STADA Arzneimittel AG — Earnings Release 2005

Mar 30, 2006

News Details

Corporate | 30 March 2006 07:30

STADA: Final financial figures for 2005 confirm robust growth course

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 – STADA Group sales of EUR 1,022.1 million (+26%) above one billion Euros for the first time – Operating profit: EUR 127.1 million (+45%); operating profit margin in the Group rises to 12.4% (previous year: 10.8%) as well as in the Generics core segment to 12.6% (previous year: 9.9%) and in Branded Products to 17.5% (previous year: 13.0%) – Net income: EUR 51.6 million (+6%); adjusted for the one-time special effects from the closing of the LipoNova/Reniale® project EUR 68.6 million (+41%) – Successful product development again leads to a high number of 380 new product launches in 2005 (previous year: 395) – Biosimilar project Erythropoietin: Following the already held EMEA pre-submission meeting, approval submission planned for Q2/2006 – approval remains possible in 2007 – Strong start in 2006: Sales increase of approx. 22% in the first two months – Optimistic prognosis The final financial figures for the year 2005, presented by STADA Arzneimittel AG today, on March 30, 2006, confirm all of the preliminary results published on March 6, 2006. ‘Overall, the results and prognosis published today emphasize how strong and sustainable the robust growth course of STADA is’, is the conclusion of STADA’s Chief Executive Officer Hartmut Retzlaff at today’s Press and Analyst’s Conference. Sales development Group sales rose strongly in fiscal year 2005 by 26% to EUR 1,022.1 million (previous year: EUR 813.5 million). The average annual growth rate in Group sales over the last five years thereby amounts to 18% p.a. Retzlaff emphasizes that this success was achieved in particular in the international business. ‘Although we also grew significantly in Germany in 2005 in terms of sales, namely in the Group by 15% and in our largest core segment of Generics by 17%, international sales again developed even more dynamically and now contribute 57% to Group sales. Here, STADA even had an increase of 35% in 2005′. The organic sales growth of STADA, without consideration of initial consolidation effects in the reporting year, amounts to 17%; acquisitions in fiscal year 2005 contributed nine percentage points to STADA’s sales growth in the reporting year. The most significant acquisitions were the purchase of 97.5% of the shares in the Russian pharmaceutical company Nizhpharm OJSC in January 2005, the takeover of the Portuguese generics supplier Ciclum Farma Unipessoal LDA in April 2005 as well as the acquisition of a package of eleven European branded products, including Mobilat® and Hirudoid® from SANKYO PHARMA Group Europe in December 2005. The Group-wide sales in what remains clearly the largest core segment, Generics, rose in fiscal year 2005 by 21% to EUR 739.0 million (previous year: EUR 608.3 million). This includes EUR 24.2 million in initially consolidated sales from acquisitions. Thus, Generics share of Group sales in 2005 amounted to 72.3% (previous year: 74.8%). The best-selling active ingredients in the Group were thereby the stomach medicine Omeprazole (EUR 70.0 million, +29%) and the cholesterol lowerer Simvastatin (EUR 40.7 million, +57%). Sales in the Branded Products core segment increased in fiscal year 2005 by 51% to EUR 211.4 million (previous year: EUR 139.6). The share of initially consolidated sales amounted thereby to EUR 48.7 million. A major contribution to this high rate of increase was made by the Russian company Nizhpharm, acquired at the beginning of the year 2005, whose product portfolio consists primarily of branded products and whose product Chondroxide® (for the treatment of degenerative joint diseases) is the best-selling product in this segment with sales of EUR 21.7 million, followed by Grippostad® (cold medicine) with sales of EUR 19.5 million (+24%). In total, Branded Products at STADA contributed 20.7% (previous year: 17.2%) to Group sales, thereby continuing to represent the Group’s second largest core segment. By far the smallest core segment at STADA, Specialty Pharmaceuticals, posted – notwithstanding intense local competitive pressure – with 2% in 2005, a slight increase in sales to EUR 25.2 million (previous year: EUR 24.7 million) This core segment’s share of Group sales was thereby 2.5% (previous year: 3.0%). Currently, this core segment consists exclusively of the Group’s oncology activities. In the core segments of Generics, Branded Products and Specialty Pharmaceuticals, sales were increased by a total of 26% to EUR 975.7 million (previous year: EUR 772.6 million). The core segments’ share of Group sales in the reporting period thereby amounted to 95.5% (previous year: 95.0%). Commercial Business, which is not among the core segments, generated EUR 39.7 million (previous year: EUR 32.0 million). Sales for the position Group Holding/Other in the reporting period amounted to EUR 6.8 million (previous year: EUR 8.9 million). This positive sales development has continued in the current fiscal year. As STADA already reported on March 6, 2006, sales in the Group in the first two months of 2006 increased by approx. 