Restructuring costs bite Covidien's profits in Q2

Covidien CEO José Almeida

Covidien ($COV) hauled in $3.1 billion in sales last quarter, good for a 5% increase over the previous year, but a spike in restructuring costs slashed net profit by 12% as the company pares down to become more efficient.

The company posted $439 million in net earnings, down from last year's $497 million, and Covidien largely attributes the decline to a $61 million restructuring charge and the effects of the 2.3% medical device tax.

But beyond the one-time charges, Covidien has a lot to be pleased about with its quarterly performance. Medical device sales increased 4% to $2.1 billion, fueled by 14% growth in the oximetry business and a 4% jump in endomechanical instruments, which brought in $602 million on the quarter.

Revenue from Mallinckrodt, Covidien's soon-to-be-spun-out pharma business, grew 13% to $573 million, powered by successful launches of new generics and 11% growth in the company's active pharmaceutical ingredient sales. Covidien says it's still on track to split from its drug business by mid-year, and it has been on an M&A tear over the past year to beef up Mallinckrodt's offerings.

In the meantime, Covidien is committed to scaling up R&D and trimming its operations to drive future growth, CEO José Almeida said. The company has invested heavily in drug-coated balloons and renal denervation, all while cutting hundreds of jobs at manufacturing plants in New York and South Carolina.

"Looking forward, we plan to make the investments necessary to enhance our growth, while continuing to deliver a solid earnings performance," Almeida said in a statement. "Our robust pipeline of new products, increased market opportunities and capital flexibility should enable us to meet the challenges of the global healthcare marketplace and deliver on our expectations."

- read the company's full results