Perrigo Co. Plc Q1 FY2025 earnings call

• Progress against the Three-S Plan: Efforts to stabilize Americas business have led to positive results, with new business awards offsetting losses and infant formula net sales up 19% in Q1 2025. Streamlining efforts have yielded benefits, with the supply chain reinvention program delivering $8M in benefit and Project Energize achieving $20M in annual savings (total run rate $159M). Strengthening growth foundation: Synergy between store brand and OTC brands is paying off, with OTC brands achieving solid organic growth excluding prior year Opill benefit. - Q1 financial highlights: Organic net sales declined 0.4% but grew 1.8% excluding lost distribution and prior year Opill sell-in. Gross margin expanded 440 basis points to 41% due to infant formula recovery. Operating margin expanded 550 basis points. EPS grew 107% to $0.60 per share. - Infant formula: Quality production led to 19% net sales growth in Q1 2025, but store brand share recovery was impacted by short-term pricing actions from competitors.

For the CSCI segment, reported net sales were impacted by prior year divestitures, exited product lines, and currency translation. Organic net sales growth in the quarter was strong at 4.5%. However, CSCI net sales declined 3.6% due to the impact of lost distribution in store brand and the prior year benefit from Opill retailer stocking, with the rest of the business flat year-over-year. First quarter operating income in both segments delivered double-digit organic growth versus prior year. In CSCI, operating income of $86 million grew 10% organically. The rest of the business had operating income of $100 million, growing 90% driven by infant formula business recovery and accretive initiatives.

• Widened net sales growth expectations: Reported net sales expected 0% - 3% growth, organic growth 1.5% - 4.5%. - Reaffirmed adjusted EPS range and net leverage target: Net leverage target of 3.5x by end of 2025. - Tariff impact: Anticipated ~5.5% gross increase to global COGS from tariffs in full year, offset by actions like strategic price actions and in-sourcing.

• Macro environment uncertainties: Consumer caution due to inflation, tariffs, etc., affecting sales. - Tariff impacts: Approximately 80% of tariff impact on U.S. oral care category and 20% on U.S. OTC business. - Competition in infant formula: Short-term pricing actions by competitors temporarily slowing store brand share recovery.

Q: On tariffs impact to EPS in 2026 and mitigation actions?

A: Eduardo said actions to mitigate 100% of the impact for 2026 and beyond are in place, so no major change in projections.

Q: Infant formula sales ramping?

A: Eduardo said similar trajectory in Q2, ramping in second half with introduction of nearly 60 national brand equivalent SKUs.

Q: Widening net sales range?

A: Patrick explained it reflects dynamic market shifts, consumer uncertainty, and infant formula share recovery impacted by competitor promotions, with work ongoing but not yet forecast grade.

Q: Pricing on oral care?

A: Eduardo said price actions expected in next 3 months, working with retailers on alternative sources like in-sourcing production to U.S. facility.

Q: Upper respiratory sales impact?

A: Patrick said no material impact anticipated from tariffs on upper respiratory products.

Q: Pharma tariffs impact?

A: Patrick said up to $100M impact, mitigated by pricing, onshoring, and identifying alternative supply routes for API.