22%. Regional Development With sales of EUR 440.9 million (+15%) in 2005, Germany continues to be STADA’s biggest national market and contributes 43.1% to Group sales. Here, the AVWG (Economic Optimization of Pharmaceutical Care Act), which is currently in parliamentary legislative proceedings, is likely to take effect in the second quarter of 2006 and can bring significant structural changes to the market with it. For generics suppliers, burdens and positive effects could offset one another but this depends mainly on the final text of the act as well as on the reactions of market participants and competitors in particular to the new AVWG regulations. STADA achieved especially pleasing sales increases in 2005 in Belgium (by 43% to EUR 93.6 million), in France (by 31% to EUR 70.7 million), in Italy (by 27% to EUR 94.6 million), in Austria (by 27% to EUR 10.4 million) and in Spain (by 19% to EUR 53.0 million). In Russia, following the acquisition of Nizhpharm at the beginning of the year 2005, STADA was able to post sales of EUR 56.6 million. In local currency, as compared to the sales achieved by the former owners in 2004, Nizhpharm was thereby able to raise sales in Russia by 40%. In the USA, STADA showed a decrease in sales in fiscal year 2005 of 26% to USD 42.0 million (previous year: USD 57.0 million). In Euro, sales decreased by 26% to EUR 34.0 million (previous year: EUR 46.0 million). The price and margin pressure there led to a loss situation for STADA’s local US business. For 2006, STADA is following the goal of significantly reducing the burdens on operating profit caused by the US business. In Asia, STADA was able to raise Group sales by 25% to EUR 28.1 million (previous year: EUR 22.5 million). Here, business in the Philippines (EUR 6.5 million, +32%) and in Vietnam (EUR 6.1 million, +18%) increased in particular. Profit development In 2005, STADA’s robust growth was mirrored by a strong increase in the Group’s operating profit which rose by 45% to EUR 127.1 million (previous year: EUR 87.8 million). The average annual growth rate in operating profit over the last five years thereby amounts to 35%. For Chief Financial Officer Wolfgang Jeblonski, the clear improvement in the operating profit margins in the two most important core segments of Generics to 12.6% (previous year: 9.9%) and Branded Products to 17.5% (previous year: 13.0%) is one of the most pleasing details in the consolidated financial statements 2005. ‘This makes it clear that we have gained earnings power particularly in the core areas of our business’ comments Jeblonski on this development. Earnings before taxes in the STADA Group in 2005 rose by 26% to EUR 97.5 million (previous year: EUR 77.6 million). Net income increased by 6% to EUR 51.6 million (previous year: EUR 48.5 million). Earnings per share in 2005 thereby amounted to EUR 0.97 (previous year: EUR 0.91), diluted earnings per share in accordance with IFRS was EUR 0.91 (previous year: EUR 0.88). The key earnings figures EBIT (earnings before interest and taxes) and particularly EBITDA (earnings before interest, taxes, depreciation and amortization) also rose strongly in 2005. For EBIT, the STADA Group achieved growth in 2005 of 21% to EUR 107.1 million (previous year: EUR 88.2 million). EBITDA increased by 31% to EUR 161.2 million (previous year: EUR 122.7 million). It was possible to achieve these reported earnings increases despite the high one-time special effects which burdened the Group in 2005. Within these one-time special effects, the consequences of the closing of the LipoNova/Reniale® project plays by far the most significant role. Without these one-time special effects from the closing of the LipoNova/Reniale® project, earnings before taxes would have risen by 52%, EBIT by 44%, EBITDA by 42%, net income by 41% and earnings per share by 42%. From other one-time special effects in fiscal year 2005, further burdens on earnings before taxes in the fiscal year of net EUR 15.4 million are included (among them EUR 6.5 million from the fourth quarter 2005), thereof particularly unscheduled depreciation on previously acquired products in the amount of EUR 13.5 million. Cost development In general, the