It also announced major expansion plans for Europe, North America and China , as well as significant expenditure on IT system upgrades.
Consolidated gross profit margins for the pharmaceutical and medical device company in Q4 were 27.5 per cent compared to the 28.7 per cent in 2006, representing a 1.2 per cent fall. They said this was mainly due to production costs, especially in the Tech Group.
"The margin decline stems primarily from the impact of a favourable mix price and volume more than offset by increased labour and production inefficiencies and higher manufacturing expenses in Europe due to high production demands," said chief finance officer, Bill Federici on a conference call.
"As we explained … margins will continue to be under some pressure in the near term due to our need to run certain plants at or above capacity pending the completion of our capacity expansion projects."
Overall, gross profits for Q4 increase from $66.5m to $70.4 from last year and reported earnings per diluted share for the same period rose from $0.43 to $0.51. The company also reported Q4 net sales increasing from $231.9m in 2006 to $256.1m in 2007.
West also predicted a 3-5 per cent sales growth in 2008 and iterated a need to increase production efficiency. Further restructuring is expected to cost an additional $8.6m, costs associated with implementing upgraded IT systems are expected to be around $5.0m and they also intend to increase research and development from $16.1m in 2007 to about $20m.
"The successful implementation of restructuring within the Tech Group, normalized utilization at Tech's new Michigan facility, and our ability to improve efficiency in our Pharmaceutical Systems business as new capacity begins to come on-line, will be important factors in achieving our revenue and operating performance goals in 2008," said chairman and CEO Don Morel.
"We will continue investing in expansions of facilities in Europe, Asia and North America; constructing a new facility in China; improving critical information systems; further augmenting our R&D efforts; and introducing several new products to our customers."
He explained the production expansions in Germany and Serbia will completed by summer 2008 while the Singapore expansion is scheduled for completion in 2009. Further rubber compounding and pharmaceutical packaging production capacity would also be added in operations in the North America.
Although the China project has been delayed due to government policies on land use rights, West broke ground in January on the plastics facility and hopes to get the plant built by the end of 2008 and production started by mid-2009.
"Simply put, the underlined strength of our primary markets remains healthy and we expect the major grow drivers discussed on previous calls to continue driving sales. These are growth in chronic diseases such as diabetes, arthritis and cancer that come with an aging population," said Morel.