Bloomberg News

Mead Johnson Rises After Formula Maker Increases Forecast

October 13, 2011

(Updates with closing share price in second paragraph.)

Oct. 13 (Bloomberg) -- Mead Johnson Nutrition Co., maker of Enfamil baby formula, gained 2.6 percent in New York trading after raising its full-year profit forecast on higher sales in emerging markets.

Mead Johnson rose to $73.73 at the close of trading, the biggest single-day jump in a month. The company expects to earn $2.73 to $2.78 a share this year, compared with an earlier estimate of $2.70 to $2.75, the Glenview, Illinois-based formula maker said in a statement. Mead Johnson released the forecast before an investor meeting held today.

Mead Johnson, which was spun off by Bristol-Myers Squibb Co. in 2009, reported preliminary third-quarter earnings that beat analyst estimates because of rising sales in China, Hong Kong and Latin America. Third-quarter profit was about 76 cents to 78 cents a share, exceeding the average estimate of 66 cents by 12 analysts surveyed by Bloomberg.

“China-Hong Kong will become the largest market in 2011,” Chief Executive Officer Stephen Golsby said at the investor meeting in Chicago. The majority of the company’s future growth will come in emerging markets, and he pointed to the company’s expansion into Russia, India and Saudi Arabia.

Full results are scheduled to be released on Oct. 27, the company said.

Chinese Pricing

Along with China and the rest of Asia, Mead Johnson is also increasing its operations in India, where it has a presence in 18 cities and is working to get regulators to approve its products, he said.

“We’re very early in our efforts in India,” said Charles Urbain, president of Mead Johnson’s Asia Pacific and Europe operations.

The company’s revenue in China grew by 11 percent from 2010 to 2011. “It’s a huge market, it’s about half of the global dollar market,” Urbain said during the investor meeting. The company has full-scale sales operations in 240 cities there and plans to expand further into the 1,000 other cities where they have some presence.

The company’s success there is being driven by a rising middle class.

“The one-child policy works for us, not against us,” said Matthew Chapple, who heads the Chinese division of the company. “When mothers and fathers only have one child, they really put a high priority on giving that child the best start in life.” That allows the company to charge prices there that are almost as high as those in the U.S., he said.

--Editors: Chris Staiti, Angela Zimm

Drew Armstrong in Washington at darmstrong17@bloomberg.net

To contact the editor responsible for this story: Reg Gale in New York at rgale5@bloomberg.net.


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