Contract packaging profit at United Drug rose in its latest results as strong US sales offset weak performance in Europe.
Ireland-based United Drug has been hit by the economic struggles of its home market but overseas sales are seeing it through a tricky period. In the last quarter 65 per cent of profits came from outside Ireland with strong US contract packaging sales contributing to growth.
“Packaging and specialty reported strong revenues and profit for the period with strong trading conditions in the US thanks to a healthy order book and efficient operations”, Stephen Gasteyger, equity analyst at Jefferies & Company, said in a note to investors.
United Drug expects the ‘healthy order book’ at its US packaging unit to ensure strong year-on-year growth for the rest of 2011. The efficiency of the US unit was also highlighted by United Drug and it plans to translate this to its European operation, which now lags behind.
Bringing efficiency in line with the US is one element of United Drug’s plan to improve business at the European packaging unit. European trading is lower than last year but in the longer-term United Drug expects to grow the unit by winning new business and improving working efficiencies.
“Capacity utilisation in the European business is still clearly below US levels - we expect an improvement in European utilisation to result in substantial operating leverage”, Gasteyger said.
Sales at the supply chain unit were down year-on-year as regulatory changes and shrinking of the Irish market dragged on results. Market share gains partly offset these factors and Gasteyger thinks United Drug is well positioned to grow.
“We continue to see United Drug as one of the most attractive stocks in our universe due to…its improving business mix and ability to add rapidly accretive bolt-on acquisitions to its existing operations”, Gasteyger said.