Q2 2021 Perrigo Company PLC Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to city pair ago second quarter, 'twenty, 'twenty, one and financial results Conference call.
All participants will be in a listen only mode should you need assistance. Please signal our conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask questions to ask a question you May press Star and then one.
All your questions you May press star and two.
Please also note today's event is being recorded.
At this time I'd like to turn the conference call over to Bradley Joseph VP of Investor Relations and Communications Sir. Please go ahead.
Thank you and good morning, everybody and welcome to <unk> second quarter fiscal 2021 earnings conference call.
And I hope you all and a chance to review the press release, we issued this morning and copy of the earnings release and presentation for today's earnings discussion are available within the Investor section of the parallel Dot com website.
Joining today's call are president and CEO, Murray Kessler, and CFO Ray Silcock.
I'd like to remind everyone that during this call participants will make certain forward looking statements. Please refer to the important information for shareholders and investors and Safe Harbor language regarding these statements and our press release issued earlier this morning.
A few notes before we start.
First and less stated all financial results discussed and presented and continuing operations basis.
And they do not include any contributions from the Rx business, which is accounted for as discontinued operations and the second quarter and in addition to other non-GAAP adjustments as described in the appendix adjusted profit and measures, including adjusted EPS and adjusted operating income exclude from both periods and certain costs incurred to support the operations of <unk>.
This business, which are reported in continuing operations see the appendix for additional details and for reconciliations of all non-GAAP financial measures presented.
And second organic growth excludes acquisitions, and divestitures and currency and both comparable periods with that and I'm pleased to turn the call over to Murray.
Thank you Brad and good morning, everyone.
So healthcare continues to be front of mind for our consumers and customers and now that our portfolio configuration to a pure play <unk>.
Tumor company is complete and.
We believe <unk> is in a great position to capitalize on this trend and I'm proud of how the pair ago team has successfully adjusted during these challenging times.
<unk> impacted channel dynamics sales mix input costs and consumer behavior and.
The good news is that the business and markets. We're in are normalizing with sharp rebounds, and consumer takeaway as the world is slowly and steadily reopening.
Barring a broad scale step backwards due to new COVID-19 restrictions I believe para goes broad diversity of product lines and geographies has helped the company weather this unprecedented storm.
Let's look at the metrics and <unk>.
And I go net sales for the second quarter were $981 million, three 4% higher than a year ago with organic net sales up 0.5% second quarter growth came despite comparison to the prior year demand surge in April and the residual impact of this year's historically.
The weak cough cold season, coupled.
A couple of big takeaways on net sales.
It was a solid quarter for all of our businesses ex the impact of cough, cold and customer inventory adjustments, which I'll detail and just a moment the rest of the portfolio and favorable currency covered the entire negative impact of those two issues and the quarter got stronger and stronger as it progressed led by <unk>.
<unk> consumer takeaway.
This topline growth did not translate to earnings growth for three reasons first.
Advertising and promotion.
As you will recall our teams pulled almost all A&P spending and last year's second quarter as the world locked down there was no point advertising to empty shelves and Q2 and in the face of massive uncertainty we prioritize liquidity that spending was moved to the fourth quarter last year in order to preserve.
Net.
This second quarter 2021, we deliberately returned that branded advertising and promotional support to its pre COVID-19 levels, where it has always been and where it is most of the fact that this along with higher R&D and negatively impacted the Q2 earnings by $14 million excluding currency.
Second.
We had unfavorable plant overhead absorption and the quarter as a consequence of the historically low cough cold season, and third input costs, including freight distribution and commodities to name a few rows quickly during the quarter.
The team did a great job offsetting these inflationary costs with our project momentum cost savings and pricing actions and the quarter.
As a result of planned savings did not pass through to the bottom line. The way we had planned they will win and input costs normalized.
All of these factors in addition to the impact from divested businesses led to EPS of <unk> 50 per share non.
<unk> below year ago.
While the adjusted EPS was lower than we were looking for we will get back the A&P impact later in the year.
