Cardinal rebuilds profits in second quarter

- Last updated on GMT

Related tags: U.s. securities and exchange commission

Cardinal health experienced a 42 per cent jump in quarterly profit,
helped by renewed growth in its drug distribution and sterile
manufacturing operations, which have both experienced problems that
dragged down earnings in previous quarters. The company's Clinical
Technologies and Services segment also picked up this quarter.

>Cardinal,​ provider of health-care products and services, reported a net profit of $304 m (€253 m) for its fiscal second quarter ended 31 December 2005, compared with a profit of $214 m in last year's Q2.

Revenue for the quarter rose 7 per cent to reach $19.92 bn, driven by an 8 per cent increase in Cardinal's drug distribution unit, which generated $16.2 bn, due to a jump in bulk sales and the forming of several distribution service agreements with branded drug makers.

This growth signals that the unit is beginning to rebound after being affected by an investigation into its accounting practices since 2003 by the Securities and Exchange Commission (SEC).

In this quarter, Cardinal set aside another $10 m to form the final part of a $35 million penalty fee that it expects to pay in relation to ongoing settlement discussions with the SEC.

Another unit beginning to rebound is Pharmaceutical Technologies and Services, due to the company's progress in addressing operational issues within its sterile manufacturing business, that has caused operating earnings to plummet in previous quarters.

As part of its response to the problem, Cardinal completed an upgrade of its Albuquerque sterile-manufacturing facility last quarter, which has since resulted in a doubling of production at the site, and closed its beleaguered sterile manufacturing facility in Humacao, Puerto Rico.

However, segment revenue and earnings growth were partially dampened by slower market growth in the nuclear pharmacy services business and ongoing industry changes within the health care marketing services business, the company said.

"We remain focused on improving key fundamentals of our business and making operational improvements that resulted in a solid quarter across the company,"​ said Robert Walter, chairman and CEO of Cardinal Health.

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