West Pharmaceutical Services, Inc. (NYSE: WST - News) today announced its results for the second quarter of 2009.Consolidated sales were 6.6% lower in the quarter when compared to the prior year period, primarily due to adverse effects of foreign currency translation, which reduced reported sales by $20.2 million. Excluding currency translation effects, consolidated sales were 0.7% higher than in the prior year quarter.
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Consolidated gross profit margin was 30.2% in the quarter, compared to 29.9% in the second quarter of 2008. The overall margin increase reflected the net positive effects of higher year-over-year sales prices and a more profitable sales mix, which together exceeded increases in production costs, including labor, utilities and other indirect costs. Raw material costs had a mixed effect on margins, as Pharmaceutical Systems segment material costs remained above prior year levels despite recent declines in relevant commodity prices, while those commodity price declines reduced both revenues and costs in the Tech Group segment. Gross profit was $78.7 million in the current quarter, reflecting $6.1 million in adverse foreign currency translation and the positive effect of the margin improvement. Excluding the impact of currency translation, gross profit grew 1.4% compared to the prior-year quarter.
Adjusted consolidated operating profit reflects a $2.6 million pre-tax increase in U.S. pension expense, which is the result of pension fund investment losses incurred in 2008, as well as $1.0 million of incremental information technology spending and depreciation, and $0.7 million of higher stock-based compensation costs. Those effects on SG&A costs were mitigated by $2.4 million of favorable effects of foreign currency translation on foreign subsidiaries' costs. Foreign currency translation and higher pension expense combined to reduce earnings by approximately $0.13 per diluted share compared to the second quarter of 2008.
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