Abbott Laboratories is building a new infant-formula manufacturing plant after the product shortage of the past year revealed gaps in U.S. production capacity.
The Chicago area-based company plans to spend $500 million to build a new baby-formula plant, chief executive Robert Ford said. An analysis of the domestic market showed the U.S. could use more capacity to ensure such shortages don't happen again.
"We are currently in the final stages of determining the site location," Ford told analysts and investors Wednesday morning.
A company spokeswoman declined to offer more information on the timeline for the new U.S. facility.
The news came during Abbott's third-quarter earnings call, where it reported lower sales attributed to softening demand for its at-home COVID-19 test kits and continued fallout of the closure of a baby formula plant in Sturgis, Mich. The U.S. Food and Drug Administration found signs of harmful bacteria at the facility early last year, resulting it its closure from February to July.
Abbott is the largest infant-formula manufacturer in America, and Sturgis is its largest production plant.
"During the quarter, we also made leadership changes, both at our Sturgis site and in our entire organization," Ford said.
Despite sales declines, Abbott Laboratories topped Wall Street expectations and raised its full-year guidance on profits for the second time this year.
The medical company on Wednesday delivered earnings per share of $1.15, topping analysts' forecast of $0.94.
Its sales dropped 4.7% to $10.4 billion for its third quarter, which ended Sept. 30.
Abbott's stock closed down more than 6.5% on Wednesday.
Company executives continued to highlight supply chain, medical staffing, inflation and currency exchange rate pressures.
"The macroeconomic conditions remain challenging," Ford said.
Abbott's strongest area was its medical device group, with U.S. sales climbing 11.3% compared to the same period a year ago, led by diabetes care products that were up 31.3%.
Pediatric sales in its nutrition division — which includes baby formula — were down 39.1% in the U.S. for the quarter. The company restarted production of Similac and EleCare at its Michigan plant during the quarter.
Its diagnostics sales were down 10.6% in the U.S. The company's full-year guidance assumes $7.8 billion in COVID-19 testing sales.
Chief Financial Officer Bob Funck said the company, which makes the BinaxNow at-home COVID test, is not expecting a fourth-quarter surge in testing.
Earlier this month, the FDA granted Abbott emergency use authorization for a monkeypox detection kit. It's the first monkeypox commercial test kit to be authorized for use but is only cleared for select laboratories.
The company is now projecting EPS in the range of $5.17 to $5.23 for the year, which is more than 10% higher than the company's outlook at the beginning of the year, Ford said.
Abbott acquired St. Paul-based St. Jude Medical Inc. for $25 billion in 2017. The company has about 5,000 employees in Minnesota.
