By Martinne Geller
July 25 Mead Johnson Nutrition Co, maker
of Enfamil baby formula, stood by its full-year forecast on
Thursday despite having to lower prices in China amid a
Its shares jumped 7 percent to $75.73.
Mead Johnson and rival formula makers including Abbott
Laboratories, Danone SA and Nestle SA
, have cut prices of their products in China in recent
weeks due to an investigation by the government into possible
price-fixing and anti-competitive behavior.
The price cut should reduce Mead Johnson's 2013 sales by
about $30 million, it said. In the future, the annual impact
should be about double that.
Still, the company stood by its 2013 forecast, which calls
for earnings per share of $3.22 to $3.30 and sales growth of
about 8 percent, saying the lost revenue would be made up by
stronger growth in markets besides China, a likely reduction in
promotions and stronger results in Hong Kong.
Because the investigation by the Chinese government is
continuing, Mead Johnson said it was too early to quantify the
Analysts see the probe as possibly part of a broader Chinese
plan to boost consumption of local infant milk products. Mothers
turned away from Chinese milk powder in 2008 when infant formula
tainted with the industrial compound melamine killed at least
six babies and made thousands sick with kidney stones.
Due to safety concerns, travelers from mainland China began
flocking to Hong Kong to buy formula in bulk, and store shelves
were often left empty. In March, the Hong Kong government
limited the number of cans of milk powder a person can take back
to the mainland to two per visit. It plans to revisit the
restrictions in October, though Mead Johnson said its outlook
assumes no change to the restriction.
Mead Johnson's sales in Hong Kong in the second quarter,
which began in April, were below that of the first quarter
though still higher than a year ago, the company said. It still
expects higher annual sales. The company added that it believes
the bulk of its product sold in Hong Kong is still being brought
The company said it does not expect its 7 percent to 15
percent price reductions in China to impact consumer buying
Overall, net income was $162.2 million, or 80 cents per
share, down from $165.8 million, or 81 cents per share, a year
Excluding legal settlements, related costs and other special
items, earnings were 84 cents per share. On that basis, analysts
on average were expecting 83 cents, according to Thomson Reuters
Net sales rose 4 percent to $1.06 billion, topping Wall
Street expectations of $1.04 billion.