And we believe the COVID-19 related headwinds are temporary.
Most importantly, our business remains strong and is getting stronger.
As I said earlier once we lapped the prior year pantry load and exited the cough cold season, we experienced higher growth and strong sales momentum across our businesses with organic growth of plus one 7% and may and organic growth of plus four 2% in June.
We expect this strength to continue into the second half of this year, especially as we compare against weak comps from the prior year second half day load and historically weak cold coffees.
This sales momentum that we observed occurred in both CA and CSPI.
Despite the impact from cough, cold and the quarter and last year's demand surge.
<unk> delivered strong growth.
Strong performance and our self care brands that were impacted last year by country Lockdowns amid the pandemic outbreak drove the results.
The SBA experienced a more pronounced headwind from cough cold and and CSI as a result of trade inventory adjustments, which I'll also show you and just a minute, but the sales momentum throughout the quarter was also evident here.
And as the cough cold headwind from the prior year waned and May and June performance since the FCA increased outside of cough cold organic net sales and the quarter grew one 3% ending the quarter with organic growth of nearly 4% and June gives us confidence and our top line expectations as we had.
And to the back half of the year.
I think it's worth repeating all of our businesses grew in both the Americas and international compared to last year, except for as I mentioned U S. OTC.
As I said, the strong CACI performance and the quarter was led by our self care brands, many of which were negatively impacted at the height of the pandemic one year ago day.
And self care products, including weight loss Sun and skin care and oral care.
We're up 6% excluding currency.
The Lucent pandemic related restrictions across Europe, and new product launches timed with the return of brand advertising and promotion investments were the big drivers of the performance.
Cough cold was still a headwind for CSPI and the quarter and while the cough cold and across Europe will likely be lower than normal as pharmacies take a wait and see approach to the season, we expect a strong second half for CSPI.
Within CSC a.
Growth in oral care and nutrition were very strong and the quarter up 17, 9% and 10, 7% versus the year ago, respectively.
Oral care was driven by Pos strength at retail as consumers return to in store purchases for their oral care needs and sales and travel related toothbrush and chips increased with a current return on travel and in the U S.
Nutrition had a great quarter, we launched the first national brand equivalent and infant formula for babies with Cala sales of our electrolyte hydration drinks are increasing due to consumer buying behavior and our third party infant formula contract partners are taking share from other national brands.
This strengthening of our business throughout the quarter reflects a sharp rebound and consumer purchasing and the U S and Europe. This was exactly what we were looking to see.
As you know consumer takeaway is always the leading indicator for factory shipments.
The one exception as I mentioned was OTC in the USA, where the rebound and consumer takeaway far outpaced shipments.
That's unusual and we attribute this to factors and both this year and last.
Last year, there was a significant restocking of retail shelves and inventories that were wiped out earlier due to the pandemic related demand surge that obviously didn't reoccur this year.
This year, the opposite actually happened retailers had excess inventories of cough cold products due to the low demand and this season and they appear to be a bit more conservative buying and at normal levels going into next half call. It season. So as you see on slide 10, our shipments were outpacing consumer.
Takeaway for the better part of last year.
The good news is that this trend reversed itself and the second quarter and since April 2021 pair ago consumer takeaway is now cumulatively outpacing Paragon factor as shipments so shipments should began to realign with consumer takeaway and to be clear.
<unk> takeaway for store brands, and the OTC categories, Recompete and arent, just up and they're up significantly growing 12, 4% over the last 13 weeks versus year ago and in fact this is true for each of the individual categories for the latest 13 weeks as shown on the chart on the screen at the moment.
And so on a year to date basis. It once again appears that shipments and consumer takeaway have come into alignment as the 10 seven.
And 7% decline and consumer takeaway aligns with the 11% decline and pair ago OTC shipments, but the fact that we're exiting the quarter growing and.
Growing robustly, along with the apparent alignment should translate into strong second half growth.
Especially encouraging to see was the sharp rebound.
So were occurred in cough cold with consumer takeaway of our cough cold products up 34, 6% for the quarter.
