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Abbott CFO: Seeking To Boost Nutrition Unit Profit Margins

By Peter Loftus Of DOW JONES NEWSWIRES Abbott Laboratories (ABT) hopes a recent leadership change atop its nutrition business will spur improved profitability, which has lagged that of rival Mead Johnson Nutrition Co. (MJN), a top executive said Wednesday. Abbott is trying to boost the profit margins of the business--which sells Similac baby formula and generates about 16% of Abbott's total sales--to catch up with those of Mead Johnson, seller of Enfamil formula, Abbott Chief Financial Officer Thomas Freyman said at a Goldman Sachs health-care conference in Rancho Palos Verdes, Calif. "The publishing of Mead Johnson's margin data has been a bit of an eye-opener for us," Freyman said. Mead Johnson was split off from drug maker Bristol-Myers Squibb Co. (BMY) following a 2009 initial public offering, causing Mead Johnson to report detailed financial results as a stand-alone company. Mead Johnson's shares have soared, trading recently at $65.70, versus an IPO pricing of $24 per share. Freyman said Abbott has started to identify ways to improve profit margins in its nutrition business, but he didn't provide specifics. He also said a recent leadership change could help the effort. Holger Liepmann retired earlier this year as executive vice president of nutritional products; he had been with Abbott in various positions since 1986. Abbott named John Landgraf executive vice president of global nutrition in January, said spokesman Scott Stoffel. A 34-year veteran of Abbott, Landgraf most recently served as senior vice president of pharmaceuticals manufacturing and supply, and has experience managing global supply chains. Freyman said Landgraf brings solid operational experience to the nutritional business. "His mission is to continue to support commercial expansion, obviously, but to really drive margin expansion," Freyman said. "We've got a lot of dedicated resource focused on that." He said Abbott was open to making acquisitions to expand its nutrition business, but there aren't many major assets available for sale. Freyman wasn't specific about the spread between profit margins at Abbott's nutrition business and Mead Johnson. Last year, Mead Johnson reported a gross profit margin of 63.4% of total sales. Abbott doesn't break out margins by unit, but its overall margin--which also reflects pharmaceuticals and medical products--was 58.3% last year. Abbott's global nutrition business had $5.5 billion in sales for 2010, or 16% of Abbott's total sales. U.S. results last year were hurt by the recall of Similac powder products due to potential beetle contamination. Abbott shares recently were up 15 cents to $51.53. -By Peter Loftus, Dow Jones Newswires; +1-215-982-5581; peter.loftus@dowjones.com

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