ZTS Zoetis Inc

By Chelsey Dulaney 

Animal-health company Zoetis Inc. said a European Commission order Monday to recover unpaid taxes from multinationals could cut its profits this year and in 2017.

On Monday, European Union regulators ruled that about 35 multinationals benefited from an illegal tax break in Belgium and ordered them to pay roughly EUR700 million ($765 million) in additional taxes.

Zoetis, a New Jersey-based maker of animal-health products, said it was "disappointed" with the European Commission's announcement and hadn't expected "such a negative decision." The company said it plans to appeal the decision.

If upheld, Zoetis said it would take a charge of up to $45 million in its current quarter to reevaluate its deferred tax assets and liabilities for 2013 to 2015.

Zoetis said the ruling would lift its tax rate for this year to 33% from its prior expectations of a 28% rate.

As a result, Zoetis said it expects its adjusted earnings for the year to come in about 13 cents a share lower. In November, Zoetis had forecast $1.84 to $1.94 a share in earnings.

For 2017, Zoetis expects the decision to reduce its adjusted earnings by six cents a share. The company had forecast $2.24 a share to $2.38 a share in adjusted earnings.

Zoetis was spun off from Pfizer Inc. in 2013. Pfizer said it won't be affected by the decision, but multinationals including brewer Anheuser-Busch InBev NV and BP PLC are facing back-tax demands as a result of the decision.

After an 11-month investigation, the European Commission concluded Monday that a Belgian tax-discount plan for multinationals amounted to "a very serious distortion of competition within the EU's single market."

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

(END) Dow Jones Newswires

January 12, 2016 08:52 ET (13:52 GMT)

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