STADA Arzneimittel AG — Earnings Release 2006

Aug 10, 2006

News Details

Corporate | 10 August 2006 07:25

STADA: Strong growth continues in H1/2006 – sales +18%, net income +32%

Corporate news transmitted by DGAP – a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. —————————————————————————— Important items at a glance – As expected, Group sales increases strongly in H1/2006 by +18% to EUR 580.0 million – Net income can be increased in H1/2006 even stronger than sales by +32% to EUR 42.2 million – Net income adjusted for one-time special effects in H1/2006: EUR 50.8 million (+35% vs. adjusted H1/2005) – In terms of sales, international business grows by +20% and now contributes 56.9% to Group sales – Robust growth course with stronger increase in operating earnings than in sales to be continued – Current Hemofarm acquisition creates additional growth opportunities The financial figures published by STADA today on August 10, 2006, show that, as expected, the strong growth of the Group continues in the first half of 2006. “We are very satisfied with the rates of increase in Group sales and net income in the first half of 2006. They represent a clear signal that STADA, thanks to the good strategic and operative positioning, can turn the structural growth potential of the markets into own growth. And the currently pursued takeover of the Serbian Hemofarm creates additional growth opportunities for us”, says STADA Chief Executive Officer Hartmut Retzlaff. Significant sales growth STADA’s Group sales rose in the first half of 2006 by 18% to EUR 580.0 million (first half of 2005: EUR 492.4 million). The acquisition-related effects included in these figures – through the staggered first time inclusion of product sales in the current fiscal year from the acquisition of the SANKYO product package in the fourth quarter of 2005 – amounted to EUR 11.2 million or 2 percentage points. Organic sales growth in the reporting period thus amounted to 16%. Sales in the largest core segment Generics (share of Group sales 69.5%) increased in the first six months of 2006 by 15% to EUR 403.4 million (first half of 2005: EUR 350.8 million). The second largest core segment Branded Products (share of Group sales 22.0%) was able to increase sales in the first half of 2006 by 20% to EUR 127.5 million (first half of 2005: EUR 106.7 million).The first time inclusion of the SANKYO product package also contributed to this positive development with 11 percentage points. The smallest core segment Specialty Pharmaceuticals (share of Group sales 2.2%) recorded a sales increase of 5% to EUR 12.9 million in the reporting period (first half of 2005: EUR 12.3 million). STADA’s international business activities again increased stronger in comparison with the Group’s overall sales, at 20%. In the first six months of the current fiscal year sales outside Germany thus had a share of Group sales of 56.9% (first half of 2005: 55.9%). Stronger increase in earnings than in sales Net income could be increased in the reporting period by 32% to EUR 42.2 million (first half of 2005: EUR 32.0 million) and thereby clearly stronger than sales growth. Earnings per share thus totaled EUR 0.79 (first half of 2005: EUR 0.60). EPS diluted amounted in the first six months of 2006 to EUR 0.73 (first half of 2005: EUR 0.56). The other key earnings figures also showed, as compared to sales, clearly stronger increase rates in the first half of 2006. The operating profit rose in the reporting period by 33% to EUR 74.7 million (first half of 2005: EUR 55.9 million). Earnings before tax (EBT) increased by 36% to EUR 69.1 million (first half of 2005: EUR 50.8 million). Earnings before interest and taxes (EBIT) recorded an increase by 34% to EUR 74.9 million (first half of 2005: EUR 55.9 million). Earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 34% to EUR 103.9 million (first half of 2005: EUR 77.6 million). Earnings from the second quarter of 2006 include burdening one-time special effects of EUR 6.1 million. This is extraordinary unscheduled depreciation on intangible assets. Together with the already known one-time special effects from the first quarter of 2006 amounting to a total of EUR 5.8 million for extraordinary unscheduled depreciation as well as compensation payments, thus one-time burdens of earnings before taxes for the first half of the current fiscal year result in a total of EUR 11.9 million. The one-time special effects from the first half of 2005 had burdened earnings before taxes at that time by EUR 6.8 million. Adjusted for the one-time special effects of the first half of 2006, as well as the first half of 2005, earnings before taxes would have risen by 40% and net income by 35%. Regional development In Germany, which continues to be STADA’s biggest national market, sales rose in the first half of 2006 by 15% to EUR 250.1 million (first half of 2005: EUR 217.2 million). The share