United Drug to seek €9m in savings as revenues fall

UNITED DRUG will introduce cost savings of more than €5 million in its Irish operations in the coming year in response to falling revenues at its Irish pharmaceutical business. A spokeswoman for the company declined to comment on any possible job losses.

The company, which is the largest pharmaceutical wholesaler in Ireland, employs 700 people at in headquarters in Dublin.

According to its third-quarter trading update released yesterday, revenue at the group’s Irish business continued to fall. Business was affected by measures taken by the Irish healthcare authorities to reduce health spending, the company said.

The contribution of Irish operations to profits has been decreasing gradually in recent years and 65 per cent of profits now comes from overseas.

As well as being a major wholesale distributor to the pharmaceutical industry, United Drug also delivers pharmaceutical products and vaccines to hospitals around the State.

The company’s weak performance in the Irish market was offset by strong growth in its contract sales and packaging divisions, particularly in the US, with the company forecasting operating profit for the full year to be ahead of 2010.

United will report full-year results to the year ended September 2011 in November.

In an interim management statement yesterday, the company said its sales, marketing and medical division – which provides contract sales outsourcing services to pharmaceutical manufacturers – performed well, boosted by the acquisition of InforMed and World Events last year, and helped by a strong performance overall in the US where it has won several contracts.

United Drug’s packaging and speciality business is also ahead year on year, the company said yesterday, though revenues and profits at its healthcare supply chain division were lower than the same period last year, as the Irish wholesale market fell by more than 4 per cent.

In total, the company plans €9 million in savings across the group, more than half of it in Ireland. These are expected to deliver annualised savings in excess of €5 million, the majority of which will accrue over the fiscal year ended September 2012.

Analysts responded well to yesterday’s trading update, with Davy Stockbroker noting United Drug’s ability to generate solid earnings in a very challenging trading environment, particularly in light of results from peer group Celesio yesterday which showed a 16 per cent fall in first-half ebidta (earnings before interest, depreciation, taxes and amortization).

NCB Stockbrokers said that United Drug was well placed to benefit from the trend towards outsourcing non-core activities in the pharmaceutical industry.

United finished up 5.5 per cent on the Dublin market yesterday at €2.13.