Cambrex Corporation (NYSE:CBM) reports results for the fourth quarter and full year ended December 31, 2015.
“Our financial performance was very strong in 2015 with fourth quarter and full year profit levels significantly higher than any year in our recent history. Full year sales growth, excluding the impact of foreign currency, was 21% driven by significant increases in our innovator and controlled substances product categories along with solid increases in generic API revenues,” commented Steven M. Klosk, President and Chief Executive Officer of Cambrex. “We are expecting another year of strong profitable growth in 2016.”
“We remain on track to bring new large scale capacity on line at our Charles City, Iowa facility by the end of the first quarter of this year. Industry trends remain favorable entering 2016 and as such, we will continue to invest in our capacity and capabilities to ensure we can meet the ongoing demand for our services. We also expect to continue to invest, typically with partners, in the development of a portfolio of niche generic drug products.”
Basis of Reporting
The Company has provided a reconciliation of GAAP amounts to adjusted (i.e. Non-GAAP) amounts at the end of this press release. Cambrex management believes that the adjusted amounts provide useful information to investors due to the magnitude and nature of certain expenses recorded in the GAAP amounts.
Fourth Quarter 2015 Operating Results – Continuing Operations
Sales were $156.9 million, compared to $128.8 million in the same period last year, representing a 22% increase. Foreign exchange unfavorably impacted reported sales growth by 3%. The sales increase primarily reflects higher volumes of certain branded active pharmaceutical ingredients (APIs) sold to innovator customers and higher volumes of generics.
Gross margins increased to 42% from 35% compared to the same period last year. The increase primarily reflects a favorable mix of products sold and higher volumes. Foreign currency favorably impacted margins one percentage point in the fourth quarter of 2015.
Selling, general and administrative expenses were $16.0 million compared to $13.8 million in the same period last year. The increase was mainly due to higher personnel costs and due diligence expenses related to acquisition opportunities.
Operating profit increased to $31.1 million from $22.6 million in the same period last year. The fourth quarter of 2015 includes $15.6 million in restructuring charges related to the decision to sell the Company’s Zenara facility in Hyderabad, India. The fourth quarter of 2014 includes a $7.2 million charge for a pension settlement and a $1.2 million benefit for the sale of land. Excluding these items, the increase in operating profit was primarily the result of higher gross profit, partially offset by higher operating expenses. Adjusted EBITDA was $52.4 million compared to $34.4 million in the same period last year.
Income tax expense was $13.8 million resulting in an effective tax rate of 44%, compared to a $6.2 million benefit in the same period last year. Excluding the impacts of the Zenara restructuring described in the Highlights section above, the effective tax rate for the fourth quarter of 2015 was 33%. The effective tax rate for the fourth quarter of 2014 was 32% after excluding the impacts of a benefit of $11.7 million for the reversal of a valuation allowance against certain U.S. tax assets, a benefit of $3.9 million primarily related to a tax audit settlement, a gain of $1.2 million on the sale of land and the related tax expense of $0.4 million, and a $7.2 million loss on voluntary pension settlement.
Income from continuing operations was $17.5 million or $0.53 per share compared to $28.3 million or $0.89 per share in the same period last year. Adjusted income from continuing operations was $33.0 million or $1.01 per share, compared to $20.4 million or $0.64 per share in the same period last year (see table at the end of this release).
Capital expenditures and depreciation were $16.4 million and $5.5 million, respectively, compared to $13.0 million and $5.7 million, respectively, in the same period last year.
Cambrex Equity Analysis
Cambrex Corporation (NYSE:CBM) opened trading today as $37.93 and is trading in the range of 34.35-38.93 today. Cambrex’s current market cap stands at $1.20 billion.
Compared to other peers in the Biotechnology sector, Cambrex hasn’t performed in terms of quarterly revenue growth year over year at 0.14 vs. the industry average of 0.18. Cambrex’s earnings per share is currently at 2.08, which surpasses the sector average of -0.35.
Cambrex is currently covered by 5 Wall Street analysts. The mean target price is $61.00 according to First Call. This presents a solid upside to the current price of the equity. The Mean Recommendation sits at 1.7 which is based on 2 Strong Buy, 2 Buy and 1 Hold ratings.
The current quarter EPS consensus estimate is .83 with revenue estimates of 152.94M. Sales are expected to grow at a 18.70% rate. Cambrex reported actual earnings last quarter of 0.40 which beats the .38 consensus estimate, a 5.30% surprise.
Cambrex Corporation, a life sciences company, provides various products and services for the development and commercialization of new and generic therapeutics worldwide. The companys products comprise active pharmaceutical ingredients and pharmaceutical intermediates that are used in the production of prescription and over-the-counter drug products. It serves generic drug companies, and companies that discover and commercialize small molecule human therapeutics. The company sells its products directly, as well as through independent agents. Cambrex Corporation was founded in 1981 and is headquartered in East Rutherford, New Jersey.