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The meeting packet that's in front of you has a couple items in it. It's got a hard copy of the presentation, as well as a electronic copy that you can plug in to your PC if you want to do that. It's actually in the leather Sigma-Aldrich Finder.In terms of meeting logistics for the day, all of our formal sessions will be in this room. We will take a break about mid day and you're welcome to join us again for refreshments. There are signs out in the -- outside of the building that direct you to restrooms and phones. We ask that when you participate in the Q&A, at the end of the program, that you do try and get as close to a microphone so that it accommodates the folks that are joining us via the webcast. When we wrap up the presentation and the session that follows lunch today, we will have transportation to the airport for those that need it. After the session, we are also going to ask you to fill out a meeting evaluation that we'll send you electronically so that we can continue to improve on these presentations. Finally, after lunch today, for those of you that are interested, we are going to make facility tours of what is our Life Science and High Technology Center here in St. Louis. We'll announce that towards the end of lunch so that any of you that want to participate in that are certainly welcome to do that. So I am required to say that today's presentation will include some forward-looking statements, including our expectations for sales, earnings, free cash flow and other results. These will include specific expectations for 2012 and longer-term, and the strategic activities that we expect will drive those results. We certainly expect that our beliefs and our expectations are reasonable, but actual results could vary for any number of reasons that are all listed here. And we have no plans to update these forward-looking statements following today's meeting.
Just a quick overview of our agenda for the day. Rakesh will start with an overview of our business, some of the activities and the results. I'll follow that with a financial review and then our business units, we'll talk about some of the activities that they have. And including those that will drive our growth above market rates. So with that overview, I'm going to ask Rakesh to start the overview. Rakesh?Rakesh Sachdev Thanks, Kirk, and good morning to everybody. See a lot of familiar faces and a few new faces. It's great for us to have you here in St. Louis. I know we didn't do this last year, we were here 2 years ago. And really last year was at the heels of my predecessor who had passed away a few months ago, which was really very tragic and I just taken the office. And so we decided that we would wait a year.Now I know we have been speaking with many of you over the course of last year, so it doesn't mean that we haven't been communicating and hopefully you've been hearing our story. And today we can get a chance to really give you that in a lot more detail. We have the entire management team here. You will see the management team. I haven't tell you that one of our management team members is not here today. We recently announced the appointment of Jan Bertsch, our new CFO in the company. We're very excited to have her on board. Unfortunately, she had a personal commitment that she had made a year ago and she could not get out of it. But she's anxiously looking forward to getting to know a lot of you and that will happen in due course. So again thanks for being here.
What I'm going to do is I'm going to give you a quick overview of Sigma-Aldrich, I going to talk about some of the markets and the trends and how it impacts us as a company. And of course, I'm going to talk to you about how we are positioning the company for the future, our strategic priorities and where you can expect this company is going in the next several years.So with that -- our vision remains the same. It's simple, it's to enable science to improve the quality of life. And that it has an enduring purpose that has endured for many years. And if you'd look at our mission statement, it's to be the trusted and preeminent global provider to both the research laboratory, as well as targeted commercial markets. So we are playing, and we'll talk a lot about that today, in the lab space but also in targeted commercial markets and adjacencies. Just some facts about the company. We have a global franchise that is extremely strong. And that strength really is in the diversity of what this company does. We have diversity in the products that we offer, the services that we offer, we have diversity in the geographic segments that we play in and we have diversity in the end market. So as you see, for most of you who've been following us, you can see that from a geographic standpoint, very quickly the feast of our business in the emerging markets that we refer to usually as APLA, as in Asia-Pacific and Latin America, has been growing. And that's about 23% of the business. And Eric Green, who runs that part of the business is going to, kind of, talk to you more about that in the end this morning, about very exciting things happening. If you look at the end market, again about 1/3 of our business is tied to pharma and biotech, about 1/3 is tied to the Industrial segment and close to a little less than 1/3 of our 25% is tied to academia and government institutions.