That's good news and seems to make sense as the incidence of cough cold illnesses continue to trend above the prior year. According to the most recent <unk> data.
And Theres also supports a stronger upcoming cough cold season, and the prior year, which is essential to our second half projections.
Turning to guidance.
Through the first half of the year, we are a bit behind but we have a number of second half tailwind.
Consumer takeaway as rebounded sharply in the U S and Europe, including and this is important and including U S. OTC.
Sales momentum realized through the second quarter is expected to continue into the second half of the year compared to the prior year second half pantry Deload.
The upcoming cough cold season is expected to normalize compared to the historically weak prior season a year ago.
Retailer inventories have come down and.
And consumer takeaway is now cumulatively above our shipments while we can't price late precisely predict retailer inventory behavior. This data suggest the major portion of the inventory headwind should be behind us.
We've taken a number of pricing actions, which have been accepted by retailers given the global inflationary environment and those will help as well.
And the divestiture of the Latin American businesses, which would have been a $50 million headwind and the second half and is.
Now, let's first expected to be offset by sales to our former Rx business, which is now a major contract customer and five.
Finally, we expect strong momentum from new products and the second half.
All of these factors support higher net sales and the second half, thus, allowing us to reaffirm our revenue guidance. We expect this robust top line performance along with lower variable expenses.
Specifically like the Q4 reduction in A&P I referred to earlier and productivity improvements to generate strong second half adjusted EPS growth, although for the full year, we will be shy of our operating growth income growth target of 5% Judy.
Due to the already realized lower volumes and the first half and higher input costs and the second half. So we would expect our adjusted EPS within our original range.
But towards the lower end of the $2.50 to $2.70 per share.
To be clear this EPS guidance is before we put any of the nearly $2 billion and cash we have at our disposal to work.
Now, let's turn to the efforts to resource certainty to our business and your investments.
Over the last few months, we have made substantial progress on reducing uncertainty and the Irish tax Noah.
For those of you less familiar with this dispute.
<unk> received a notice of assessment of $1.65 billion euros at the end of 2018, following and an audit of the 2013 tax return for allot.
The company Perrigo and subsequently merged with.
And the assessment relates to the tax treatment of Alon and sale of its to Sobhraj. Ron It asserts that intellectual property sales transactions were not part of Ilan and trade as a result, and notice argues that these transactions should have been treated as chargeable James subject to a 33% capital gain.
And as tax rather than the 12, 5% applicable to trading income.
Paragon and maintains that ilan and filed correctly.
On July 13th we filed an 8-K, saying that after an extensive extensive exchange of information.
We received written confirmation from riders revenue that based on the information that they have now that they didn't have back in 2018, they would not object and the tax Appeals Commission adjusted the amount of the assessment to less than 1 billion euros equating to a reduction of at least 40%.
From the original 2018 assessed amount and to be clear. This was agreed to without revenue conceding any point.
They use the exact same methodology that they've been using all along with that more current and.
Formation.
This is not any discussion or settlement. It is just a restatement of the high end of the range.
As I said and the interview with and the Irish times, even though we still believe that Elon filed correctly and that ultimately and a long drawn out battle, we will win and we believe the right thing to do right now is to settle this case and a number that makes sense if that can be accomplished.
The starting point for any negotiation.
Would be from this Noah new lower starting point.
And then from that point, we will either come to a shareholder friendly settlement through our ongoing discussions or we will proceed to the tax Appeals Commission hearings to be held this November where we strongly believe and our position.
We also completed the sale of our generic Rx business this quarter and July this completed paradigms transformation to a pure play consumer self care leader, we were able to announce and close the sale within four months a great effort by many and the organization.
Make this happen so quickly and as I said, we will have nearly $2 billion at our disposal to drive shareholder returns and accelerate our growth.
Our first priority is to be acquisitive going forward and put this cash to work.
This is a big value enhancing opportunity for pair ago, but it's got to be done with discipline and it has to be done within our five areas of focus and North American based investment would likely centered around private or value label, a European based investment would likely center on branded assets.
