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Published on 17 January 2008

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Novartis profit plummets following restructuring

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Swiss drug giant Novartis saw its fourth-quarter net profit drop 42% to $931m, falling below analysts’ expectations, as restructuring costs and slim US sales cut into earnings.

The profit fall was no real surprise, however, since the firm had already unveiled a planned reshuffle of operations, including 2,500 job losses, in December 2007, and said it would take a hit of $444m in the fourth quarter as a result.

The group also sounded a warning over the impact of generic competition on its sales at the time, and said its restructuring programme was specifically designed to help it stay competitive “in a dynamically changing environment” and generate $1.6bn savings by 2010.

Overall, sales during the period climbed 6% to $9.93bn, but strong performances from around the globe, from generics unit Sandoz and from the consumer health division were dampened by weak turnover in the USA, which fell 15% to $3.07bn, largely due to generic competition, and by the vaccines unit, which is more active during the third quarter.

On the positive side, the firm booked record results for the full year, with 8% organic growth in turnover to nearly $40bn helping to drive a 66% increase in net income to $12bn.

Novartis

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