Abbott still eager for emerging markets, but currency headwinds an issue

Abbott CEO Miles White

Abbott Laboratories ($ABT) still likes emerging market plays, with Chairman and CEO Miles White suggesting M&A activity in those countries remains a top focus while highlighting a tough exchange rate picture from those geographies in the third quarter.

"The single biggest thing ... that's affected all of us in emerging markets is exchange, and across the board," White said on the Oct. 21 earnings call.

"Last quarter was among the toughest I've seen from an exchange standpoint. And you say to yourself: we've got to go where the growth is, and the growth is clearly attractive in emerging markets; it's double-digits; it's healthy. Strong double-digits on the top line, and we'd all give anything for strong double digits on the top line."

For White, that means looking at acquisitions that fit in with current growth products and prospects across established pharmaceuticals, nutrition and medical devices and diagnostics.

"So obviously we look for growth segments, whether it be geographic or business segments; and we're in those now," White said in response to an analyst question on M&A prospects in emerging markets.

"If you were to look at the Pharma segment, there gets to be a blurring sometimes because you're in OTC, OTX, and Rx. And depending on the nature of a given geography or market or distribution channels in that market, there's opportunity for expansion there for us. So I look at strategic fit first. We're not financial engineering our growth."

Last week, Vietnam said it wants to sell major stakes in state-owned companies, including dairy producer Vinamilk with the 45.1% stake held by State Capital Investment Corporation possibly worth as much as $2.5 billion, according to Vietnamese publication Tuoi Tre News.

In the second quarter earnings call, White mentioned a drop in nutrition sales in Vietnam where it holds the top spot in the market. On the third-quarter call he noted however that Abbott has looked to prepare on the longer-term front for higher commodity prices.

"I think we're going to feel the pressure of commodity prices," White said.

"At some point that will turn. We've tried to put plans in place to be able to mitigate that when the time comes, so I think that will be some pressure on us sometime in the future, and we should probably anticipate that at some point."

On China, the company reiterated solid prospects, providing color on overall sales, but steered clear of any comment on policies or the yuan devaluation in the second quarter.

"Given continued investor interest in the Chinese economy, I note that our sales in China, which represents about 8% of our overall sales, increased double-digits overall and across each of our reportable business segments," said Brian Yoor, senior vice president for finance and chief financial officer.

Overall, the Chicago company reported third-quarter worldwide sales of $5.2 billion, up nearly 11% on an operational basis, though 1.4% on a reported basis as the currency issue bit hard.

- here's the Abbott Q3 release

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