Murray S. Kessler
President and Chief Executive Officer at Perrigo
Thank you, Brad, and good morning, everyone. In Q3, we had major accomplishments, company-changing accomplishments, the kind that will secure Perrigo a bright year for years to come. Unfortunately, we also experienced some very significant challenges this quarter related to the global supply chain disruption experienced by many companies in multiple industries. I'll come back to those in a few minutes.
But first, I want to remind everyone that during the third quarter, we completed our transformation to a consumer self-care company by first, closing the generic Rx divestiture transaction for $1.6 billion, which dramatically lowers volatility and makes selfcare our sole strategic focus; and second, announcing our agreement to acquire HRA Pharma, and its leading portfolio of consumer self-care brands for EUR1.8 billion, which we estimate will add USD400 million in revenue and $150 million in operating income in 2023. During the quarter, we also dramatically reduced the tremendous uncertainty that has been an overhang on Perrigo for the last three years.
This was accomplished by favorably settling the headline EUR1.6 billion Irish tax NoA for a much smaller amount. And while we believe Perrigo had a very strong case, if the Tax Appeals Commission disagreed, this tax assessment could have cost the company $3 billion or more when including interest. We settled for EUR297 million in total, with cash payable of EUR266 million net after we received credit for prior payments. This issue is now completely resolved and behind us. And even better, we paid for this settlement from a EUR355 million award, we received during the quarter through binding arbitration arising from the Omega transaction.
The result, Perrigo is now a focused consumer self-care company poised for strong growth, unencumbered by the major overhangs of the past. Our long-term future has never been brighter. Let's shift back to Q3 business performance. Results were below a year ago, mainly due to under-absorbed overheads and higher input costs. For net sales, supply chain disruption was the culprit. This led to an inability for Perrigo to meet very strong consumer demand in the quarter. Absent the supply chain disruption, net sales growth would have been in line with what we had projected, higher costs for freight, other input costs and lower operating efficiencies in the form of unabsorbed manufacturing overhead attributed to last winter's historically weak cough cold season also negatively impacted earnings.
Let me provide a bit more detail. For net sales, as forecasted, the strong consumer takeaway in Q2 translated to higher factory orders in Q3. This was highlighted by a 21% year-over-year growth rate in our cough/cold sales in the U.S. and continued double-digit growth in e-comm, plus 36% year-over-year globally. Consolidated net sales increased 4% versus a year ago despite a supply chain disruption impact of $43 million with the bigger impact in the U.S., $38 million, causing a 5.5 percentage point drag on CSCA's Q3 net sales performance. Had those orders shipped under normal patterns, CSCA shipment growth would have been very close to the strong consumer takeaway growth observed in the quarter.
Let's take a look at those market trends for CSCA. Importantly, category consumption grew briskly in the categories we compete in for all three of our U.S. business units. The total OTC category was up 18.1% versus a year ago. Total nutrition, which for us is infant formula and electrolytes, was up 29.9% and Oral Care was up 9.7%. It's worth noting that total store brand OTC lost market share to national brands during the third quarter about 1.5 share points. But this is not a reason for concern. The share loss was attributed to buyers of national brands increasing consumption rather than buyers of store brands switching to national brands.
I repeat, the growth did not come from private label buyers switching to national brands, and that's good news. As the national brands drive category growth, it becomes a revenue source for us in the future. In our CSCI division, market share was stable in Q3. Like the U.S., the categories we compete in showed a very strong rebound in consumer takeaway and they grew briskly. Total CSCI consumer takeaway was up nearly 10% over a year ago, but CSCI factory shipments lagged consumer takeaway and we're basically flat for the quarter. We believe this trades to a light pre-cough/cold season buy-in by pharmacists across Europe who are worried about getting stuck with too much inventory if the cough/cold season doesn't rebound.
But that worry appears unfounded as the cough/cold season in Europe is, in fact, off to a very fast start. Consumer takeaway was up 36% in Q3. We expect this to translate to strong cough/cold sales in Q4 as pharmacy inventories are low, as I just stated, and we already saw that begin to occur in the month of October. That is strong cough/cold sales. Turning to the third quarter earnings. EPS fell short of our internal projection and was $0.15 below a year ago. Supply chain disruption negatively impacted EPS by an estimated $0.08; lower operating efficiencies and higher input costs impacted by $0.17; and separately, we had two product recalls that had a $0.05 negative impact.
Tight management of expenses offset some of these negatives. Looking towards updated guidance, we expect consumer demand to remain very strong in Q4. However, we also expect higher input costs, supply chain disruption and the impact from under-absorbed overheads to continue. Based on Q3 results and those continuing trends, we've lowered our EPS guidance range for the year to $2 to $2.10. This new annual estimate includes a total year negative estimate of $0.79 per share from COVID-19-related external factors, which is obviously quite significant.