operative costs in the Group developed positively in fiscal year 2005. Cost of sales went up in 2005 at a rate lower than that of sales and amounted to EUR 509.5 million (previous year: EUR 415.0 million). This gives cost of sales a share of Group sales in the reporting period of 49.9% (previous year: 51.0%). The sales-related gross margin improved in 2005 to 50.1% (previous year: 49.0%). Selling expenses also rose in the reporting period at a rate lower than that of sales to EUR 271.4 million (previous year: EUR 232.1 million). This results in improved selling expenses as a percentage of sales of 26.6% (previous year: 28.5%). Due to STADA’s lean Group structure, general and administrative expenses of EUR 69.7 million (previous year: EUR 53.2 million) or a share of Group sales of 6.8% (previous year: 6.5%) continued to be at a low level in 2005. With personnel expenses of EUR 160.4 million (previous year: EUR 136.0 million) personnel expenses as a percentage of sales in the Group improved in 2005 to 15.7% (previous year: 16.7%), this although the number of employees in the Group on an annual average, due primarily to the acquisition of Nizhpharm, increased worldwide to 3,892 (previous year: 2,586). The position research and development expenses increased in the reporting period to EUR 30.7 million (previous year: EUR 23.3 million). The rate of research and development expenses as related to Group sales amounted to 3.0% in 2005 (previous year: 2.9%). It should be considered here that, in this connection, it is only a matter of development costs because STADA, due to its strategic positioning, does not carry out any research into new active ingredients. Income taxes in 2005 amounted to EUR 45.5 million (previous year: EUR 29.0 million). The tax ratio therefore amounted to 46.7% (previous year: 37.4%). The rise in the tax ratio was caused for the most part by the high amount of special effects which were tax deductible only to a limited extent, this mainly in connection with the closing of the LipoNova/Reniale® project. With continuing cost optimization, not only should the price pressure – which is inseparable from the STADA business model – be compensated, but new earnings potential should be opened up in addition. The focus of the continuing cost optimization is thereby the areas of procurement and production; additionally, more and more economy of scale effects in the sales area are becoming possible. Overall, STADA is thereby aiming for an improvement in the operating margin in the years to come. Balance sheet In the Executive Board’s view, the Group’s financial position is healthy and stable. With expansion-related total assets of EUR 1,349.8 million (previous year: EUR 1,020.4 million) STADA had equity of EUR 684.8 million available as of December 31, 2005. The equity-to-assets ratio is thereby – despite the high amount of investments in the reporting period – at a high 50.7% as of December 31, 2005 (previous year: 62.6%). Indeed, due to the extensive acquisitions in particular, net debt increased on the balance sheet date to EUR 234.2 million (previous year: EUR 103.6 million). In comparison with the Group’s equity, earnings power and cash flow from operating activities, however, this net debt can, in the Executive Board’s view, continue to be described as moderate. The conclusion of STADA’s Chief Financial Officer Jeblonski: ‘Overall, our balance sheet structure continues to provide a solid basis for further organic growth and the continuation of our active acquisition policy’. Cash flow Cash flow in 2005, in the estimation of the Executive Board, developed in a clearly positive manner as compared to the previous year. Cash flow in fiscal year 2005 was again significantly characterized by effects arising out of the strong organic and acquisition-related expansion of the Group and amounted to EUR -3.0 million (previous year: EUR -64.0 million). Gross cash flow thereby increased in the reporting period to 109.9 million (previous year: EUR 81.3 million). Cash flow from operating activities rose by 329% to a pleasing EUR 163.3 million (previous year: EUR 38.0 million). Here, STADA was able, for the most part, through active cash flow management with regard to inventories as well as through an increase in operative earnings strength, to achieve a significant improvement in total. Furthermore, cash flow from operating activities in 2005 had a one-time positive influence due to the payment modalities for the acquired SANKYO branded products package through deferred income in the amount of EUR 67.0 million. As regards cash flow from investing activities, STADA recorded cash outflows of EUR 264.0 million. Of this amount, EUR 192.1 million was used