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Cardinal Health reports $91 billion in fiscal 2014 revenue

BY Michael Johnsen

DUBLIN, Ohio — Cardinal Health on Monday reported fourth-quarter fiscal 2014 revenue of $23 billion, down 9.8%. Fourth-quarter revenue was up 12% excluding the impact of the Walgreens contract expiration, the wholesaler reported. 
 
Fiscal year 2014 revenue was $91.1 billion, down 9.9% from fiscal year 2013 revenue of $101.1 billion. 
 
"I am extremely proud of the progress we made in a year of transition for both Cardinal Health and the health care system," stated George Barrett, chairman and CEO Cardinal Health. "We made significant progress on our strategic priorities: launching the largest generic purchasing entity in the U.S. through our joint venture with CVS Caremark, expanding our position and capabilities in specialty, substantially increasing our line of consumable medical products, taking significant steps to enhance our program on physician preference items in both cardiovascular and orthopedics, enlarging our footprint in the home, and showing continued strong growth in China."
 
In fiscal year 2014, the company generated $2.5 billion in operating cash flow and returned $1.1 billion to shareholders through dividends and share buybacks.
 
Barrett continued, "We enter fiscal year 2015 well-positioned to address the needs of a rapidly changing health care system. Our fiscal year 2015 outlook for non-GAAP diluted EPS from continuing operations is $4.10 to $4.30."
 
Fourth-quarter revenue for the pharmaceutical segment decreased 12% to $20.1 billion, and segment profit decreased 5% to $377 million. The decrease in both segment revenue and profit was due to the continuing impact of the expiration of the Walgreens contract.   
 
Excluding the impact of Walgreens, fourth-quarter revenue for the pharmaceutical segment grew 13%, driven by organic sales growth, growth in the company's specialty solutions division and China. The impact of the Walgreens contract expiration on segment profit was partially offset by strong performance under generic programs.  
 
For the full year, revenue for the pharmaceutical segment decreased 12% to $80.1 billion, and segment profit increased 1% to $1.7 billion.

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P&G to trim brand portfolio to focus on core brands

BY Antoinette Alexander

CINCINNATI — In a move to streamline and simplify Procter & Gamble’s business and brand portfolio, the company will trim its brand portfolio to focus on 70 to 80 of its largest and best performing brands, A.G. Lafley, president and CEO, told analysts on Friday during its fourth quarter conference call.

Over the next 12 to 24 months, P&G will “harvest, partner, discontinue or divest” 90 to 100 brands, whose sales have been declining 3% per year over the past three years. Profits have been declining 16%.

“The strategic narrowing and refocusing of the brand portfolio will have a number of significant benefits mutually reinforcing. Seventy to 80 brands will bring clarity, focus and prioritization and simplicity to a smaller, more integrated, better coordinated organization,” Lafley said.

At least one industry observer viewed the moved as “a long-term positive.”

“While it seems like a sea change given P&G will only be left with 70 to 80 brands, these divested brands represent only 10% of sales and 5% of profits, and P&G had already indicated it would divest up to 10% of sales,” said Morgan Stanley analyst Dara Mohsenian in a research note. “Still, we view this move as a positive, as it will result in simplification for P&G when completed over the next 12 to 24 months, and a higher growth/higher margin portfolio as the remaining brands have outgrown P&G’s portfolio by 100 bps on the top-line and 100 bps in pre-tax margins over the last three years.”

Mohsenian noted that P&G is divesting a broader portfolio of brands than expected and that, while other companies could buy some brands, most potential divested brands are small and declining, which could limit the interest.

In looking to Euromonitor’s data, leading brands that will remain in P&G’s portfolio, according to Mohsenian, include Tide, Gillette, Olay, Crest, Pantene and Pampers.

As Lafley told analysts, the remaining 70 to 80 core brands are leaders in their industry category or segment, with 23 of them bringing in sales of $1 billion to $10 billion, another 14 with sales of $0.5 billion to $1 billion, and the remaining 30 to 40 with strong brand equities in sales of $100 million to $500 million.

