Zoetis' financial results for the fourth quarter and full year 2013 have been reported, with the company recording a revenue of $1.25 billion for the fourth quarter of 2013, an increase of 7 percent from the fourth quarter of 2012. Revenue reflected an operational increase of 9 percent with foreign currency having a negative impact of 2 percentage points.
Net income for the fourth quarter of 2013 was $105 million, or $0.21 per diluted share. Adjusted net income for the fourth quarter of 2013 was $180 million, or $0.36 per diluted share. Adjusted net income for the fourth quarter of 2013 excludes the net impact of $75 million, or $0.15 per diluted share, for purchase accounting adjustments, acquisition-related costs and certain significant items.
For full year 2013, the Zoetis revenue reached $4.56 billion, an increase of 5 percent from the full year 2012. Revenue reflected an operational increase of 7 percent, with foreign currency having a negative impact of 2 percentage points.
Net income for Zoetis for the full year 2013 was $504 million, or $1.01 per diluted share, an increase of 16 percent compared to the full year 2012. Adjusted net income for the full year 2013 was $709 million, or $1.42 per diluted share, an increase of 32 percent and 31 percent, respectively, compared to the adjusted full year 2012. Adjusted net income for the full year 2013 excludes the net impact of $205 million, or $0.41 per diluted share, for purchase accounting adjustments, acquisition-related costs and certain significant items.
"In 2013, we successfully established ourselves as a new public company, delivered on our financial objectives, and continued meeting our customer commitments," said Zoetis CEO Juan Ramón Alaix. "Our performance in 2013, together with our guidance for 2014, confirms our long-term objective to grow revenue in line with, or faster than, the market; to grow adjusted net income faster than revenue; and to bring additional value to our customers, colleagues and shareholders."
"We continue to expand our diverse portfolio, receiving approvals and bringing important new products to our customers, such as Apoquel for veterinarians in the U.S., European Union and New Zealand," said Alaix. "We have maintained a reliable, high-quality supply of products around the world, while managing our separation from Pfizer. We also continue to achieve important milestones in standing up our company and achieving our growth strategies. I am very proud of the people of Zoetis for their dedication to our customers and for building on our legacy as the world leader in animal health."
"I am very pleased with our financial performance in our first year operating as a public company and with the progress we have made in building our infrastructure," said Rick Passov, executive vice president and chief financial officer of Zoetis.
Zoetis organizes and manages its business across four regional operating segments: the United States (U.S.); Europe/Africa/Middle East (EuAfME); Canada/Latin America (CLAR); and Asia/Pacific (APAC). Within each of these regional segments, the company delivers a diverse portfolio of products for livestock and companion animals tailored to local trends and customer needs.
In the fourth quarter of 2013:
- Revenue in the U.S. was $516 million, an increase of 7 percent over the fourth quarter of 2012. Sales of livestock products grew 8 percent, with contributions across cattle, swine and poultry. Cattle products showed a significant increase during the quarter based on improved market conditions. Meanwhile, swine and poultry products benefited from continued growth in new products. Sales of companion animal products grew 5 percent.
- Revenue in EuAfME was $330 million, an increase of 9 percent operationally over the fourth quarter of 2012. Sales of livestock products grew 9 percent operationally, driven primarily by sales of swine and poultry products, particularly in Germany and Russia. Sales of companion animal products grew 9 percent operationally, and benefited again this quarter from increased sales associated with third-party manufacturing agreements. Excluding these sales, companion animal product sales grew 5 percent operationally.
- Revenue in CLAR was $223 million, an increase of 8 percent operationally over the fourth quarter of 2012. Sales of livestock products grew 7 percent operationally, driven largely by cattle product sales in Brazil. Poultry sales increased primarily due to medicated feed additives in Brazil and southern Latin America, and swine products grew due to sales of immunization products, anti-infectives and medicated feed additives in the region. Sales of companion animal products grew 14 percent operationally, largely due to increased sales in Canada and Brazil.
- Revenue in APAC was $185 million, an increase of 14 percent operationally over the fourth quarter of 2012. Sales of livestock products grew 16 percent operationally, driven primarily by swine, poultry and cattle products in India, Japan and China. Sales of companion animal products grew 8 percent operationally, tempered by a decline in equine products. Companion animal product growth was led by Japan based on continued acceptance of recently launched products.
Zoetis continues to drive demand and strengthen its diverse portfolio of products through brand lifecycle management, strong customer relationships and access to new markets and technologies. The company is focused on improving the performance and delivery of its current product lines; expanding product indications across species; and pursuing approvals across new geographies. Some recent highlights include:
- Expanding the portfolio's reach - Zoetis continues to receive approvals that help expand its key products into new markets or with new formulations. In swine products, for example, the Fostera PRRS vaccine received approvals in Korea, Thailand and Mexico in the fourth quarter, and is now available in six markets after being introduced in 2012. Fostera PRRS aids in the prevention of respiratory disease associated with porcine reproductive and respiratory syndrome (PRRS) virus that could compromise herd health and performance. In poultry products, the company's Poulvac line of vaccines continue to receive approvals in markets across Latin America and Europe; these vaccines help combat many common diseases, including Marek's disease, Newcastle disease, Salmonella, Infectious Bronchitis and Infectious Bursal Disease.
- Continuous innovation - Zoetis continues to advance animal health science through innovations that address unmet market needs or improve veterinarians' approach to treatment. In the fourth quarter, the company received U.S. regulatory approval for Fostera PCV MH, a new combination vaccine for swine, which is the first vaccine to offer one-bottle, one-dose convenience with the flexibility of two-dose administration. Apoquel (oclacitinib tablet) successfully completed its early experience program in the U.S. in the fourth quarter, and fully launched in the U.S., UK, Austria and Germany in January; other market launches will follow. Apoquel is approved for the control of pruritus associated with allergic dermatitis and the control of atopic dermatitis in dogs at least 12 months of age.
- Focus on emerging diseases - Zoetis also uses its research and development expertise to address emerging diseases. The company recently announced a research partnership with Iowa State University (ISU) to identify and test a vaccine candidate to help control porcine epidemic diarrhea virus (PEDV) in the United States. Zoetis also announced recently it was first to market in the U.S. with GA08, a conditionally licensed vaccine for an infectious bronchitis virus in poultry.
Financial guidance and commentary
Zoetis's guidance for full-year 2014 reflects the company's confidence in the diversity of its portfolio, the strength of its business model, and its view of the evolving market conditions for animal health products this year.
Zoetis provided its financial guidance for full year 2014, reflecting foreign exchange rates for late January:
- Revenue of between $4.65 billion to $4.75 billion
- Reported diluted EPS for the full year of between $1.15 to $1.21 per share
- Adjusted diluted EPS for the full year between $1.48 to $1.54 per share