Merck Sees $200 Million Hit to 2013 Results on Venezuela


Drugmaker Merck said Wednesday that the devaluation of Venezuela's currency will reduce its net income by about $200 million this year.

Merck will take a charge of 5 cents per share in the first quarter as a result of the devaluation of the bolivar. The devaluation will reduce the company's net income by about 2 cents per share over the rest of the year.

The Whitehouse Station, N.J., company isn't changing its full-year earnings estimates, either adjusted or non-adjusted. Earlier this month Merck forecast income of $3.60 to $3.70 per share in 2013 excluding one-time charges. Analysts forecast $3.66 per share, on average, according to a survey by FactSet.

For the first quarter, Merck expects adjusted earnings per share of 76 cents to 78 cents in the first quarter. Analysts expect 86 cents per share.

Shares of the pharmaceutical giant were lower in pre-market trading prior to the opening bell. (Click here for the latest before-hours quotes.)

Venezuela's fifth devaluation in a decade is taking effect on Wednesday. The new government-set rate of 6.30 bolivars to the dollar is down from the previous rate of 4.30 bolivars to the dollar. The country relies heavily on imports and on oil sales in dollars, and the government hopes to reduce the amount of money it needs to borrow.

Merck is the latest company to say the devaluation is going to hurt its annual results. On Monday Colgate-Palmolive said the devaluation will cost it $120 million in revenue in 2013. The company's products include Colgate toothpaste, SpeedStick deodorant, and Irish Spring soap. Oilfield services company Halliburton aid the move will cost it $30 million in the first quarter.

Avon Products said Wednesday it expects $50 million in charges related to the devaluation in the first quarter, including write-downs and deferred taxes. Avon expects to take another $50 million in charges related to accounting for some non-monetary assets.

Goodyear Tire & Rubber said it is still evaluating the effect of the devaluation on its results, but it lowered its operating income guidance by about $150 million. It said the devaluation was one reason for the cut. Goodyear said changes in foreign currency exchange rates will reduce its income by $40 million to $60 million in 2013, and the devaluation of the bolivar is a significant part of those losses.