Ultimately any acquisition would need to be both revenue and margin accretive and deliver a return above our weighted average cost of capital.
We have a strong track record in this area and see it as a huge value creation.
<unk> so in summary.
We have momentum and.
And a number of tailwind heading into the second half of the year.
And we've made significant progress to reduce uncertainty for shareholders and are looking to put our balance sheet to work with accretive acquisitions.
And <unk> pure play consumer business model is highly defensible, our software solutions are differentiated and on trend and.
Our portfolio offerings are well diversified across categories and geographies, we have world class consumer industry talent and our business fundamentals are extremely durable.
That I will now turn the call over to our CFO Ray Silcock to discuss our financial results and more detail Brad.
Thank you Marie and good morning, everyone.
Before we get into the quarterly results I would like to Echo Marty's comments on the strong business trends, we saw develop during the second quarter.
Although we experienced some turbulence this quarter, which made for a difficult comparison to prior year as Martin explained earlier.
To remain encouraged by the sequential monthly topline growth trends, we had improved growth versus prior year and each month of the quarter. In addition, we saw continued normalization of consumer takeaway in the quarter.
This is not an easy operating environment, but our team performed exceptionally well and managing the various and evolving trends across our businesses I would like to thank all our colleagues for their dedication and continued efforts and driving our business forward.
With that let's take a look at our second quarter results. As a reminder, all the figures presented today and from Perry goes continuing operations and exclude the Rx business, which was divested on July six the Rx business was accounted for as discontinued operations in the second quarter.
On a consolidated basis, the company reported a GAAP loss from continuing operations of $112 million for the second quarter of 2021 oral and loss of 84 per diluted share.
On an adjusted basis consolidated net income from continuing operations was 68 million.
And adjusted diluted EPS from continuing operations was 50.
<unk> 50, a share and <unk>.
15, 3% decline compared to the prior year.
The adjusted EPS decline versus prior year is primarily because we reinstated advertising and promotion spending in the quarter to pre COVID-19 levels.
Lower cough cold volumes were partially offset by strong performance across the balance of our portfolio, while unfavorable overhead absorption was offset by operating expense reductions. We also had a higher effective tax rate and in the quarter, 23% as compared to 18% and Q2 last year.
Last year's adjusted ETR was favorably impacted by the passage of the cares Act.
Non-GAAP and non-GAAP expense adjustments of $179 million.
Included impairment charges of $159 million, primarily from the held for sales Latin American business.
$54 million.
Excuse me amortization, which we always add back.
$13 million of unusual litigation expenses and $9 million and.
Restructuring costs.
Non-GAAP adjustments to the tax rate for the quarter included $11 million of tax expense arising from the pretax non-GAAP adjustments $62 million from the intercompany transfers of intellectual property as a result of the Rx divestiture.
As well as the effect of a valuation allowance release in the U S.
Full details of these and other adjustments can be found and the non-GAAP reconciliation table attached to this morning's press release.
From this point.
Forward and this presentation, all dollar numbers basis points and margin percentages will be on an adjusted continuing operations basis.
Unless stated otherwise.
Since Murray has already covered net sales for the second quarter I will begin with our gross profit consolidated gross profit was $4 million higher than prior year, primarily due to favorable currency translation, partially offset by adverse plant overhead absorption increased.
Material costs, including resin and inbound freight would largely offset by pricing and procurement actions taken in the quarter.
Consolidated gross margin for the quarter was 38, 4% 90 basis points lower than the prior year, primarily due to that lower overhead absorption and also to a less favorable product mix as compared to last year.
<unk> operating income for the quarter was $118 million.
<unk> thousand 14 million below prior year, primarily driven by the reinstatement of the advertising and promotion spend.
Now, let's turn to the segment results touch and starting with the CFC.
Gross profit and the quarter.
The CSC a of $197 million.
Was $9 million lower than prior year as the impact of new product introductions, and a strong performance and oral care were more than offset by lower plant overhead absorption and lowest sales and AUM.