And again, that -- that's what we experienced so far plus the fourth quarter estimate. I place these factors into three buckets as follows: first, cough/cold. The impact of a historically weak season significantly impacted our first quarter net sales and earnings as well as continuing to have a negative impact on manufacturing efficiencies through under-absorbed overhead for the balance of the year. Total impact estimated at $0.49. Higher input costs is the second factor, a spike in cost that is progressively escalated throughout the year, including freight and other input costs are estimated to have a total impact for the year of $0.09.
And then finally, supply chain disruption, both inbound and outbound logistics, that became a major issue beginning in Q3 is estimated to have a full year total impact of $0.21. We believe this large reduction in 2021 net sales and EPS from these three factors is not indicative of the underlying progress the company has made and that they can progressively be recaptured over the next two years.
Let me address each bucket one at a time to explain how we believe that will happen. First, the historically weak cough/cold season that dramatically impacted Q1 net sales was clearly a one-off. Illnesses are up according to IQVIA. Cough/cold consumer takeaway was up 61% in the U.S. and 36% in Europe during Q3, and October cough/cold sales for Perrigo remained robust. While we aren't yet forecasting a full recovery to the 2019 level, cough/cold sales are expected to be up dramatically in the first quarter of 2022 versus 2021.
As that higher volume runs through our plants, the negative absorption impact will come back to us, albeit that will take 12 to 18 months to play out. But we have a very high confidence in getting this full $0.49 back. Second, the $0.21 impact from supply chain disruption is also expected to be temporary. The global supply chain is forecasted to gradually improve by mid next year. But in the meantime, we've taken a series of actions to improve the current situation, including outsourcing highly complex product lines to a third-party logistics provider allowing more room on our trucks for hire profit OTC products, also adding regional carriers for challenged shipping lanes, hiring additional distribution center personnel which allows us to change our order delivery schedule to account for the many no shows we've experienced.
And finally, increasing the purchase cycle for ingredients and packaging and the like from 30 to 90 days to make sure we have sufficient lead times for delivery. These actions have resulted in a 25% increase in daily shipments for the month of October as compared to the third quarter average. And not all of the actions that have even been fully implemented yet. Some of these changes will remain in place until the larger U.S. supply chain normalizes. Some of these changes we intend to leave in place as a hedge against future disruption. And third, as for the input costs, $0.09 from the second half of this year and any flow-through impact in the first half of next year will be addressed by raising prices on 70% of our product lines in CSCI and 75% in CSCA. U.S. retailers have been more accepting than usual of price discussions as they understand the massive cost increases we and, frankly, everyone else are facing.
And national brands are also raising price. And we will continue to maintain a tight focus on discretionary costs and remain focused on achieving, at the least, the final $30 million of Project Momentum cost savings. Several other actions have also been put in place to get earnings growing again. We've made several management changes in the U.S. to refocus the team on core OTC market opportunities, of which there are many and of which have already resulted in some significant customer wins.
Second, our successful and growing e-com business, which is up 25% year-to-date, remarkably on top of last year's more than 100% growth has been reorganized internally to allow focus and add resources to further accelerate growth. And of course, the previously announced acquisition of HRA will have a dramatic positive impact on financial results and the growth trajectory of Perrigo. The transaction remains on track to close mid next year. So to reiterate, despite the best efforts of my Perrigo colleagues, and they've been remarkable, the COVID-19 pandemic has raised successive challenges, which began in 2020 and continued through 2021.
The impact has been real, and our response has been real as well. We believe that the negative business impact of the big three drivers in 2021, a historically weak cough/cold season, supply chain disruption and higher input costs will be mostly recovered and/or be offset with pricing and Project Momentum cost savings. And we remain on track to close HRA mid-next year, which will substantially increase net sales, operating income and margins for years to come.
We, therefore, still believe we can get to our -- at least close to our original 2023 EPS targets we shared with you back in May 2019 and again during the HRA announcement just a few months ago. So from our perspective, this is not a reset. It's just a very big bump in the road. In conclusion, we've come a long way over the last three years with the most massive elements of the transformation plan having come to fruition in this most recent quarter. The volatile generic Rx division has been divested.
The HRA acquisition is on track and is expected to add approximately $1 of EPS in 2023, and the Irish NoA and the uncertainty it created over the last three years is gone. Perrigo is now a focused consumer self-care company determined to be a world-class consumer self-care company that consistently delivers profitable growth over the long term, consistent with industry peers. And while COVID-19 has created many unforeseen challenges in 2020 and 2021, big challenges, we work through them as they occur and we will not let them deter us from making our vision a reality, nor hitting the ultimate growth plans we originally established.
With that, I turn the call over to Ray Silcock, our Chief Financial Officer, to discuss the financials in more detail. Ray?