|Abbott CEO Miles White|
For the second quarter, top executives from Abbott ($ABT) came on the July 22 earnings call with Miles White, chairman and CEO, following fellow chiefs from Novartis ($NVS) Johnson & Johnson ($JNJ) in highlighting concerns about China--though at the same time emphasizing actual growth in the country and good prospects across the company's divisions.
He also said concerns about a crackdown over nutrition products bought in Hong Kong for sale in mainland China--where concerns over safety and quality of such products are high--was not a major factor in operations.
He started the call by highlighting China's contribution to the diagnostics business, which was up 9% overall in the second quarter.
"We continue to capture share and win new core laboratory accounts with our customer focused solutions, including the immunoassay business of the two largest commercial labs in China during the first half of the year," he said.
He then discussed the launch of the company's wireless i-STAT handheld device and in the Middle East, Japan and Latin America "where we achieved double-digit sales growth in the quarter."
But the elephant in the room for Abbott is nutrition, mainly dairy-linked products, and Asia has been the star for the company in past quarters. But it fell behind in the second quarter overall at 4%, White said.
"In China we achieved double-digit growth and share expansion with the new pediatric products we launched last year. At the same time recent market softness in Hong Kong and Vietnam impacted our overall international pediatric growth rate in the quarter."
The company's vast Established Pharmaceuticals business that in the past year added major purchases in Chile and Russia once again came through for the company internationally, White said.
"Improved operational execution and portfolio expansion are driving above market sales growth in several geographies including India, China and Colombia. We're seeing the benefit from the integration of CFR Pharmaceuticals with a broader product portfolio in key therapeutic areas and expanded salesforce driving double-digit underlying sales growth in Latin America."
However, Brian Yoor, senior vice president and chief financial officer, took some time to detail how a stronger dollar has hurt the bottom line, even as the company kept its overall guidance intact for the full year.
In particular, even as sales rose a healthy 10.8% on an operational basis, the end result was hit by unfavorable foreign exchange of around 8.5%, Yoor said, adding that sales in emerging markets increased 21% on an operational basis and 11% in constant currencies.
He then broke out China in general terms.
"Given recent investor interest in the Chinese economic situation, I'd note that our sales in China, which represent around 8% of our overall sales, increased strong double digits in the quarter," Yoor said.
The analysts indeed wanted more on China, and Mike Weinstein of JPMorgan Chase & Co. put that to White as the first question.
"Okay. Well let me comment on China first. A lot of times you don't know how you're really doing until you see reports of your own competitors to give you context about what others are experiencing in a market," White said.
"I'd say overall we're pretty pleased with China. We're gaining share, the launch of our new products is moving us along quite nicely. I think several others have experienced this cross-border issue in Hong Kong, some more than others apparently, and that certainly impacted us a little bit as well but we feel pretty good about China."
In another look at Asia on nutrition, White said that outside of China, the company has seen a drop in Vietnam where it holds the top spot in the market.
"The market in Vietnam has slowed I'd say kind of suddenly and a lot," White said. "And I don't think we're losing any share in Vietnam but we've certainly seen it slow and from time to time we see the impact of government price pressures and so forth, but do I expect that to be a sustained situation in Vietnam?"
"No, I don't. I can't always explain why any given market will suddenly take a breather but they seem to. And in this particular case Vietnam and Hong Kong both are impacting these numbers to a degree."