T C as well as by raw material cost inflation.
Procurement actions helped offset increased freight and raw material costs and importantly, we were able to take some pricing and the quarter and overall <unk> pricing was held flat to prior year.
Lower plant overhead absorption was the primary driver.
I have a 120 basis points margin decline in the quarter.
Operating income was $107 million $17 million lower than prior year due to unfavorable gross profit flow through and higher operating expenses, including customer freight and investments and <unk> and R&D this quarter.
Moving onto consumer self care International CACI gross profit was $179 million.
Up $13 million from last year, and 8% increase favorable currency translation and proactive pricing and procurement actions in the quarter combined to more than offset higher input costs reduced volumes and the impact of the Rosemont divestiture.
Adverse product mix, primarily higher growth and lower margin categories, such as pain cough cold and led to a 180 basis point decline in gross margin versus last year.
Operating income was $47 million.
$3 million lower than last year as gross profit flow through was more than offset by an increase in operating expenses, primarily driven by adverse currency translation impact and by the reinstatement of our advertising and promotion spending to pre COVID-19 levels.
Moving now to the balance sheet and operating cash flow consolidated cash on the balance sheet at the end of the second quarter was $336 million.
Down $145 million from the $481 million cash balance at the end of the first quarter.
This decrease was driven by three primary factors $100 million.
And various Rx related tax payments with no P&L impact $60 million and investing and financing activities, including Capex, all offset by cash collected during the quarter Importantly, we believe that our goal of 100% operating.
Cash flow conversion for the full year is achievable based on the positive business trends, we see as we exit the second quarter.
These include increased consumer takeaway as well as monthly sequential sales volume increases.
I would like to note that our $336 million of cash for the second quarter balance sheet does not include the $1.5 billion and proceeds from the sale of the Rx business, which closed after the quarter ended.
In conclusion, and our second quarter results represent a tremendous efforts made by the entire team as we continue to navigate through a challenging business environment. The positive trends, we saw during the quarter, including increased consumer takeaway and growth momentum across our businesses give us confidence and a strong second half.
Expectations.
Operator can you. Please open the line for questions.
Ladies and gentlemen at this time well begin the question and answer session.
And question you May press Star and then one using a touchtone telephone if you are using a speaker phone and we do ask that you placed a couple of handset before pressing the keys to ensure the best sound quality.
And what's your all your questions you May press star and two.
And once again net of Star and then one to ask a question.
Pause momentarily to assemble the roster.
Our first question today comes from Elliot Wilbur from Raymond James. Please go ahead with your question.
Thanks, and good morning.
Good morning the.
First question for yourself Murray just want to go back to some of your comments.
In connection with first quarter results and and specifically looking at your expectations from the recovery and cough cold based on the <unk>.
Fan data.
Assuming you are still relying on on that tool to gauge your expectations to some extent wanted to know if there's been any meaningful change and <unk> outlook for second half volumes.
And given that they had expected such a significant increase I think they expected volume should roughly double in the.
Current year cough cold season versus.
Last year wondering if even though your guidance was indicated to be conservative you're still looking for recovery of roughly half that it still seems like a significant increase in volumes versus what we're currently seeing.
Just wanted to know how good your line of sight is into customer orders for the the balance of the year or do we really need to see these actual cough cold numbers turn in terms of the incident rates.
Well thank.
Thank you rightfully characterized it as a little bit complicated and I. Thank all of the IC EBITDA numbers versus first quarter trending right and the same direction.
Yep.
And the bigger issue Elliott for me is.
Our our consumer takeaway numbers and our shipment numbers are normally within a point or two of each other.
Look at the second quarter, our cough cold and consumer takeaway was up 40% and.
And are you know are our actual ship factory shipments were still down.
I don't have the exact number in front of me, but 30% or something like that it's like a <unk>.
50, or 60 point swing.
Which is unusual and and again its when youre looking at shipments versus consumer takeaway. They always come back to you always there will be periods of time, when it's up and down and that's what I tried to show and that one graph.
