EXTON, PA — West Pharmaceutical Services, Inc. (NYSE: WST) reported its second-quarter 2024 financial results, revealing a significant drop in net sales and adjusted earnings per share (EPS). The company also revised its full-year guidance downward, citing ongoing customer destocking issues.
Second-Quarter 2024 Summary
The company posted net sales of $702.1 million, a 6.9% decline from the same period last year. Organic net sales, which exclude the impact of currency translation and prior-year divestitures, fell by 5.9%. Reported diluted EPS came in at $1.51, down from $2.06 in the second quarter of 2023. Adjusted diluted EPS also decreased to $1.52 from $2.11 a year earlier.
Eric M. Green, President, CEO, and Chair of the Board, acknowledged the challenging quarter. “While the results were below our expectations, we were encouraged to see our second-quarter revenues increase sequentially. Our outlook anticipates that revenues in the second half of the year will be stronger than the first half,” Green said.
Proprietary Products Segment
Net sales in the Proprietary Products segment fell by 9.4% to $559.7 million. Organic net sales declined by 8.4%. High-value products, including self-injection devices and Envision® components, accounted for over 70% of segment sales.
The Generics market unit saw a double-digit decline in organic net sales, driven by lower volumes of FluroTec® and Westar® products. The Biologics market unit experienced a mid-single-digit decline due to reduced sales of Daikyo CZ® and Westar® products, although this was offset by increased sales of self-injection device platforms. The Pharma market unit saw a low-single-digit decline, mainly due to reduced sales of Administrative Systems and Westar® products.
Contract-Manufactured Products Segment
In contrast, the Contract-Manufactured Products segment reported a 4.9% increase in net sales, reaching $142.4 million. Organic net sales grew by 5.4%, with currency translation slightly reducing sales growth. The segment’s performance was bolstered by the strong demand for components associated with injection-related devices.
Financial Highlights
For the first six months of 2024, operating cash flow was $283.2 million, a 7.8% decrease from the previous year. Capital expenditures rose by 21.1% to $190.8 million. Free cash flow, defined as operating cash flow minus capital expenditures, fell by 38.3% to $92.4 million.
The company also repurchased 1,239,015 shares for $454.1 million at an average price of $366.53 per share during the first half of 2024.
Updated Full-Year 2024 Guidance
West Pharmaceutical has revised its full-year 2024 net sales guidance to a range of $2.870 billion to $2.900 billion, down from the previous range of $3.000 billion to $3.025 billion. The company now expects organic net sales to decrease by 1% to 2%.
The updated full-year adjusted diluted EPS guidance is between $6.35 and $6.65, compared to the prior range of $7.63 to $7.88. This guidance includes a headwind of approximately $0.03 due to current foreign currency exchange rates and EPS of $0.22 from first-half 2024 tax benefits related to stock-based compensation.
Capital spending for the year is now expected to be $375 million, up from the previous estimate of $350 million.
West Pharmaceutical remains optimistic about a return to organic growth in the fourth quarter and into 2025, driven by confirmed orders and ongoing customer engagements. “We see considerable growth opportunity in the markets we serve, and our investments position us to create continued value for our customers, patients, and shareholders well into the future,” Green concluded.
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