Perrigo company is taking actions to drive substantial profit growth in 2016 and beyond. In total, the actions are expected to add incremental benefits of $175 million when the full run rate of the plan is achieved.
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With the inclusion of approximately $0.15 in EPS derived from $500 million in share repurchases to be completed in 2015, Perrigo expects to deliver adjusted EPS of approximately $9.45 in 2016.
This represents a 22 percent increase over the calendar year 2015 EPS guidance midpoint.
The company's actions are focused on maximizing efficiency and productivity, and further leveraging the strength of Perrigo's global platform. These actions include:
Consolidation of Global Supply Chain Activities in Ireland
The company is taking immediate steps to consolidate its operations, supply chain and procurement management activities into one global center of excellence in Ireland in order to maximize value through the elimination of redundancies and enhancement of purchasing power.
Global R&D leadership will join Global Portfolio Management in Ireland to drive a company-wide product selection and development process. Perrigo expects annualized operational and tax benefits of $105 million from these initiatives.
Organizational Enhancements
Perrigo is accelerating the realization of the benefits from its shared service model and improving operational efficiency by streamlining its organizational structure and eliminating redundant administrative functions. These changes strengthen Perrigo's focus on organic growth strategies, while ensuring efficient global capabilities in quality, research and development (R&D), information technology and services, human resources and finance.
These actions are expected to deliver $35 million in annualized operating benefits. Perrigo will not compromise its focus on innovation, and will take these actions in a manner that preserves its growth strategies and ensures that it is well supported by a quality team.
Strategic Portfolio Refinement
Perrigo is taking actions to refine its portfolio, including commencing a sales process for the U.S. Vitamins, Minerals and Supplements (VMS) business. These actions will improve the company's operating margins and return on invested capital (ROIC), and are expected to deliver $35 million in annualized operating benefits.
In total, Perrigo will reduce its workforce by approximately 800 employees, or approximately 6 percent of its current global headcount. The company estimates the total cost of implementing the actions to be between 0.25x to 0.50x of the total $175 million annualized run rate benefits. ■