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J&J profit falls on recall woes

Johnson & Johnson has reported a 23 per cent decline in profit for Q1 2011 in spite of increased revenues, as the company experienced high costs related to product recalls and lawsuit
Johnson & Johnson (J&J) has reported a 23 per cent decline in profit for the first quarter in spite of increased revenues, as the company experienced high costs related to product recalls and lawsuits.  

The company's revenue rose 3.5 per cent to $16.17bn for the quarter. Net income was $3.48bn, or $1.25 per share, down from $4.53bn, or $1.62 per share, in 2010's first quarter, when results were positively affected by a $910m gain related to litigation.

Consumer product sales were down 2.2 per cent to $3.68bn, largely due to the recalls. Prescription drug revenue was up 7.5 per cent globally to $6.1bn, while revenue from medical devices and diagnostics rose 3.3 per cent, to $6.43bn.

"Our pharmaceuticals business demonstrated strong operational sales growth this quarter of over 6 per cent, due to the success of our recently launched products such as Stelara and Simponi and core medicines such Remicade and Prezista," J&J chief financial officer Dominic Caruso said during a conference call. 

"And our consumer healthcare business saw sequential improvements in its operational sales growth versus the fourth quarter of 2010 in various markets, excluding the impact of the plant shutdown and the lower production levels in our McNeil US over-the-counter (OTC) business, where we are making good progress in addressing the manufacturing and quality issues in that business," he added. 

J&J also increased its estimate of costs per share related to recalls this year. "We had previously included in our guidance for 2011 an impact of approximately $0.06 per share from of the ongoing remediation efforts at McNeil," Caruso said. 

"Now that we have finalised the terms of the Consent Decree, we estimate that, that impact will be twice that amount. This results from both the slowdown in sales reflecting the impact on production volumes as we implement the additional quality steps outlined in the Decree, as well as additional investments required in the remediation process."

J&J raised its profit forecast for the year by 10 cents to $4.90 to $5 per share.

20th April 2011

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