 excludes the net impact of $154 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational basis, revenue for full year 2016 increased 5%, excluding the impact of foreign exchange. This performance reflects the impact of product rationalizations and business changes in certain markets as part of the company's operational efficiency initiative as well as acquisitions. Adjusted net income for full year 2016 increased 17% operationally, excluding the impact of foreign exchange.

EXECUTIVE COMMENTARY

"In 2016, we delivered our fourth consecutive year of operational revenue growth and improved profitability since becoming a public company," said Juan Ramón Alaix, Chief Executive Officer of Zoetis. "Our 5% operational growth for the year was driven by the successful launch of several new products and the strength of our diverse portfolio. We also completed significant initiatives to shape our business for greater efficiency and cash generation, which helped us deliver 17% operational growth in adjusted net income and make investments that will sustain our future growth, innovation and market leadership."

"In the fourth quarter, we delivered another solid quarter of double-digit operational growth in adjusted net income, overcoming the negative impact to revenue of fewer calendar days and business changes related to our operational efficiency initiative," said Glenn David, Executive Vice President and Chief Financial Officer of Zoetis.

"In 2017, we again expect revenue to grow in line with or faster than the market and to deliver double-digit growth in adjusted net income -- fully realizing the benefits of our operational efficiency initiative. Cash flow is expected to grow significantly in 2017, and we will leverage our improved financial position for investments in promising internal and external opportunities and to return excess capital to shareholders."

QUARTERLY HIGHLIGHTS

Zoetis organizes and manages its commercial operations across two regional segments: the United States (U.S.) and International. Within these segments, the company delivers a diverse portfolio of products for livestock and companion animals tailored to local trends and customer needs. In the fourth quarter of 2016:

Revenue in the U.S. segment was $631 million, a decrease of 1% compared with the fourth quarter of 2015; this decline reflects the impact of fewer calendar days and product rationalizations. Sales of companion animal products grew 2%, driven by increased sales of Apoquel® (oclacitinib tablet) and other new products, including Simparica® (sarolaner) Chewables and Cytopoint™, as well as initial sales into newly expanded distribution relationships. This growth was partially offset by a decline in sales of surgical fluid products. Sales of livestock products declined 3%. Excluding the impact of product rationalizations and fewer calendar days, livestock sales grew, driven by cattle and poultry products, while swine products declined.
Revenue in the International segment was $636 million, an increase of 2% on both a reported and operational basis compared with the fourth quarter of 2015; this growth reflects the impact of product rationalizations, fewer calendar days, and acquisitions. Sales of companion animal products grew 8% on a reported basis and 10% operationally, primarily due to increased sales of Apoquel and other new product launches. Sales of livestock products were flat on a reported basis and declined 1% operationally. The impact of product rationalizations and fewer calendar days were offset by growth from the acquisition of PHARMAQ, as well as growth in cattle and swine products in key emerging markets.
Zoetis continues to drive demand and strengthen its diverse portfolio through new product delivery, lifecycle innovations, strong customer relationships and access to new markets and technologies. The company is focused on enhancing the performance and delivery of its current product lines; expanding product indications across species; pursuing approvals in new geographies; and developing and marketing innovative medicines, treatments and solutions for emerging diseases and unmet customer needs.

Zoetis continues to advance animal health through innovations that address market needs or improve veterinarians' approach to treatment.

The company continued to strengthen its canine dermatology portfolio with the approval of Cytopoint and further geographic expansion of Apoquel. Zoetis received a full license from the U.S. Department of Agriculture for Cytopoint, the first monoclonal antibody (mAb) therapy approved to help provide a reduction in the clinical signs associated with atopic dermatitis in dogs. The company also received approval in Argentina and Korea for Apoquel, a novel Janus Kinase inhibitor for the control of pruritus, or itching, associated with allergic dermatitis and the control of atopic dermatitis in dogs; Apoquel was first approved in the U.S. in 2013.

Simparica, a once-monthly flea and tick medication for dogs, was approved in Australia. Meanwhile, in the U.S. and Canada, the product received a new claim approval for protection from an additional tick species known as Ixodes scapularis (black-legged tick) which is associated with the transmission of Lyme disease.
The company continues to receive approvals for new indications and formulations of key livestock products, as well as expand major products into new geographies.

Draxxin® (tulathromycin), an injectable anti-infective to help control and treat respiratory disease in swine and cattle, was approved in the European Union to treat virulent foot rot (D. nodosus) in sheep. The product also received approval for new label language in the EU regarding its demonstration of immune-modulating and anti-inflammatory actions for cattle and swine. Zoetis also expanded its Fostera® swine vaccine franchise. In the U.S., Fostera PCV MH received approval for 23 weeks duration of immunity against Mycoplasma hyopneumoniae (M. hyo), making it the only combination vaccine to have demonstrated 23 weeks duration of immunity for both porcine circovirus-type 2 and M. hyo.


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