“These brands are well positioned with consumers and customers and well-positioned competitively. These brands have strong equities in differentiated products and a track record of growth and value creation driven by product innovation and brand preference,” said Lafley. “These brands are core strategic and have very real potential to grow and deliver meaningful value creation.”
 

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Cardinal Health, RBC attendees donate $344,000 to Wounded Warrior Project

BY Antoinette Alexander

WASHINGTON — Cardinal Health’s commitment to the Wounded Warrior Project continued to shine bright at this year’s Retail Business Conference in Washington, D.C., as Cardinal Health once again held a silent auction to raise funds. Retired Army Staff Sergeant Erick Millette shared how Wounded Warrior Project saved his life.

"We have been partnered with Cardinal Health for four years, and they are true stewards of our mission, which is to honor and empower Wounded Warriors. Not only have they helped raise more than $1.4 million to help support our 20 life-saving programs, they have also energized their employees to support our nation's great heroes,” said Brea Kratzert, director of strategic partnerships at Wounded Warrior Project. “We are incredibly grateful to Cardinal Health, their employees and customers.  With their support we are able to make a true impact and work toward our vision of fostering the most successful, well-adjusted generation of injured service members in our nation's history."

Cardinal Health once again held a silent online auction in support of the Wounded Warrior Project.  Cardinal Health employees, together with customer and vendors who attended RBC, raised more than $194,000 for Wounded Warrior Project and the Cardinal Health Foundation contributed $150,000 — raising a grand total of $344,000 for the organization in 2014 alone.

“The members of Wounded Warrior Project understand as well as anyone the impact change can have on our lives. These are the brave men and women whose dedication to our country is steadfast, yet they have faced what most of us might see as devastating changes,” said Marc DeLorenzo, VP Independent Sales East Region at Cardinal Health. “But rather than let their injuries diminish their spirits, they have built a network of support to help each other adjust to some of life’s most intense changes.”

To share how Wounded Warrior Project has changed his life, Millette, a former combat patrol leader in Iraq, took to the stage during the Opening Night Celebration.

“Erick’s military career as a combat patrol leader in the U.S. Army is a story of survival against all odds. He suffered many injuries due to multiple direct hits by improvised explosive devices (IEDs). Despite a challenging recovery, Erick’s feelings echo many Wounded Warriors when he says, ‘I believe each day is a gift, and I want to help injured service members live that gift to its fullest,” DeLorenzo said.

After surviving multiple direct hits by IEDs, Millette was forced to retire in December 2007. Millette said it was then that his life began to unravel as he battled feelings of guilt, anger and post-traumatic stress disorder.

“I began to self-medicate heavily with alcohol. I became suicidal. I locked myself in solitary confinement within that prison in my mind. I was battling the invisible wounds that I didn’t understand. How could I expect anyone else to understand them?” said Millette. “I thought I was alone until November 2012 when I picked up the phone, and I called Wounded Warrior Project.”

Today, thanks to the support he has received over the years through Wounded Warrior Project, Millette said he no longer has thoughts of suicide or a desire self medicate.

“It is because of everyone in this room that Wounded Warrior Project can offer their 20 high-touch, high-impact programs and services at no charge to our warriors and their families,” Millette told attendees. “… All of you had a part in helping to save my life.”

Throughout the year, Cardinal Health’s independent pharmacy customers also took it upon themselves to raise funds for Wounded Warrior Project. For example, Dale’s Southlake Pharmacy hosted its 3rd Annual Warrior Walk. As part of the effort, Southlake Pharmacy staff pharmacist Ron Stephens helped raise awareness and funds for Wounded Warrior Project by walking 300 miles throughout local communities in central and northern Illinois. Together with its partner, Doc’s Drugs, Dale’s Southlake Pharmacy collected $43,000.

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