Pall posted weaker than expected results after the switch to a new ERP system caused “self-inflicted disruption” of supply.
Adoption of the enterprise resource planning (ERP) system in the Americas caused supply delays. Lost third-quarter sales, plus the cost of fixing the problem, knocked more than than 10 per cent off earnings per share. Despite this, Pall management maintains the transition could have gone worse.
“In the scheme of how major ERP implementations are handled and how radically wrong they can go, this is by no means a disaster”, Lawrence Kingsley, CEO of Pall, told investors in its third quarter call.
The ERP transition in the Americas covered 2,800 users at 28 locations and comes after Pall moved to the new system at other global locations. Once the system is fully functional Kingsley said it “clearly will have significant long-term benefits” but for now it is dragging on performance at Pall.
Biopharma clients were hit by the delays but Kingsley said “customers have been understanding and supportive”. The challenge now is to recover from the disruption and Pall expects to have caught up with the backlog by August.
Clearing the backlog should help fourth quarter sales improve after the ERP-related shortfall. Sales in the Americas, where the ERP switch occurred, dipped by close to two per cent and limited biopharma growth.
Biopharma sales were up nine per cent, with consumables and systems contributing equally, but Pall said performance was ‘dampened’ by ERP implementation. Similarly, bookings at the biopharma unit were flat, with systems down 60 per cent, but sales teams at Pall were distracted by ERP problems.
“Some of the orders number that you see in the quarter really reflects some of the distraction. That's not lost, it's business that, I think, again, we'll see placed over the fourth quarter. We saw some of those systems projects come in already during the last month”, Kingsley said.