Revenues from continuing operations increased 11 per cent to $164.2m, with company CEO Wesley Wheeler stating that sales growth was particularly strong (up by 35 per cent) in Europe, due to increased volumes in both prescription manufacturing and pharmaceutical development services, especially in Italy, where demand for Patheon's sterile large-volume parenteral capacity continued to grow. Sales also rose for the contract manufacturer in Canada and in Cincinnati, US reflecting higher volumes for a number of clients, although sales actually dropped off in North America overall in the first quarter by $3.1m (3 per cent) over the same period a year ago. Moreover, the volume increases in Canada and Cincinnati were also offset by a "significant decline" in volumes of a major product manufactured at the Caguas, Puerto Rico facility. Despite the overall sales increase of 11 per cent, Patheon reported a markedly greater loss from continuing operations of $12.2m, compared with a $3.6m loss in the comparable period last year, along with a pre-tax loss of $11.9m, again significantly more than the loss of $1.8m posted in the first quarter of 2006. "We achieved strong top-line growth, but this was not reflected in our EBITDA performance," said Wheeler. He said this was "due to a number of factors", including a "significant weakening" of the US dollar, which reduced EBITDA by approximately $4.0m, along with "continued losses in Puerto Rico". Patheon's Puerto Rico operations, which were acquired in 2004 from Mova Pharmaceutical, have been largely underperforming for some time and continue to be responsible for much of the company's financial woes - EBITDA (operating profit) before repositioning expenses and excluding Puerto Rico, was $15.4m for the quarter, and $20.6m in the same year-ago period. However, Wheeler pointed out that the losses in Puerto Rico were "significantly lower" relative to the third and fourth quarters of 2007, due to new management on the island and "aggressive" workforce reduction. Patheon has been taking affirmative action to remedy the situation in Puerto Rico as quickly as possible and is in the midst of a restructuring and cost reduction programme to adjust for declining revenues and to address operational challenges. Following a "comprehensive review", the company also revelaed in December that it had decided to cut its Carolina plant loose, offering it up for sale, while holding on to the other two facilities at Manati and Caguas, with the objective of bringing them to the point where they break even of operating profit by the end of 2008. "We made good progress on our Carolina divestiture initiative during the first quarter," Wheeler said. "We have had preliminary discussions with potential buyers of the site, and have identified a significant number of additional prospective buyers". Wheeler added that the continuing operations at Caguas and Manati are "making steady progress". "We have significantly upgraded the executive management and technical support at both sites and are re-focusing our efforts to sell this capacity. We are also continuing to streamline overhead and common services as we make plans to divest one of our three sites", he said. In addition, Wheeler said that although Puerto Rico delivered less revenue than the same quarter last year, "we are now beginning to secure new business which we expect to begin contributing to results in the latter half of 2008, based on our customers' timelines". Meanwhile, the firm's Canadian sites have also been subject to a round of restructuring. In January Patheon completed the divestiture of its Niagara-Burlington over the counter (OTC) commercial manufacturing business to Pharmetics. For $8.3m, Pharmetics acquired the assets, including equipment, facilities and land, at Patheon's facilities in Fort Erie and Burlington, provided employment to the workforce at the two facilities and will continue to manufacture and supply all of the products that were manufactured at these sites, the firm said. Moreover, in December Patheon agreed to sell its York Mills property for a price of CAD$12.5m, with the transaction scheduled to close during the second quarter of this year. Under the terms of the agreement, Patheon will lease back the facility for up to two years until the transfer of production to other sites has been completed. However, Wheeler said that "while efforts by previous management to reduce corporate-wide expenses have had some effect, there is still more work to do". "The leadership team is being re-configured and supplemented with new talent, and I am in the process of evaluating all aspects of the company". Wheeler outlined several new initiatives that have been implemented in a bid to attract new business, streamline operations, and eliminate waste, giving the example of a global Lean Six Sigma programme that was launched, which he said will use "new key performance indicators, in-depth analysis and focused training to create an environment of continuous improvement."