We have over 9,000 employees and we are in many, many countries. We have operations in many countries where we do business. Practically everywhere in the world, our customers expect us to provide similar service levels. And I'll tell you, our service levels in the emerging market have been growing up quite significantly which has also led to a very rapid growth for Sigma-Aldrich. I'll let the team, when they come, and talk about what we've been able to achieve in the last year or 2.Two distinct businesses, most of you know that. We enable science for both manufacturing, as well as enable science in the lab. Our Research business, or the business that we have that caters to researchers, is about a little over 70% of our business. And then close to 30% of our business is in what we refer to as the SAFC, or the Fine Chemical business. And I will give you a little introduction on both and then of course Frank Wicks, who runs our Global Research business is going to be down here speaking about that business, and Gilles Cottier, who runs our SAFC business will do the same for SAFC. The Research business really, if you look at the strategy of what we are trying to do there, we are selling convenience, we are selling science, we are selling products. But it's the convenience that provides a very broad portfolio of products to our customers who trust the quality in the service that we provide. And frankly, the franchise is strong because of all the things that we offer. Now if you've seen the layers within the Research business of what we do, you can see there are several things that we do. Our Biology business is almost 1/2 of what we do in research today. So biology based products, about 1/2. And then in biology, we have the traditional Biology business, which is selling BioBasics, which we have done as a company since it began. It's a very solid business, a very profitable business for us. And then as you know for the last several years, we have been getting into the more innovative areas of biology. And Frank and David Smoller will be here to talk about that, but we're into biomolecules, we're into Functional Genomics, we're into all sorts of series of [ph] cells. And we are into things like gene editing. Businesses within that innovative Biology business that are growing very, very rapidly for us. I mean, we'll point that out to you.
We also have about, I would say, close to 20% of our business, is what we refer to as our Analytical business and Material Science business. And those are the 2 high-growth businesses for us. The Analytical business is where we supply separation columns, we are in the Standards business and we have exposure to different markets such as environmental safety, food safety and we, frankly, made a couple of acquisitions in the last 12 months in the space. And those businesses are doing extremely well for us and growing and we're very, very pleased.Of course, then we have our Essentials and Labware business, which is the basic stuff that lab scientists use in the labs. Whether it's supplying acids, or bases or solvents. Again, what we bring there is convenience, we bring high quality -- or high purity of products that we provide. And even though that market is fairly mature and not growing as fast as some of the other markets that I just talked about, we have very important segments there. And then of course, same thing with the Chemistry business where we have been -- we've had some tremendous run [ph]. I think what you're going to hear from Frank is there are several tenets of our strategy in research. We are expanding our products and services. We're using innovation clearly, and we are also using the eBusiness channel. We are expanding into the emerging markets such -- it's a combination of many, many things that we are doing in the Research business that certainly gives us a lot of optimism of where we can take this business over the coming few years. The SAFC business, and you're going to hear Jim talk about it. Really it's a based on 3 things. One, we are fairly unique in what we do. So we have chosen areas where products are hard to manufacture. And what we do is typically stuff that is very difficult to manufacture, is very difficult to handle. So whether it's precursor chemicals for the electronics industry, which are highly flammable and difficult to handle or high potency drugs, it's -- typically that's what we do. It's usually products that have a very critical impact on the performance of the end product. So for our customers, this is a very significant product. And just one thing I would say is it's usually a product that makes up a small part of the cost of the end product. It gives us leverage on pricing and many other things, which is why this business for us, unlike some of the high-volumes, some already refined Chemical business, they're very, very far from what we do. And Jim is going to talk about that. And this business that we have been growing successfully. I would say this 2011 was a second-year in a row that we grew this business in the high-single digits, and we expect the same in 2012. And so we are very excited about some of the things that we're doing. And this is products and services. We acquired BioReliance. It has the exposure to the same kind of customer base and the same growth trends. And Charlie Harwood, who runs BioReliance is here today, and he will speak with you about the things that we are doing in BioReliance and some of the integration issues that we have been working on.
For those who have followed us know the Sigma-Aldrich value proposition is based on many pillars. It's not just one thing. We are a science-based company and we have a lot of scientific knowledge in this company. But we are also a tremendous distribution and logistics company that can provide the service that our customers need no matter where they are in the world. 95% of the time, people who order our products, we give them the next day in most places. Quality and compliance is an extremely important thing for us. We have a very large QA/QC function in this company. Everything that leaves our docks and our doors is certified and because we are supplying the -- all of this stuff -- we are supplying all sorts of very important products. And so this is very truly, very important, I would say it's a comparative advantage that we have. Extensive selection of products and services, we offer over 200,000 products today, I think we have probably one of the broadest offerings of products in our category. And of course, when you do all this, you establish trust and you build a franchise, which I think is what we have done over the years.I'm not going to talk a lot about the history, most of you know this, but I can tell you that I think from a performance standpoint, which really demonstrates the ability for this company to execute, is you have to go back, in fact you could go back 35 years, this shows the last 5 years and you can see that we have had consistent stable growth in several of these metrics. Our sales have grown about 7% on average. Our ROE has remained high right through this year in 21%, 22%. That bounced up and down partly because ROE is also influenced by exchange rates. So the reason I think of the event last year is because when the dollar becomes a little weak, it has an impact on ROE. But obviously, fundamentally our return -- our actual return on the investor capital, our returns on the balance sheet metrics are very, very strong in the quarter. And margin expansion has been good. I stood here, I think in 2009, and we talked about expanding margins about 300 basis points, I remember the time it was only about 24% and we certainly did that over 4 or 5 years. We've been on that journey and it's happening and I can tell you because I get this question, about are we expanding margins at the expense of growth. And I can tell you, standing here, absolutely not and we will not do that. Margins are going up because we have, frankly you'll have, a lot of low-hanging fruit in the company. And we've been taking advantage of that, we've been getting our supply chain more efficient. And we've been very successful. There is still more room. But I would tell you our margins are pretty good where they are. And we are clearly -- and if you looked at what we are focused on, in growth. Because when we have growth all those things happen. And then, more than Charlie has been seeing us [indiscernible] for many of us in the company. And we know that we are actually producing shareholder value for many of our investors, or all our investors, and that we have outperformed the broad industry as well as outperformed our peers.