There was a period of time, when our shipments were outpacing consumption, they caught up and now its reversed itself and consumption Fortunately.
<unk> is leading the way so you know to make our projections that the way the consumer takeaway is trending and then we'll hit our projections easily I'm not going to say there is upside at this point, but it's our consumer metrics on all of our businesses are exactly what we forecasted that lag as shipments are coming back a little.
Flow or that looked like.
Some some inventory adjustment and it feels like when you look at it cumulatively over the past seven or eight months, they've now come to pretty darn close to to even okay. So.
Other factors.
There'll be the bi and BMS.
As as high are there whether it be a little more caution, but that could result, and the retailers and it's a good cough cold season scrambling to order more later on so we'll see how it plays out but.
This has been a heck of a ride for the last two years and we're still trying to get back to normal and manage our way out of what's been a lot of volatility and certainly a dynamic marketplace.
Okay, and if I could follow up that question and your response with just a query into.
Dean.
Reduction in overall customer inventories was it pronounced at any one channel more than other.
And are the Rx side of course, you most companies have fairly good insight into inventory held by the big three imagine that's not necessarily true for you guys, but how good is your line.
Your line of sight into actual inventory levels at your biggest step brick and mortar Custer.
Customers well.
Two things that we're normally very good as well, but it is not normal times. So.
And normally Youre just looking at the patterns that are consistent but what's happened over the last year and as you had a complete shutdown last year of <unk>.
Drugs channels as an example of that and then shifting to E com and it's shifted over to grocery stores and now lets shifting back from grocery stores.
Back into the normal store traffic levels, some give back and e-commerce still.
Still growing but a give back to where it was last year. So there you are sort of your normal patterns don't apply and.
Inventory relative to the customer and the way, they're managing it and the way we track it has a numerator and denominator. It's just not how much they have and the warehouse that you have to divide that by the consumer takeaway right. So and that's coming up with no change their weeks of inventory come down.
And.
And two to adjust for that so.
As long as the consumption continues to grow the way it's going.
We should be fine, but it is and <unk>.
And an interesting one to track versus what has been something where historically very.
Good and and we would have to be got it.
Okay and then maybe last question for me I understand many of the factors as to why gross margins.
Underperformed external and internal expectations for the quarter, which still expect improvement and the second half of the year and both C. F. C. A N C. S C I, but trying to get a little bit better sense of what you think is now a good number and each of those segments or a lack of a better term sort of an aspirational target I know we talked about <unk>.
33% and the TSA business.
And the second half of the year that may be a little bit more challenging to reach in light of some of these are these.
Issues that we're talking about today, but is that still sort of your longer term expectation and that's kind of a good baseline number to improve off of and similar question on the CPI business.
Yes.
I'll answer it and feel free to.
Comp and the.
And the factors SRA and so there we had a big bump in input costs and numerous areas right.
You can take the EBITDA, if you're still looking at operating margin or versus gross margin and just take the A&P is coming out of the fourth quarter and went and the second quarter, just reversing itself from last year back to 2000.
19, but the bigger issue is with a weak weak cough cold season, now youre feeling on margins first off those are high margin items. So.
I'm actually I know this.
It may seem a.
A bit odd, but the reality is to have 20% of the business like a math of it and still grow our franchise and hold it the way we did.
But for the move and advertising and promotion I think pretty good.
And while we're weathering the storm because.
Add that back and we were relatively flattish at the gross margin line.
<unk> produces much you have.
Or you don't have as much bought and and cough cold or a high margin item. So you hit the hit there on the top and then you lose it again and unfavorable plant absorption right because we have certain plants that do nothing but Ron cough cold products. So that's.
And negative hit.
Your question about whether that is permanent of course, that's not permanent and when the cough cold season comes back the throughput goes through the plant.
Nor Dover HUD is no longer a factor and and future years and you get the margin back the gross margin back on the sale of.
The cough cold products, so theres a number of those that are our Tampa.
Temporary in nature like that.
And the longer term input costs when it comes to freight difficult.
