Novartis profits rise but functional food arm declines

Related tags Nutrition

Novartis, the Swiss pharmaceuticals group, has reported a 20 per
cent rise in first-quarter profits, exceeding analysts' forecasts,
however this was largely a result of strong growth in
pharmaceuticals and US business, while the Health and Functional
Foods sector experienced a downturn.

Novartis, the Swiss pharmaceuticals group, has reported a 20 per cent rise in first-quarter profits, exceeding analysts' forecasts. Net profits for the three months to 31 March were up from CHF1.48 billion to CHF1.78 billion (€1.21bn), boosted by improved margins and a rise in financial income.

Group sales rose 10 per cent from CHF7.22 billion to CHF7.96 billion, in line with forecasts.

However, sustained sales growth in the pharmaceuticals division, strong sales in generics and overall superior performance in the US were the main contributors to the overall growth, while the combined Medical Nutrition and Health & Functional Food sales grew only by 3 per cent in local currencies to CHF375 million (€255.4m).

Novartis explained that slightly lower sales in the Health & Functional Food segment than in the prior period were caused by the continued weak performance of the juice business in Poland and lower-than-expected food and beverage sales in China due to a change of distributors. Plans to divest the HF&F business by year-end are proceeding on track, it said.

The plans to divest the Health and Functional Food business (annual sales of about CHF850 million) were announced​ in February, along with reorganisation of the Consumer Health division into business units.

In a report by FT.com, Novartis chairman Daniel Vasella said the company had received over a hundred requests for information about its health and functional foods division, which it had put up for sale. He hoped to have completed the sale by the end of the year.

He also played down speculation that Novartis would shortly bid for Bristol-Myers Squibb. "It is not up for sale today and they seem determined to go forward alone"​ he said, adding, "if it were for sale, nobody could afford not to look, but that does not mean you can say what the answer would be."

The pharmaceuticals business is expected to boost revenues by 10 per cent this year, however, earnings growth might increase at a lower rate due to an expected drop in financial income.

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