Perrigo Company plc Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Three-S Plan Progress:
  • Stabilize: Infant formula net sales grew 9% led by store brand formula; U.S. store brand OTC saw new business awards overtake lost businesses, gaining volume and unit share.
  • Streamline: Project Energize and Supply Chain Reinvention programs on track, delivering significant savings; sale of Dermacosmetics business to sharpen strategic focus.
  • Strengthen: Scaling category-led market activation growth model; brand-building activities delivering results (e.g., Jungle Formula grew 14% and achieved record share in U.K.; Compeed grew 6% and achieved record share in France, Spain, Italy).
• Financial Highlights: Second quarter organic net sales flat; OTC brand organic net sales growth 3.6%; EPS in quarter grew 7.5%, up over 50% organically year-to-date; year-to-date organic operating income growth 28.3%.
• Segment Details: Pain and Sleep-Aids grew 8%, Nutrition added nearly 1 point of growth, Upper Respiratory added 0.7 points; OTC brands grew 3.6%, with Jungle Formula and Compeed showing strong growth; Digestive Health impacted by lower PPI consumption; Oral Care declined due to lost distribution.

Segment Performance

• CSCI (Consumer Self-Care International): Reported net sales were up 0.7%. Organic net sales growth was 2.7%, led by supply recovery of key products, growth in highly profitable products like Jungle Formula and Compeed, and share gains in ellaOne.
• CSCA (Consumer Self-Care Americas): Net sales declined 1.9% due to lower net sales in Digestive Health and Oral Care, but growth in the Nutrition business, Healthy Lifestyle, and Upper Respiratory categories. New business awards in the U.S. store brand OTC outpaced previously disclosed lost businesses, expected to benefit second half growth.

Guidance

• Reaffirmed full-year EPS target range of $2.90 to $3.10 per share, expecting strong double-digit growth.
• Top line expected heavily weighted to fourth quarter due to timing of new business in U.S. store brand OTC and later European cough/cold selling activities.
• Operating expenses expected higher in third quarter vs fourth quarter as they amplify A&P investments.
• Reaffirmed gross and operating margin outlooks; tariff impacts estimated at $10M-$20M in Q4 and $50M-$60M full year, to be offset by strategic pricing and supply chain actions.

Risks

• Challenging consumer environment with soft seasonal trends and slower consumption impacting top line growth.
• Infant formula recovery slower than initially anticipated.
• Tariff impacts on global cost of goods sold, estimated to increase COGS by ~2% of global COGS.
• Volatility in foreign product importation affecting store brand formula share and capacity assumptions.

Question and Answer

Q: Keith Devas asked about infant formula context, second half expectations A: Patrick and Eduardo discussed market fluidity, store brand formula volume growth, steps to ramp up in the second half (e.g., increasing promotional activity, launching remaining SKUs), and EPS target context, noting EPS requirement for second half is in line with guidance Q: Susan Anderson inquired about strategic pricing, private label trends A: Eduardo discussed tariff impact offset through strategic pricing and supply chain actions; Patrick noted store brand OTC is gaining share, with consumers increasingly trading down to store brands, and examples of successful demand generation activities Q: Chris Schott asked about infant formula product scrap, second half share target A: Patrick explained an isolated production issue led to product scrap, steps taken to address quality assurance, and reaffirmed no change to long-term store brand formula share ambition despite slower ramp-up, while noting variability in foreign product importation