Even though Perrigo Company (Nasdaq:PRGO; TASE:PRGO) last week lowered its guidance for the 2009 fiscal year ending in June, Perrigo Israel president Rafi Lebel is optimistic about the future.
Despite the fall in profits he said, "The major challenge is the need to increase our production capability due to the increase in demand stemming from the weakness of competitors. The acquisitions that we recently made will help us increase production, but meanwhile, in order to respond to demand we are manufacturing products in the vitamins and nutritional supplements via subcontractors. At the same time, there has been a rise in the price of inputs. For the most part, raw materials come from China where there is a type of cartel but we are trying to authorize additional suppliers."
Perrigo specializes mainly in over-the-counter (OTC) pharmaceuticals and products. The company's share was trading on Friday at $24.46, giving a market cap of $2.25 billion. Since lowering its guidance last week, Perrigo's share has fallen by about 16%.
Lebel was asked if retailers had asked for prices to be lowered and for Lebel that means first and foremost Wal-Mart Stores Inc. (NYSE: WMT). "Wal-Mart sells more than a billion dollars worth of Perrigo products a year. A wise retailer knows that you have to pay us a fair price. We have seen that when you pay cheaper prices, you don't always get products that meet FDA standards and for example Leiner Health Products went bankrupt and disappeared from the market that's a risk for a retailer."
Lebel did not specify the names of any new Perrigo products that are about to be launched, but he did cite GlaxoSmithKline plc (NYSE: GSK) Alli medication for weight loss as an opportunity for the company.
Lebel continued, "When the crisis passes, we will be a stronger company, much stronger. Even today we expect profit growth of 11% to 20%, mostly in-house, and that's not so simple. We are in the right place and we are the right company."
Published by Globes [online], Israel business news - www.globes-online.com - on February 9, 2009
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