<unk> getting some things out of China for oral care and and others are purchasing people. Originally when we built a plan and believe by the third quarter, we would be that back to normal and now they're saying.
Early next year, and and will it be all the way back to where it was before and we may give up a little bit of margin there, where we're pushing harder on cost increases and don't lose sight of the fact that Ray said that for the first time in years, we were actually able to pass through price increases which is not.
And then the K.
So our customers are working with us and.
And some of those will start to affect it that's a long way and you say.
And I'm not backing off our margin calls and I don't think we'll get there and the second half of this year, but we will wait.
And we will get there.
And anything you want to add to that.
And from it we cover the localized Murray.
Alright, thank you.
Thank you.
Our next question comes from Chris Schott from Jpmorgan. Please go ahead with your question.
And this is actually catarina on for Chris. Thank you so much for taking our questions and actually the jump on your price increase comment. Thank.
Thank you mentioned this year for the first time and a while can you elaborate a bit more on the customer relationships and broader market dynamics that are enabling you to take them.
And kind of price increases.
And then my second question would be can you talk a bit about more on the demand trends that you've been seeing across consumer categories in July and maybe the first two weeks of August any early visibility into what <unk> could look like there. Thank you so much.
Okay well on the.
The latter part of the question.
We did show through the first couple of weeks and our.
On July yes.
Turning to July 11th So then that data that we put in a pill a couple of days ago said through the middle of June and we got and the latest period. So we brought that and I'll, just say that it and move those numbers up a little bit not down so from right now the data that we have and consumer takeaway is through July 11th and <unk>.
July 11, and that trend accelerated and not.
It didn't slow down so that's good news that's the most encouraging thing right because the shipments haptic ultimately alarm lineup at and cash and it's just taken a bit longer remind and with the first part of your question about the price and Chris right.
And yes price increases we normally when we started this and I joined the pair ago two years ago. Whenever we were every quarter or a year. We were we had moved from a -1% to 2% price erosion and a year ago about a 2% to 3% our goal was to get it back to minus one to two and the quarter on almost a year is flat so far.
So you know that's you know.
And that's a pretty big.
And when versus what we normally plan and a year because we weren't a budget and it would be down you know that 1% to 2% and that's helped offsetting some of the volume reduction so you.
And you basically had a good job by the organization that had higher input costs of almost $19 million $20 million that were completely offset by the purchasing group.
Working their size and on the other side, you've had lower volume offset by pricing to some extent and bi and the input costs.
And so all of those coming together and.
But for the A&P move what about our EPS flat versus year ago, roughly flat versus a year ago, a little bit of tax implications as well as it goes to customer relations and our customers.
There are partners.
On a normal circumstance of beta and we weren't coming and just to take price increases for our margin.
To boost our bottom line and they would resist that heavily and in fact push and the other way.
Under normal circumstances when.
And there they are not blind and they see what's going on and the world and input costs and it's affecting them, it's affecting everybody. They see what's happening to their national brand competitors who've been taking price increases.
So yes, they have partnered with us.
And and have accepted these price increases as good partners.
Great. Thank you so much.
Once again, if you would like to ask a question. Please press star and one our next question comes from David Steinberg from Jefferies. Please go ahead with your question.
Good morning.
Good morning. Thanks, again, thanks, a couple questions first and.
In terms of new products. So I think you'd mentioned that you're expecting strong momentum and the second half and so could you give us some flavor and some of the products, you're launching and then sort of and the medium term thinking about potential Rx to OTC switches and you discussed and Asia next coming up and you discussed potential switches like tamiflu.
To say Alice glaze.
And what line of sight do you have.
And these potential switches and in fact, that's our big categories like dermatology or migraine break loose overtime and your view.
Okay, well, let's do the first one and <unk>.
First one we have and a number of new products that are out of work.
And recently launched that are public I'm not going to share anything that that's not public that's part of our move to be more of a consumer company, we know where we need to keep that confidential but.
But we haven't we've already shared with you that we have launched new versions of ex L. S. Throughout Europe, we have launched <unk> and which is the launch and the <unk>.
