Covidien experiences strong profits despite weak Q4 imaging sales

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Covidien has reported positive results for the fourth quarter of fiscal 2008, which ended Sept. 30.

In the fourth quarter, the company said that net sales rose 12 percent to $2.6 billion from $2.3 billion a year ago, fueled by growth in the medical devices, pharmaceutical products and medical supplies business segments.

For the fourth quarter, the Hamilton, Bermuda-based Covidien reported operating income of $541 million, versus $386 million a year ago.  

The fourth-quarter effective tax rate was 18.4 percent, which was lower primarily due to favorable foreign exchange offset by changes to certain non-U.S. tax rates.

However, selling, general and administrative expenses were higher than in the fourth quarter of last year. The company attributed the increase to planned growth in selling and marketing investments, foreign exchange and higher administrative costs. Research and development expense in the quarter was up 41 percent over the prior year and represented 4 percent of sales.

“Growth was broad-based, with three of our four segments reporting double-digit increases,” said Chairman, President and CEO Richard J. Meelia. “Our performance was especially strong in markets outside the U.S., as we continued to benefit from the incremental investments made over the last few years to augment our sales force and expand geographically. Our imaging segment, however, posted disappointing fourth-quarter results, but we have plans in place designed to improve its performance going forward.”

The company also updated its fiscal 2009 guidance to reflect the recent strengthening of the U.S. dollar against most currencies, which negatively impacts sales and profit growth in the medical devices and imaging solutions segments. Covidien now estimates that sales in the 2009 will be flat to up 3 percent, including foreign exchange at current rates. Including foreign exchange at current rates, net sales are expected to be -3 percent to flat versus 2008 in the medical devices segment and -4 percent to -1 percent in imaging solutions.