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Egis Q3 profit plunges 55% on tax changes, financial loss

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Hungarian drugmaker Egis, majority-owned by France's Servier, had consolidated net profit of HUF 2.31 billion in the third quarter of its business year ending September 30, down 55% from the same period a year earlier because of changes to regulations on deductions of R+D spending, the company said in its Q3 report published late Tuesday.

Egis booked HUF 2.5 billion in extra costs during the quarter, because of changes to legislation.

Hungary's parliament approved in June an amendment that eliminates, with retroactive effect, tax preferences for R+D spending by drugmakers for the 2011 calendar year. The amendment also reduces the amount of R+D spending drugmakers may deduct from the sector tax they pay from 100% to 50% for the 2010 calendar year.

Egis issued a profit warning on July 1, citing the amendments.

Without the unforeseen costs due to the legal changes, Egis said its Q3 profit would have fallen just 19%.

Operating profit fell 27p% to HUF 2.78 billion, but excluding the effect of the tax changes it would have risen 21%.

Revenue was up 7% at HUF 32.4 million.

Domestic revenue rose 9.7% to HUF 9.38 billion.

Euro-term export sales climbed 8pc to €86.5 million. Sales in Russia were up 4% at €29.1 million and sales in Ukraine edged up 2% to €3.3 million but sales in other CIS countries were down 8% at €6.7 million. Sales in Eastern Europe rose 7% to €33.3 million and sales in the rest of the world were up 4% at €4.4 million.

Egis had consolidated net profit of HUF 11.53 billion in Q1-Q3 of its 2010/2011 business year, down 18% from the same period a year earlier. Excluding the one-off impact of the tax changes, net profit would have fallen 11%, the company said.

Revenue was up 11% at HUF 95.87 billion in the period. Cost of sales rose at a slightly slower rate, climbing 9% to HUF 41.21 billion and lifting gross profit by 12% to HUF 54.65%.

Administration and distribution expenses were up 6% at HUF 37.92%.

R+D spending rose 8% to HUF 8.58 billion.

Operating profit came to HUF 13.12 billion, up 15%.

Egis booked a HUF 589 million net financial loss in Q1-Q3 compared to a net gain of HUF 3.11 billion in the base period.

Egis had total assets of HUF 181.9 billion on June 30, up about 8% from twelve months earlier. Net assets rose 9% to HUF 159.5 billion.

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