UPDATE 1-Cardinal plans to improve supply chain business

(Rewrites, adds conference call, stock price, dateline, byline)

By Debra Sherman

CHICAGO, June 27 (Reuters) - Cardinal Health Inc. (CAH.N) said on Wednesday it believes it can improve its Supply Chain Medical business, which generates about 9 percent of its revenue, within a year.

Chief Executive R. Kerry Clark told a conference call that the company will enter fiscal 2008, which starts July 1, with good momentum in many of its businesses and reiterated its financial outlook given on April 27.

But its Supply Chain Medical business, which distributes medical lab and surgical equipment from manufacturers to hospitals, is expected to perform below its targeted 6 to 9 percent profit growth and 4 to 7 percent revenue growth in fiscal 2008.

"This is where we have our work cut out for us," said Clark, who took the helm at Cardinal a year ago.

"I'm not a person of infinite patience, but I do think the business can be fixed and I really do think we're going to start to see noticeable signs of turnaround by the second half."

Clark described the business as inefficient and said Cardinal will try to cut costs and overhead. He said it is the "backbone" and the core business that supports its other programs that serve hospitals.

Cardinal, one of the nation's three top drug wholesalers, expects to benefit in fiscal 2008 from leverage resulting from its share-buyback program, continued growth in generic drugs, and strong demand for its medical delivery pumps.

Clark said growth will be generated by its existing businesses and signaled only small "tuck-in" acquisitions in the upcoming fiscal year.

He said management's focus will be on integrating its $1.4 billion acquisition of Viasys Healthcare, which is expected to be completed this week.

The company earlier repeated its outlook, calling for 12 to 16 percent growth in earnings from continuing operations before special items, and an 8 to 10 percent increase in revenue over fiscal 2008 to 2010.

On Tuesday the drug distributor had said it expects fiscal 2007 earnings before items in the top end of its prior view of $3.32 to $3.40 a share. It had also reiterated its fiscal 2008 earnings outlook.

Cardinal shares were up 38 cents at $69.69 in midmorning New York Stock Exchange trading.

(Additional reporting by Aniruddha Basu in Bangalore)

((Editing by Brian Moss; debra.sherman@reuters.com; Reuters Messaging: debra.sherman.reuters.com@reuters.net; +1 312 408 8134)) Keywords: CARDINALHEALTH OUTLOOK/

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