Company delivers strong performance, executes on investment plans that continue to strengthen product portfolio.

February 15, 2019

5 Min Read
Zoetis releases improved financial results

Zoetis Inc. reported its financial results for the fourth quarter and full year 2018 and provided full year guidance for 2019. Financial results for the quarter and year included the impact of the acquisition of Abaxis, the company said.

The company reported revenue of $1.6 billion for Q4 2018, which was an increase of 7% compared with the Q4 2017. Net income for the Q4 2018 was $345 million, or $0.71 per diluted share, compared with $81 million, or $0.16 per diluted share, in the Q4 2017.

Adjusted net income for the Q4 2018 was $382 million, or $0.79 per diluted share, an increase of 12% and 14%, respectively. Adjusted net income for the fourth quarter of 2018 excludes the net impact of $37 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational basis, revenue for the Q4 2018, excluding the impact of foreign exchange, increased 11% compared with the fourth quarter of 2017. Adjusted net income for the Q4 2018 increased 21% operationally, excluding the impact of foreign exchange.

For full year 2018, the company reported revenue of $5.8 billion, an increase of 10% compared with full year 2017. Net income for full year 2018 was $1.4 billion, or $2.93 per diluted share, an increase of 65% and 67%, respectively.

Adjusted net income for full year 2018 was $1.5 billion, or $3.13 per diluted share, an increase of 29% and 30%, respectively. Adjusted net income for full year 2018 excludes the net impact of $97 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational basis, revenue for full year 2018 increased 10%, excluding the impact of foreign exchange. Adjusted net income for full year 2018 increased 31% operationally, excluding the impact of foreign exchange.

“Zoetis delivered another year of strong performance in 2018 and executed on investment plans that continue to strengthen our product portfolio across the continuum of care,” said Juan Ramón Alaix, chief executive officer of Zoetis. “We achieved operational revenue growth for the year of 10%, growing revenue across all of our core species, major markets and therapeutic areas. We also grew our adjusted net income faster than sales, at 31% operationally, as we continue to deliver on our long-term value proposition.”

Looking ahead, Alaix said the company will continue to build on its strategic investment plans to support the growth of its core business, and in evolving spaces such as diagnostics, devices, digital and data analytics.

“For full year 2019, we expect operational growth of 7.5% to 9.5% in revenue and 8% to 11% in adjusted net income. We remain committed to funding investments that will help us maintain our leadership and growth, while returning excess capital to shareholders,” he said.

Quarterly highlights

Zoetis organizes and manages its commercial operations across two regional segments: the United States (U.S.) and International. Within these segments, the company delivers a diverse portfolio of products for livestock and companion animals tailored to local trends and customer needs.

Revenue in the U.S. segment was $809 million, an increase of 14% compared with the Q4 2017. Sales of companion animal products grew 26% driven primarily by the acquisition of Abaxis, the company’s key dermatology portfolio, and new products, including Simparica. Growth in the companion animal business was partially offset by lower sales of certain in-line products due to anticipated competition.

Sales of livestock products grew 3% in the quarter with all species contributing to growth.

“Growth in our cattle business was primarily due to higher sales of premium products, as well as competitor supply constraints. Poultry business growth was largely due to increased sales of alternatives to antibiotic medicated feed additives, while our swine business growth was the result of promotional efforts that drove increased demand across our therapeutic portfolio,” the company said.

Revenue in the International segment was $727 million, a decrease of 2% on a reported basis and an increase of 5% operationally compared with the Q4 2017. Sales of companion animal products grew 7% on a reported basis and 14% on an operational basis. Growth resulted primarily from the acquisition of Abaxis, parasiticides (Simparica for dogs and Stronghold Plus for cats), and increased sales across our key dermatology portfolio.

Sales of livestock products declined 6% on a reported basis and grew 2% operationally; poultry, swine and fish all exhibited growth, while cattle was relatively flat in the quarter. Increased revenue in poultry products was the result of solid performance in other emerging markets, including Egypt and Indonesia. Growth in our swine business was largely driven by the recently launched Suvaxyn PCV combo and PRRS vaccines in Europe, as well as strong demand for our products in other emerging markets. Our fish business grew due to market share gains of our PD vaccines in both the UK and Norway, as well as the continued growth of our LiVac SRS vaccine in Chile.

“Zoetis continues to drive demand and strengthen its diverse portfolio through product lifecycle innovations, as well as expansion of key products into new geographies,” the company said.

Since the last quarterly earnings announcement:

  • Zoetis received approval in the U.S. and Canada for Revolution Plus (selamectin and sarolaner topical solution), a new combination topical product for cats and kittens that provides parasite protection against fleas, ticks, ear mites, roundworms, hookworms and heartworms. Revolution Plus combines the proven broad-spectrum protection of selamectin with the advanced flea- and tick-killing power of sarolaner. This first-of-its-kind product exemplifies Zoetis’ dedication to innovation in parasiticides and builds on the 20-year trusted legacy of feline Revolution.

  • The company also continued to bring its newest leading canine products to additional markets. Cytopoint  (lokivetmab), a monoclonal antibody that is part of Zoetis’ canine dermatology portfolio, and Simparica, an oral flea and tick medication for dogs, both received additional approvals in countries in Asia and the Middle East.

Zoetis provided full year 2019 guidance, which includes:

  • Revenue between $6.175 billion to $6.300 billion

  • Reported diluted EPS between $2.83 to $2.99

  • Adjusted diluted EPS between $3.42 to $3.52

The guidance reflects foreign exchange rates as of late January, the company said.

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