for acquisitions in fiscal year 2005. Within the framework of cash flow from financing activities, however, only a net of EUR 105.8 million (previous year: EUR -17.2 million) of third-party financing was needed, so that not only the normal investments from STADA, within the framework of organic growth, but also a significant part of the considerable acquisitions of the year 2005 could be covered by the internal financial strength of the Group. This can also be seen in the increase in free cash flow for the STADA Group adjusted for expenditures on acquisitions which increased in 2005 by EUR 97.7 million to EUR 91.5 million (previous year: EUR -6.2 million). Product development Also in 2005, STADA was able to prove the development strength of the Group with 380 new product launches (previous year: 395). STADA continues to have a well-filled product pipeline at its disposal, so that the Group can launch numerous new products in the future too. This applies in particular to generics in the EU. In the development of biogenerics, or biosimilars, STADA, as is well-known, cooperates with BIOCEUTICALS Arzneimittel AG, a company initiated by STADA and financed mainly with venture capital. STADA holds the worldwide exclusive distribution rights for products developed by BIOCEUTICALS via a wholly-owned subsidiary. In the current first quarter 2006, BIOCEUTICALS received additional financial resources amounting to approx. EUR 15 million through a capital increase that was subscribed to by several investors, including STADA. Together with already existing lines of credit, a financial framework is now in place which, from today’s perspective, puts BIOCEUTICALS in the financial position from which it can push forward with an EU-wide approval for a first biosimilar product with the active ingredient Erythropoietin. As planned, clinical trials, which were regarded as necessary for an approval application from BIOCEUTICALS Arzneimittel AG for this Erythropoietin project, were successfully concluded in the fourth quarter of 2005. The documents for submission of the application for approval are currently being compiled; thereby the indications dialysis and oncology are being strived for. At a ‘pre-submission’ meeting carried out with the EMEA in February 2006, the remaining open questions were cleared up so that the submission of the approval documents to the EMEA can likely follow in the second quarter of 2006. In the view of Christof Schumann, STADA Executive Board Member responsible for Research & Development, ‘there continues to be a chance to obtain an EU-wide approval for a biosimilar from Erythropoietin in 2007’. Dividend proposal The Executive Board proposed already on March 6, 2006, that a dividend for fiscal year 2005 that, as compared to the previous year, is unchanged in the amount of EUR 0.39 per common share will be distributed. The Supervisory Board supported this proposal. Should the Annual Shareholder’s Meeting follow this proposal on June 14, 2006, it would represent, with a total dividend payment of EUR 20.8 million, a dividend ratio of 40% of net income. Outlook for 2006 Also in the future, STADA wants to profit from the structural growth opportunities which will arise from increasing generics penetration and patent expiration in important national markets. The broad international sales position, strength in product development with a well-filled product pipeline as well as the active acquisition policy should all contribute to this. STADA’s Executive Board is therefore optimistic about the prognosis for further business development. The Executive Board assumes – regardless of continued and not always calculable regulatory interventions in individual national markets – to be able to continue the many years of robust growth within the Group in the future. Thereby, a disproportionate increase in earnings in relation to sales is being targeted. The conclusion of STADA’s Chief Executive Officer Retzlaff: ‘STADA has excellent opportunities to continue to grow on its own and to create significant value for our shareholders also in the future’. Further information: STADA Arzneimittel AG / Corporate Communications / Stadastrasse 2–18 / 61118 Bad Vilbel / Germany / 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 30.03.2006 ————————————————————————— language: English emitter: STADA Arzneimittel AG Stadastraße 2-18 61118 Bad Vilbel Deutschland phone: +49 (0)6101 603- 113 fax: +49 (0)6101 603- 506 email: communications@stada.de WWW: www.stada.de ISIN: DE0007251803, DE0007251845, DE000AOHN446 WKN: 725180, 725184, AOHN44 indexes: MDAX stockmarkets: Amtlicher Markt in Frankfurt (Prime Standard), Düsseldorf End of News DGAP News-Service —————————————————————————