of the German market of Group sales thus amounted to 43.1% in the reporting period (first half of 2005: 44.1%). At the same time, sales in the Generics segment in Germany rose by 17% to EUR 183.7 million (first half of 2005: EUR 157.4 million). In the reporting period the Economic Optimization of Pharmaceutical Care Act (AVWG) took effect in Germany on May 1, 2006. The market segment for prescription generics (Rx generics), in particular, is thus subject to significant and complex regulatory changes, which, for STADA, can be partially beneficial, but also a significant burden. Overall, form today’s perspective, STADA continues to assume that the effects of the AVWG in the current fiscal year will not lead to an adjustment of the Group’s prognosis. However, it remains to be seen over the course of the year whether the regulatory interventions and the competitive reactions of the various market participants to it will actually show the expected, and thus for STADA in balance manageable effects. Outside of Germany, the following national markets in particular showed pleasing developments in the first half of 2006: In Italy sales rose by 17% to EUR 49.7 million (first half of 2005: EUR 42.4 million). In Russia sales increased in local currency by 43% to RUB 1,231.7 million (first half of 2005: RUB 860.6 million) and in Euro by 51% to EUR 36.3 million (first half of 2005: EUR 24.1 million). In Belgium sales grew by 14% to EUR 50.8 million (first half of 2005: EUR 44.5 million). In Spain STADA presented a sales rise of 14% to EUR 31.4 million (first half of 2005: EUR 27.5 million). In France STADA recorded – due to regulatory-related price reductions as of February 1, 2006 – a sales decrease of 5% to EUR 32.4 million in the first six months of the current fiscal year (first half of 2005: EUR 34.1 million). These price reductions have also significantly burdened the margin situation in the French business. In Switzerland Group-consolidated local sales rose in the first half of 2006 by 41% to EUR 4.2 million (first half of 2005: EUR 3.0 million). As is known, STADA held here a 50% stake in the Swiss generics supplier Helvepharm AG. For sales strategy reasons, STADA separated from this stake in the current third quarter to July 1, 2006 and thereby achieved a book profit expected at approx. EUR 1 million at a selling price of EUR 2.5 million for 50% of the shares. In the USA sales decreased in the first half of 2006 in local currency by 19% to USD 16.3 million (first half of 2005: USD 20.1 million), in Euro by 16% to EUR 13.2 million (first half of 2005: EUR 15.8 million). The local STADA sales company continued – like other small suppliers too – to be massively affected by the continuing price and margin pressure in the US pharmaceuticals market. As is known, STADA has, in the face of the significant loss situation which has existed in the US business for several quarters, decided to sell the US business. For this purpose, in the current third quarter on July 13, 2006, STADA concluded a contract for the sale of its entire stake in its wholly-owned subsidiary STADA Inc., Cranbury, New Jersey, USA to DAVA Pharmaceuticals Inc., New Jersey, USA. (see corresponding STADA ad hoc release from July 13, 2006). According to this contract, the sale can be expected to be closed within the current third quarter 2006. Depending on the balance sheet structure given at the closing date, as well as the exchange rate relevant at that time, STADA currently continues to expect a selling loss from the deconsolidation of approx. EUR 10 million before taxes and approx. EUR 5 million after taxes. In Asia STADA increased sales in the first six months of 2006 by 100% to EUR 26.0 million (first half of 2005: EUR 13.0 million). Sales in the Philippines with growth of 10% to EUR 3.4 million (first half of 2005: EUR 3.1 million) and in Vietnam with a sales rise of 419% to EUR 15.8 million (first half of 2005: EUR 3.0 million) in particular contributed to this. In Vietnam, the special factor of a one-time tender business with a sales volume of approx. EUR 14 million contributed to the positive development. EUR 12.3 million were applied to the first half year of 2006. Successful product development The Group’s comprehensive development and approval activities continue to ensure a continuous flow of new product launches. Thus, 176 new products could be launched Group-wide in the first half of 2006 (first half of 2005: 151 launches). In the context of the development of the biosimilar products Erythropoietin, Filgrastim and Interferon beta-1a which is being carried out by BIOCEUTICALS Arzneimittel AG, a company initiated by STADA and predominantly financed via venture capital, on June 30, 2006, as planned on behalf of BIOCEUTICALS Arzneimittel AG, STADA, as is known, submitted the approval application for a biosimilar from Erythropoietin with the INN label Erythropoietin-zeta to the European