Let's talk about our market space. Where does this company play? And you can see on the left-hand side, if you look at the lab market, that's our Research business. We have estimated this to be about $25 billion. And we have close to about $2 billion. So there's a lot of headroom for growth and if you peel that back even more, you see that's made up of 3 broad areas. We have chemicals, reagents and kits, which is about 1/2 of the lab market, and we are [indiscernible]. That market is typically growing and we foresee that to grow at about 3% to 4% [indiscernible]. You have the lab essentials market, which is sort of as I said, are the essential products that most laboratory scientists use and that's about a $3 billion business. That's probably not growing as fast. But again, it's the business that's highly predictable, and it's where we still have a lot of value in what we do. And then the last one is labware and this is, again, plasticware and glassware, many other products that we are in today, but not in a very big way. So that's probably where we have appraised more shares, that's close to about $10 billion revenue [ph]. And then if you look at the targeted commercial markets at the right side there, our SAFC business. Life Science -- they play in 3 segments, Life Science, electronics and industrial. In fact, over 70% of SAFC's business is in the Life Science segment and that's a $55 billion addressable market for us. It's huge and it's -- it also includes services and it's fairly one that we are pursuing quite heavily. The electronics, we have carved out a niche in electronics. The total electronics market for chemicals is larger. But as I said, we are focusing on things that are hard to manufacture, that have a profound impact on the end product. And so for us, that market today is about $5 billion. And Fred Rollins, who runs their high tech business, is actually here today and he's going to speak with you about the things we're doing for the LED segment, what's happening in the LED segment, what's happening in the semi-conductor segment and why we are very excited about that segment. And them the last one is the industrial segment where we supply critical raw material and that's, some of you know, that's we call the Supply Solutions business and all of that is there, that we believe has an addressable market for us of $15 billion and frankly that business has been doing quite well for us in the last year and even coming into this year, that's been very successful.
I'll talk about some of the external trends and the impact some of those trends is likely have on our company. We believe that these trends could have a very favorable impact on Sigma-Aldrich. So we'll talk a little bit about industry consolidation. Well I'll tell you is why there's an industry consolidation that's been taking place. This industry is still very fragmented and I'll show you why. The growth of the Internet and how that's impacting the industry and really creating some opportunities for companies like Sigma-Aldrich. Emerging market growth, frankly, we have been there, we have been capitalizing on it. I'll talk a little bit about outsourcing of the pharma company and then how that's creating opportunities, selective opportunities for companies like Sigma-Aldrich. And then, the regular 3 environment and what's happening in the [indiscernible] in certain areas, especially with renewable energy and those kinds of things and how we have taken advantage of that, whether it's through our materials science activity or some other business.So if you look at consolidation, while consolidation has taken place, if you really look at -- and this is the research segment. If you look at chemicals, reagents and kits, and even break that further, and you look at some of the Analytical business that you're in, life science, reagents and kits, and specialty chemicals, you can see that the soft tickers have a decent amount of shares, anywhere between 25% and 40% and we are one of them. But then you have a huge market, that is so fragmented, with a number of small players. And the opportunity really is-- one is to gain market shares, which through organic means, which I believe we have been doing, and the other one is to look at possible bolt-on opportunities where it makes sense. So we can either get more channel, more access, more products and so on and so forth. I mean, I think Frank's going to talk a little bit about that. Same thing with essentials and labware. You have a few big players and -- but then again it's a very, very fragmented, and interesting. And mind you, I'm talking about the total globe, I'm not just talking about the U.S. Read the rest of this transcript for free on seekingalpha.com