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Sigma Ends Q4 With 1.8-Percent Organic Sales Growth; CEO Warns More Weakness Expected

Take away currency benefits of 4.8 percent, and a boost of 2.6 percent from acquisitions, and Sigma-Aldrich’s revenues grew 1.8 percent in the fourth quarter of FY 2004, the company reported this week.

“Market growth made our sales expectations a challenge in 2004 and I expect that it will continue to do so, if to a lesser degree, in 2005,” David Harvey, Sigma’s chairman and CEO, said in a statement.

The company, a growing presence in the molecular biology tools sector, primarily as a maker of synthetic DNA, and a distributor of other chemicals used in genomic and proteomic research, said it expects internal sales growth of 4 percent to 6 percent in 2005, with a boost from the acquisition of JRH Biosciences, a $370 million deal that was announced in January (see BCW, 1/20/2005). The transaction, which is expected to provide annual sales of approximately $165 million and become accretive to earnings after 2005, is expected to close before April, the company said Tuesday.

“We believe [JRH] opens up some real potential in the fast-growing biopharmaceutical production market and enables us to compete more effectively in the cell-culture research market with an assured supply of sera,” Harvey said. JRH Biosciences of Lenaxa, Kan., is a 400-employee sera and cell-culture product manufacturing firm with $150 million in sales in 2004.

Sigma said it would fund the acquisition with existing cash, short-term debt, and three-year term debt. The company reported $170 million in cash on hand as of Dec. 31. As of the end of the fourth quarter, Sigma had long-term debt of $177 million, and short-term debt of $9 million.

The company is actively seeking further acquisitions.

For the quarter, total revenue was $352 million, compared to $322 million for the same quarter in 2003 — an overall increase of 9.2 percent. Net income was $55 million, including a $4.2 million benefit from currency, compared to $47 million in the year-ago quarter with no currency benefit.

Some 50 percent of the company’s sales are in currencies other than dollars.

R&D costs were level, at $11.1 million, year-over-year, while SG&A expenses rose to $104 million from $89 million a year ago.

Sigma-Aldrich includes three operating divisions — scientific research, biotechnology, and fine chemicals. Two of these benefited from price increases ranging from 3 to 4 percent. Scientific research, with 8.5 percent growth boosted by 5.5 percentage points from currency benefits, instituted a price gain of 4.3 percent for the quarter and saw unit sales volume “decline slightly,” the company said. Biotechnology, with 6.2-percent growth boosted by a 5.3-percentage point benefit from currency, saw a 3.4-percent price gain for the quarter offset a 1.9-percent decline in volume.

Sigma’s web-based sales for the scientific research and biotechnology units increased to 25 percent of their sales, the company said, compared to 20 percent in the year-ago quarter.

The fine chemicals division was boosted by contributions from the acquisitions of Tetrionics of Madison, Wisc., and Ultrafine, of Manchester, UK., adding 14 percentage points to the unit’s growth for the quarter.

Sigma declared a quarterly cash dividend of $.19 a share, payable on March 15.

— Mo Krochmal ([email protected])

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