US-based sterilisation system providers Steris this week announced their fiscal 2007 third quarter results, revealing the impact of the relocation of manufacturing capacity to Mexico and the firm's European restructuring.
Pre-tax profits for the nine months ending 31 December 2006 dropped by over $8m (€6m) compared to the previous year, hitting just over $82m. Income from operations for the company dropped to $86m during the nine month period, compared to the previous year's figure of $91m.
The company's Q3 results were affected by the firm's European restructuring and the transfer of manufacturing operations from Erie, Pennsylvania to Mexico in cost-cutting measures announced in January 2006.
Expenses associated with these measures negatively impacted the company's pre-tax income by $4.5m, with $3.2m reported as restructuring expenses. The firm has moved its medium and small steriliser assembly activity to the Mexico site, and are beginning fabrication activities with the aim of fully completing the transfer in the next few months.
Speaking at a conference following the release of the financial results, Les Vinney, Steris president and CEO, anticipated that total expenses associated with the Mexico transfer would come in the region $3-4m in the fourth quarter.
The firm's European restructuring was reported as progressing faster than forecast, and this improvement is expected to be reflected in the next quarterly results statement.
"In Europe we have identified a range of actions to improve performance and have taken several key steps to restructure our operations, which resulted in the $1.6m pre-tax restructuring expense in the third quarter," said Vinney.
"More specifically, we consolidated some key parts of our organisation in the region, and restructured certain businesses, sales support activities and facilities. These efforts along with reductions in discretionary spending levels, are having a positive impact as we drive to achieve long-term profitable growth in Europe."
Meanwhile, revenues for the nine months ending 31 December 2006 increased to $847.6m from $829m in the comparable period the previous year. Sales from consumables in the third quarter 2007 contributed 22 per cent of overall revenue for the company, services providing 35 per cent and the remaining 43 per cent from capital. Part of the tilt towards capitals and services was put down to stronger growth in the company's Life Sciences unit and Isomedix contract sterilisation services, and global service activities in the Healthcare unit.
However, despite being pleased with progress in the Life Science business unit, Steris highlighted that as a company it is still experiencing a competitive pricing environment, and having to account for relatively high costs of raw materials such as stainless steel.
The company reported that its earnings potential remains on track although warned that revenue growth is expected to be below previous estimates for fiscal 2007, coming in between 2 to 3 per cent.