Medical Evaluation Agency (EMEA). From today’s perspective, STADA continues to assume that there is a chance to obtain an EU-wide approval for Erythropoietin-zeta in 2007 and that sales and marketing of the product can start at the beginning of 2008. In the second quarter of 2006, the pre-clinical trials began for a further biosimiliar project with the active ingredient Filgrastim. After the successful completion of these ongoing pre-clinical trials the start of the clinical trials is expected before the year’s end. Current Hemofarm acquisition creates opportunity for growth acceleration As of June 30, 2006 the STADA balance sheet structure presented an equity-to-assets ratio of 50.3% (50.7% as of December 31, 2005) and a net debt of EUR 294.4 million (December 31, 2005: EUR 234.2 million). This healthy balance sheet structure is a solid base for the acquisition of Hemofarm currently being pursued. As is known, in this connection in the current third quarter, STADA has, in Serbia, on July 14, 2006, submitted a public takeover offer to the local Commission for all 3.3 million shares of the company which has been listed on the stock exchange in Belgrade since 2002 (see corresponding STADA ad hoc release from July 14, 2006). Hemofarm’s management has welcomed STADA’s takeover offer. The validity of the takeover offer, the time limit for which expired yesterday, depended on an acceptance rate of 67%. The acceptance rate achieved amounts to 97.9% (see ad hoc release from the Company on August 9, 2006); Thus, STADA will achieve a position as majority shareholder of Hemofarm within three working days. STADA intends to accelerate the many years of growth even beyond the aspired Hemofarm acquisition by making appropriate acquisitions. “We will continue to constantly analyze potential takeover objects. Also in consideration of the Hemofarm acquisition, we still have further credit lines available to us for this purpose. But of course appropriate capital measures are also possible for the financing of such projects in the foreseeable future, in the view of the Executive Board,” says STADA Chief Financial Officer Wolfgang Jeblonski. Personnel In August, 2006, STADA’s Supervisory Board, as is known, has appointed Hartmut Retzlaff, Chairman of the Executive Board and Wolfgang Jeblonski, Executive Board member responsible for Finance, to further five year terms from September 1, 2006 until August 31, 2011 (correction to the date August 3, 2011 given in the Corporate News of August 4, 2006) and extended the appointment of Dr. Alexander Oehmichen, Executive Board member responsible for Legal, Human Resources and Corporate Development and Christof Schumann, Executive Board member responsible for Research and Development, from a three year term to a five year term until December 31, 2010. After Hans Stols, former Executive Board member responsible for Procurement, Production and Logistics, departed the company effective August 4, 2006 for personal reasons, the Supervisory Board appointed Dr. Hans-Martin Schwarm as new Executive Board member responsible for Procurement, Production and Logistics until August 3, 2009. Outlook The STADA Executive Board continues to be optimistic for the future of the Group. Although regulatory interventions and increased price wars will continue to occasionally lead to burdens in some national markets, from today’s perspective the STADA Executive Board continues to assume that the Group’s many years of robust growth will proceed in the future. Thereby, a stronger increase in operating earnings than in sales will be targeted. “The basis for our continuing positive prognosis is clear strategic positioning in growth markets, strong operative alignment and many years of expertise in areas crucial to success such as sales and marketing, product development, approval as well as procurement and production. And with the majority takeover of the Serbian Hemofarm expected in the near future, we will be able to not only create additional growth opportunities in eastern Europe, but also benefit from synergy effects in the various areas,” underlines STADA Chief Executive Officer Hartmut Retzlaff the optimistic outlook. Further information: STADA Arzneimittel AG / Corporate Communications / Stadastraße 2–18 / D-61118 Bad Vilbel / Phone: +49(0) 6101 603-113 / Fax: +49(0) 6101 603-506 / E-Mail: communications@stada.de Or visit our website at www.stada.com (c)DGAP 10.08.2006 ————————————————————————— Language: English Issuer: STADA Arzneimittel AG Stadastraße 2-18 61118 Bad Vilbel Deutschland Phone: +49 (0)6101 603- 113 Fax: +49 (0)6101 603- 506 E-mail: communications@stada.de WWW: www.stada.de ISIN: DE0007251803, DE0007251845, WKN: 725180, 725184, Indices: MDAX Listed: Amtlicher Markt in Frankfurt (Prime Standard), Düsseldorf; Freiverkehr in Berlin-Bremen, Hannover, Hamburg, München, Stuttgart End of News DGAP News-Service —————————————————————————