Baxter (NYSE: BAX) today said it expects to lose out on at least $200 million worth of sales due to flooding at its North Cove manufacturing facility from Hurricane Helene.
That estimate — which includes about $40 million to $50 million worth of Kidney Care sales and around $150 million to $160 million worth of Medical Products & Therapies sales — is only for the fourth quarter, the company said.
While Baxter has resumed production at the facility, the company said it doesn’t yet know when it will return to pre-storm levels.
“Assessment, equipment repair, and phased testing continue at a rapid pace across all other North Cove production lines, and Baxter will continue to work in close coordination with FDA to resume operations in phases,” the company said in a news release announcing financial and operating results for the third quarter, which ended on Sept. 30.
Deerfield, Illinois–based Baxter said that sales loss will hurt adjusted diluted earnings per share (EPS) by 15¢ to 20¢ in Q4. That estimate includes profits from the Kidney Care segment, which is now reported as discontinued operations due to its pending sale.
The company decreased its full-year sales growth forecast to a range of 1% to 2%, down from the 3% growth forecast in August when the company reported Q2 earnings. Baxter said it now expects full-year profits (adjusted, before special items) of $2.90 to $2.94 per diluted share, down from the previous forecast of $2.93 to $3.01.
Baxter Chair, President and CEO Joe Almeida said the company’s recovery efforts are “making substantial progress … thanks to the inspirational commitment and resilience of our Baxter team, in coordination with government agencies.”“While the hurricane’s aftermath is expected to have an impact on our near-term financial outlook, we remain confident in Baxter’s outlook and growth trajectory following completion of the pending Kidney Care sale,” he said in the news release.
Baxter’s Kidney Care sale update
Baxter still expects to close the sale of its Kidney Care business to Carlyle in late 2024 or early 2025, subject to regulatory approvals and other closing conditions. The company said it has started reporting business results from that segment (which will be operate under the new name of Vantive) under discontinued operations.
“In light of the reporting change moving Kidney Care business results to discontinued operations, corporate costs that had previously been allocated to the Kidney Care segment, which will not convey with the Kidney Care business in the sale, are now reported in unallocated corporate costs,” Baxter said.
“These stranded costs (or dis-synergies) are expected to be mitigated in 2025 through income to be received from Vantive under transition service agreements (TSAs) as well as cost-containment initiatives the company is in the process of undertaking,” the company continued. “Baxter currently expects to fully offset the impact of these stranded costs and loss of TSA income in 2027.”
Baxter’s Q3 results
“Baxter delivered positive performance in the third quarter of 2024, as the company continues to execute against its strategic transformation,” Almeida said.
Baxter reported total Q3 sales of $3.85 billion, down 1% from the same period a year ago, but up 4% when excluding sales from Baxter’s former BioPharma Solutions (BPS) business.
Net income totaled $140 million in Q3, or 27¢ per diluted share. Adjusted net income was 80¢ per diluted share, exceeding Wall Street analysts’ expectations of 78¢ per share on sales of $3.85 billion.
Baxter said its profit for the quarter exceeded its forecasts due to “top-line strength in Medical Products & Therapies and Kidney Care as well as continued improvements in integrated supply chain and disciplined management of operating expenses.”
Baxter reaffirmed its preliminary financial expectations from its August announcement of the Kidney Care deal, saying it will target operational sales growth of 4% to 5% annually after the sale closes.
“The company also anticipates a full-year 2025 adjusted operating margin of approximately 16.5% on a continuing operations basis, which reflects an anticipated 100 basis point negative impact due to stranded costs, net of anticipated TSA income, and the manufacturing supply agreement (MSA) the company plans to enter into with Vantive upon the completion of the sale of the Kidney Care segment,” the company said.
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