Celesio Nine-Month Net Income Falls 85 Percent on Competition

Celesio AG (CLS1), Europe’s largest drug wholesaler, said nine-month net income fell 85 percent as increased regulation in the U.K. and competition in France and Germany limited sales growth.

Profit for the period declined to 29.7 million euros ($40.2 million) from 193.4 million euros a year earlier, Stuttgart, Germany-based Celesio said today in a statement.

Tighter restrictions on government medical spending in the U.K. were among reasons Celesio cited when cutting its full-year profit forecast on Oct. 26 for the second time this year. Celesio said at the time that it may sell units that handle logistics, sales and marketing for pharmaceutical manufacturers to focus on drug wholesaling and pharmacies.

“We have already begun with the implementation of the Operational Excellence program, and in the meantime made some pleasing progress,” Chief Executive Officer Markus Pinger said in today’s statement. “We are confident of being able to reduce costs quickly.”

Sales for the nine months fell 1.1 percent to 17.2 billion euros from 17.4 billion a year earlier.

The company is forecasting that full-year earnings before interest, tax, depreciation and amortization will total at least 575 million euros, excluding one-time items. Celesio reduced the forecast in October from a prediction in June that Ebitda would amount to about 600 million euros.

The strategy shift includes a reorganization aimed at saving 50 million euros in costs annually, Celesio said in October. Spending on the program will total as much as 100 million euros, with most of the cost to be posted this year. Celesio said at the time that Chief Financial Officer Christian Holzherr will leave the company at the end of November.

The businesses that Celesio is considering selling are Movianto, which offers contract logistics services to drugmakers, and Pharmexx, which provides sales and marketing. Celesio is also discussing the future strategy of its DocMorris mail-order pharmacy business following what the company said were conflicts with drugstore industry customers.

Celesio fell 2.7 percent to 10.69 euros yesterday in Frankfurt. The stock has dropped 43 percent this year, valuing the company at 1.82 billion euros.

To contact the reporter on this story: Allison Connolly in Frankfurt at aconnolly4@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net