Probiotics.
Throughout.
All of Europe.
A few months ago, and expect that to impact the second half of the year, we launched our hypo allergenic.
Infant formula and we have.
Signed a deal with a.
A meaningful new.
Contract on a on a branded infant formula that so far is looking and incredibly promising and we launched burts bees infant formula and.
And we had said that later in the year burts bees and wouldn't be rolled out too.
A broader line of products.
<unk>.
And that's happening as we speak those are just coming from some examples as it relates to <unk>.
Rx switch.
I think the most relevant ones that are relatively newer skies and you'll also have the combo product from.
And bill with the ibuprofen and that's out of Medicine combination yeah vast a CRO, we're not through on having all the sizes on our voltaren and equivalents. Yeah. I mean, those are just a few big ones, whether and when they come or non com, whether it comes with a C. Alice and others, we're still continuing to hear and rhetoric as those companies.
Or are launching and spinning off their consumer divisions. So yeah.
Yeah, it's been a positive contributor and we expect that.
Continue.
Okay, and just a quick follow up.
So and thinking about cough cold flu from them.
I don't know.
But.
That's.
Uh huh.
Lowest historic levels of cough, cold and 2021 coming out of the winter season.
Even lower than last year.
And there was also.
Hum.
And Mark.
And I suppose.
This call and local and then just a follow up on the price.
And finally close and close.
Uh huh.
And lastly, moving quite smooth.
Why why did margins are really cool.
Okay.
And one sales at a price was just offsetting input cost so.
And also inflation yeah.
Net.
For all of and saturation and so that's that was flat what was the impact of that.
And Australia.
Yes, I think Australia as an example, what would happen if the world shut down but that is not the norm.
Or Australia, and we are in Australia and board member who is in.
Are still incomplete.
Laughter and complete mask requirements and I caveat and my my my comments that if if we went that far backwards again sure that would be.
A risk to our plan.
As it is happening now and schools reopening and and.
And and Lockdowns.
Pretty much gone around the world with you know there are some exceptions.
We think things will will open up and we've already seen a higher level of a significantly higher level of illnesses and you'll see it and the consumer takeaway numbers that are so dramatic. So you know if you want me to ask is there and it's a world with <unk>.
Delta variant or some other variant was the shut the world and all the way back down again would it have an impact on our business of course, it would but.
And our.
I think there'll be some some masking measures, but it doesn't at least feel that way to us that that anywhere in the world is real and while it.
Is willing to shut it down and that hard day ever.
But it needs to get the world Vaccinate.
Great. Thanks.
Okay.
And ladies and gentlemen at this time and showing no additional questions I'd like to turn the floor back over to management for any closing remarks.
Thank you.
Like I said this is this has been a challenging 18 months.
For sure but.
And I'm proud to say that the team continues to make the adjustments and has is literally very close to right on track where we were.
What or where we set up of about two years ago with the transformation and our <unk>.
And I'm not going to go through the wheel again, but to sit there are a couple of years and say despite COVID-19. We have completely reconfigured. This company. Despite taking a hit on you know cough cold, which is almost 20% of our business and to be still growing.
To be and a year with these challenges and have already sold Rx, which I don't think the world expected. It and now have those resources were which were working hard on to to.
To drive even stronger results and our 35 long term promise.
And and have been making major major progress where we've.
And we believe we've cut in half the biggest risk to the company from and uncertainty standpoint.
The company is still progressing and and setting itself up long term for ultimately making lives.
Better through our self care vision so.
With that in mind.
And I like where we sit and.
And I'm optimistic about the future and we just got to work our way through these inventory issues and input costs, which we will but they don't churns changed the fundamental strength of the company and the long term trajectory and the benefits that we ultimately believe our investors will get.
From all of this hard work over the past two years. So I think the all of the employees, who have helped make that happen and I. Thank you for your interest and Paragon.
Ladies and gentlemen that does conclude today's conference call. We do thank you for attending you may now disconnect your lines.