Sigma-Aldrich Corporation develops manufactures and distributes the broadest range of high quality biochemicals organic chemicals chromatography products and diagnostic reagents available in the world. These products are used in high technology research and development in the life sciences at universities and in industry for the diagnosis of disease and as specialty chemicals for pharmaceutical and other manufacturing purposes. SigmaAldrich Corp. has a market cap of $6.34 billion; its shares were traded at around $51.93 with a P/E ratio of 19.4 and P/S ratio of 2.9. The dividend yield of SigmaAldrich Corp. stocks is 1.1%. SigmaAldrich Corp. had an annual average earning growth of 12.6% over the past 10 years. GuruFocus rated SigmaAldrich Corp. the business predictability rank of 4.5-star.
Highlight of Business Operations:Sales decreased 10.1% for the second quarter of 2009 to $522.0 from $580.7 in the second quarter of 2008. Sales decreased 9.5% for the first half of 2009 to $1,041.3 from $1,150.3 in the first half of 2008. Organic sales growth, which is defined as reported sales adjusted for changes in foreign currency exchange rates, for the second quarter and first half of 2009 was a decrease of 1.7% and a decrease of 0.4%, respectively. Changes in foreign currency exchange rates decreased reported sales in the second quarter and first half of 2009 by 8.4% and 9.1%, respectively, when compared to the same periods last year. Price increases in the three research business units increased sales by 3.5% and 3.6% of the Companys total organic sales change for the second quarter and first half of 2009, respectively. The remainder of the sales change was primarily attributable to volume decreases of approximately 5.2% and 4.0% for the second quarter and first half of 2009, respectively.
SAFC currency adjusted sales declined 7.2% and 6.3% for the second quarter and first half of 2009 compared to the same periods in 2008, respectively. Sales in all world areas reflected a decrease in the quarter. During the quarter the biotechnology and government customer segments showed improved demand, reflecting an increase of 23.9% and 33.3%, respectively. Certain products reflected positive growth including pharmaceutical products in the U.S., hitech products in Europe and bioscience products in CAPLA. Softening in demand in the other product groups more than offset these gains. Bioscience and supply solutions product groups were particularly hard hit in the U.S. during the quarter, which experienced declines of 6.3% and 7.4%, respectively. Sales in all world areas showed a decline for the first half of 2009 as compared to 2008, although biotechnology and universities/government customer segments reflected positive sales growth. These gains are more than offset by declines in the industrial, hospital and pharmaceutical customer segments for the first half of 2009.
Web-based sales, through our award winning website, as a percentage of worldwide Research Chemical (Research Essentials, Research Specialties, and Research Biotech) sales during the three and six months ended June 30, 2009 increased by 3.0% and 3.1% over the same period in 2008, respectively. Web-based sales improved to approximately 45% of worldwide second quarter 2009 Research Chemical sales as e-commerce sales to U.S. customers increased by 4.7%. E-commerce sales to U.S. Research customers were 54% of total U.S. Research sales compared to the 52% during the second quarter of 2008. For the first half of 2009, Web-based sales were approximately 44% of worldwide 2009 Research Chemical sales with sales to U.S. customers increasing by 4.8%. E-commerce sales to U.S. Research customers during the first half of 2009 were 54% of total U.S. Research sales compared to the 51% level achieved during the first half of 2008.
Selling, general and administrative expenses as a percentage of sales decreased to 24.8% for the three months ended June 30, 2009 compared to 24.9% during the same period last year. Travel and entertainment expenses as a percentage of sales declined 30 basis points due to company-wide reductions in travel. Advertising and Catalog expenses as a percentage of sales were reduced by 30 basis points, as a result of reduced advertising campaigns. Salaries and other employment costs as a percentage of sales increased 30 basis points, primarily due to the lower sales base, as the amount spent decreased approximately 9% from the same period in 2008. Bad debt expense as a percentage to sales increased by 30 basis points due to a provision for a specific small volume European dealer. Worldwide transaction expense related to fluctuations in foreign currencies also increased 40 basis points due to the currency volatility within the quarter. No other changes in expense categories were individually significant as a percentage of sales in the three months ended June 30, 2009.
Research and development expenses as a percentage to sales increased to 3.0% for the three and six months ended June 30, 2009 compared to 2.8% during the same periods last year. The increase in research and development spending primarily relates to our innovation efforts and launches of new manufactured products. Manufactured products currently account for approximately 60% of total sales.
The effective tax rate for the second quarter of 2009 was 31.3% compared to 30.8% in the same period in 2008, and was 31.3% for the first half of 2009 compared to 31.4% for the same period in 2008. The increase in the second quarter tax rate compared to the same period in 2008 is due primarily to the reduction of certain tax contingencies resulting from the settlement of certain audits in the second quarter of 2008. This was partially offset by increased earnings in lower tax jurisdictions and the benefits of the research and development tax credit.
Read the The complete ReportSIAL is in the portfolios of Edward Owens of Vanguard Health Care Fund, John Hussman of Hussman Economtrics Advisors, Inc., Kenneth Fisher of Fisher Asset Management, LLC, Chris Davis of Davis Selected Advisers, Dodge & Cox.