Mettler-Toledo International's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Mettler-Toledo International (MTD)

Q1 2012 Earnings Call

May 03, 2012 5:00 pm ET


Mary T. Finnegan - Head of Investor Relations and Treasurer

Olivier A. Filliol - Chief Executive Officer, President and Director

William P. Donnelly - Chief Financial Officer, Principal Accounting Officer and Group Vice President


Jonathan P. Groberg - Macquarie Research

Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division

Daniel Arias - UBS Investment Bank, Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Sung Ji Nam - Cantor Fitzgerald & Co., Research Division

Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division

Derik De Bruin - BofA Merrill Lynch, Research Division

Gregory W. Halter - LJR Great Lakes Review



Good day, ladies and gentlemen, and welcome to our First Quarter 2012 Mettler-Toledo International Earnings Conference Call. My name is Stephanie, and I will be your audio coordinator for today. [Operator Instructions]

I would now like to turn our presentation over to your hostess for today's call, Ms. Mary Finnegan. Please proceed, ma'am.

Mary T. Finnegan

Thank you, Stephanie, and good morning, everyone. I am Mary Finnegan. I'm the Treasurer and responsible for Investor Relations at Mettler-Toledo, and I'm happy to welcome you to the call. I am joined here today by Olivier Filliol, our CEO; and Bill Donnelly, our Chief Financial Officer. I want to cover just a couple of administrative matters. This call is being webcast and is available on our website. A copy of our press release and the presentation that we refer to on today's call is also available on our website.

Let me summarize the Safe Harbor language, which is outlined on Page 1 of the presentation. Statements in this presentation, which are not historical facts, constitute forward-looking statements within the meaning of the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934. These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements.

For a discussion of these risks and uncertainties, please see the discussion in our recent Form 8-K. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the caption Factors Affecting our Future Operating Results and in the Business and Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Form 10-K.

One other item. On today's call, we may use non-GAAP financial measures. More detailed information with respect to the use of and differences between non-GAAP financial measures and the most directly comparable GAAP measures is provided in the Form 8-K.

I will now turn the call over to Olivier.

Olivier A. Filliol

Thank you, Mary. Good evening. I am pleased to welcome you to the call. I will start with the summary of the quarter and then Bill will provide details on our financial results and our updated guidance. I will then provide an update on some of our growth initiatives in 2012. As always, we will have time for Q&A at the end.

The highlights for the quarter are on Page 2 of the presentation. We are very pleased with our local currency sales growth of 8%, which was strong and better than expected. We achieved this despite slower growth in our markets and challenging conditions in Europe. In addition, last year's sales growth is particularly strong. Adjusted operating profit increased 10% and adjusted EPS increased 14%. Overall, we are very pleased with these solid results in the start of the year.

I will have some additional comments on our growth initiatives, but let me turn it to Bill to provide more details on the first quarter results as well as guidance.

William P. Donnelly

Thanks, Olivier, and hello, everybody. Let me start with additional details on sales which were $535.4 million in the quarter, an increase of 8% in local currency. On a U.S. dollar basis, sales increased by 7%, which included a negative impact of 1% due to currency.

Turning to Page 3 of the presentation, we outlined sales by geography. In the quarter, local currency sales growth increased by 2% in Europe, by 7% in the Americas, and by 17% in Asia/Rest of World. Acquisitions contributed approximately 2% to total growth with 3% benefit to Europe and a 2% benefit to the United -- to the Americas.

On Slide #4 of the presentation, we outlined our sales by product area. In local currency, laboratory sales increased by 8% and industrial sales increased by 10%, while food retailing was down 1%. Acquisitions contributed approximately 5% to industrial growth in the quarter.

Turning to Slide #5 of the presentation, we show the P&L. Let me walk you through some key items. Gross margins were 51.8%, a 60 basis point decline versus last year. We benefited from pricing and reduced material costs in the quarter. However, these benefits were more than offset by mix, especially a significant component of lower margin industrial projects in China, as well as the fact that our mix of sales towards Europe was less than usual and we enjoy high margins on our European sales. Currency was also a drag on margins.

R&D amounted to $28.7 million, an increase of 8% in local currency. SG&A amounted to 176 -- $167.6 million, an increase of 4% in local currency. The increase was attributable to higher sales and marketing investments, particularly in emerging markets, which was offset partially by lower variable compensation.

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