Pall up on downstream as ATMI boosts sales but cuts margin
For Q3 2014, total sales for the Pall Corporation totalled $682m (€501m), with $236m attributed to its biopharma business comprising of up and downstream consumables. This figure rose 13% from the $208m reported in the same quarter last year and was due to the $185m acquisition of ATMI, completed in February this year.
Pall CEO Larry Kingsley told investors during a conference call its Life Sciences segment continued to show strength globally, with biopharma standing out, but noted the gross profit margin for the quarter fell from 57.5% to 54.9% year-over-year for the sector, blaming both changes in currency strengths and Pall’s M&A strategy.
“Our recent Life Sciences acquisitions negatively impacted gross margin by about 80 basis points,” he said, according to a transcript from Seekingalpha.com. “About 50 basis points was due to the new single-use medical products, the other 30 basis points related to an inventory step-up that we were required to take in connection with the ATMI acquisition.”
Despite the impact on margins, Kingsley said Pall would continue with its “two-pronged” acquisition strategy of buying “high growth, Life Science properties on one hand, and opportunistic and accretive industrial bolt-ons on the other.” Earlier this month the firm bought specialty bag filtration firm Filter Specialists to boost its non-pharma markets.
ATMI Integration & Downstream Optimism
Kingsley also spoke about the ongoing integration of ATMI, which he told stakeholders was “bringing all that we assumed in the way of single-use capability to allow us to continue to effectively transition people from what were classic purification, centric applications that Pall’s always served well to more complete single-use base, turnkey kinds of solutions of the future.”
The growth of single-use technologies in the industry is growing very quickly, he said, and ATMI’s technologies gives Pall a greater “share of the wallet” as well as a complement to Pall’s base business, focused on stainless steel systems for filtration and separation science, which he said was also growing consistently.
“The only offset to that in the quarter, and what we don't see in terms of quite as robust growth, is in our lab instrumentation,” he said, though this represents just a small part of the total business. “Those market dynamics that are so called downstream in the BioPharm business continue to look quite good for some time to come.”
