Novartis Q4 Profit Misses, Plans Buyback

by Ike Obudulu Last updated on April 2nd, 2019,

Pharmaceuticals giant Novartis AG (NVS) in Switzerland reported weak profit in its fourth quarter, and core earnings were below market estimates. Net sales, however, increased and topped analysts’ view. Further, the company proposed higher dividend as well as share repurchase program of up to 10 billion Swiss francs.

Looking ahead to fiscal 2019, Novartis forecasts the new focused medicines company’s group net sales to grow mid-single digits and Group core operating income to grow mid-to-high single digits, both in constant currencies.

For the current Group structure, Novartis projects fiscal 2019 group net sales to grow low-to-mid single digits and Group core operating income to grow in mid-single digits, both in constant currencies. The outlook assumes Alcon and the Sandoz U.S. oral solids and dermatology business remain part of Novartis for the full year 2019.

Vas Narasimhan, CEO of Novartis, said, “Looking ahead, we expect to sustain top and bottom line growth driven by the strength of our in line brands and our exciting lineup of 10 potential blockbuster launches by 2020.”

The Novartis board of directors has proposed a dividend of 2.85 Swiss Francs per share, an increase of 2 percent from the prior year. The company’s board also proposed to launch an eighth share repurchase program of up to a maximum of 10 billion francs until 2022.

Regarding the spin-off of the Alcon eye care division, the company said the efforts are progressing with its Board providing final endorsement of the potential transaction. Novartis shareholders will vote on the proposed spin-off at its Annual General Meeting of Shareholders or AGM on February 28.

For the fourth-quarter net income was $1.19 billion, down 40 percent from last year’s $1.98 billion. Earnings per share fell to $0.52 from $0.85 a year ago.

The decline in net income was due to higher restructuring and impairment charges, and the impacts from M&A transactions as well as growth investments, partly offset by continued strong sales growth.

Core net income was $2.88 billion or $1.25 per share, compared to $2.82 billion or $1.21 per share last year. On average, seven analysts polled by Thomson Reuters expected earnings of $1.28 per share. Analysts’ estimates typically exclude special items.

Net sales for the quarter were $13.27 billion, up 3 percent from prior year’s $12.92 billion. Analysts expected sales of $13.24 billion. Sales grew 6 percent in constant currency rates.

Volume grew 9 percentage points, mainly from Cosentyx, Entresto, Oncology including AAA, and Alcon. Strong volume growth was partly offset by the negative impacts of pricing, down 2 percentage points, and generic competition.

In Switzerland, Novartis shares were trading at 83.58 francs, down 2.43 percent.

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