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Sigma-Aldrich's Earnings Beat, Sales Meet

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Lab chemical and life sciences company Sigma-Aldrich Corporation (SIAL) posted adjusted earnings of $1.03 per share in the first quarter of 2013, above the year-ago earnings of 99 cents. The results beat the Zacks Consensus Estimate of $1.00. The adjusted earnings exclude unfavorable currency impact of 2 cents a share.

Profit, as reported, rose roughly 4.3% year over year to $122 million (or $1.01 per share) in the quarter from $117 million (or 96 cents per share) a year ago.

Revenues and Margins

Revenues rose 1.5% year over year to $675 million in the quarter, at par with the Zacks Consensus Estimate. Acquisitions added 2% to sales while foreign exchange translation had a negative impact of 1%. Sigma-Aldrich’s overall end markets remained steady with improving pharma trends.

Adjusted operating margin (excluding restructuring costs) for the first quarter was 24.6% compared with 25.9% recorded a year ago due to higher selling, general and administrative expenses for incentive compensation and higher investments in the realigned business units.

Segment Highlights

Research Chemicals sales were $361 million, down 1% on an organic basis. Organic sales growth through the dealer network was in the low-single digits. However, pharma organic sales growth was flat year over year, reversing a three-quarter negative trend. Sigma-Aldrich has launched its “Dealers as Partners” program in Europe, Middle East, and Africa (:EMEA) region, which is aiding sales.

Applied business unit’s sales amounted to $159 million. Organic sales increased 3% and acquisitions contributed 2% to the rise while changes in foreign currency exchange rates had a negative impact of 1%. The division has a strong portfolio of analytical products, kits and solutions, and its sales and marketing teams are coming out with innovative ideas and expanding into new locations.

Sales from the SAFC Commercial segment were $155 million. Organic sales rose 3%. The industrial cell culture media business and custom pharma business witnessed strong growth due to Sigma-Aldrich’s therapeutic trend to biologics and high-potency compounds.

Lower metal organic precursors pricing for the LED market led to a double-digit decline in high-tech organic sales. The industrial cell culture media business performed well in the quarter.

Financial Health

Sigma-Aldrich’s cash and cash equivalents stood at $471 million as of Mar 31, 2013, compared with $558 million as of Mar 31, 2012. Long-term debt remained flat year over year at $300 million. Debt to capital ratio was 13% as of Mar 31, 2013, compared with 24% as of Mar 31, 2012. Operating cash flow jumped nearly 6.9% year over year to $154 million.

The company repurchased 0.3 million shares during the first quarter for $27 million. It expects to continue to buyback shares to offset dilution associated with stock-based compensation.

Sigma-Aldrich, in Feb 2013, announced an 8% hike in its quarterly cash dividend to 21.5 cents per share.


Sigma-Aldrich reiterated its guidance for 2013. The company expects low-to-mid single digit organic sales gain in 2013. It envisions adjusted earnings per share in the band of $4.10 to $4.20 for the year.

Free cash flow for the full year is expected to exceed $430 million. Capital expenditures are expected to be roughly $130 million while operating cash flow has been projected to exceed $560 million. Effective tax rate is expected to be in the range of 28% to 29% in 2013.

Sigma-Aldrich recently signed a deal with Applied Minerals, Inc. (AMNL), a leading global producer of halloysite clay solutions. Under the deal, Aldrich Materials Science, a strategic technology initiative of Sigma-Aldrich, will market and distribute research quantities of Dragonite halloysite clay.

Applied Minerals, on the other hand, will market its halloysite clay solutions to customers through its domestic and international sales network.

The acquisition of BioReliance and expansion initiatives in Asia Pacific and other high growth markets are expected to add to Sigma-Aldrich’s growth in 2013. However, unfavorable currency exchange translation may continue to weigh on its revenues and earnings.

Sigma-Aldrich currently maintains a Zacks Rank #4 (Sell).

Other companies in the specialty chemical space with favorable Zacks Rank are Minerals Technologies Inc. (MTX) and Prospect Global Resources Inc. (PGRX). Both of them hold a Zacks Rank #2 (Buy).

Read the Full Research Report on SIAL

Read the Full Research Report on PGRX

Read the Full Research Report on MTX

Read the Full Research Report on AMNL

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