Higher revenue, improved margins lift Richter Q1 earnings


Image by gedeonrichter.com

First-quarter net income of Hungarian pharmaceutical company Gedeon Richter rose 38% year-on-year to HUF 37.1 billion as sales climbed and margins improved, state news wire MTI writes citing an earnings report released ahead of the opening bell on Tuesday.

Revenue climbed 19% to HUF 168.1 bln. Direct cost of sales rose at a slower pace, increasing 15% to HUF 72.1 bln, lifting gross profit 23% to HUF 96 bn.

Sales and marketing costs rose 12% to HUF 32.5 bln and R&D spending increased 9% to HUF 17 bln.

Operating profit climbed 54% to HUF 37.5 bln. 

Earnings per share came to HUF 199 for the period.

Russian sales climb

Turnover in Russia, Richter's second-biggest market, rose 7% to HUF 19.5 bln.

Richter noted "slight temporary delays" at its business in Russia in the early days of the war, but said shipments have since "broadly returned to their pre-war routine". It also cited market data indicating higher retail sales due to price increases and stockpiling.

Payments for Russian deliveries were received "in due order" in Q1, Richter said. It acknowledged "difficulties" in Russia in the process of settling receivables and FX bank transfers at the end of Q1, but said these issues have been "contained at manageable levels so far".

As an "additional cautionary measure", Richter is supplying Russian wholesalers exclusively from its local warehouse.

"Notwithstanding a volatile market environment presenting unforeseeable risks connected to the ongoing war and the subsequent sanctions imposed on Russia, business operations resumed at levels experienced prior to the pandemic," Richter said.

Sales in Ukraine, calculated in euros, fell 9% to EUR 6.1 million as commercial operations were disrupted with the start of the war.

Richter closed its office in Kyiv, but kept its more than 200 staff in the country on payroll and assisted those who fled the country to find housing and employment in Hungary. Richter also offered all of its local inventories for humanitarian relief and has sent further non-commercial shipments to the country through charity services.

The company said it is prepared to resume its business activities in Ukraine "as soon as the situation enables commercial activities".

The report shows Richter's total exposure in Russia, including credit to the local business, receivables, inventories, and cash, adds up to HUF 54.7 bln. Exposure in Ukraine comes to HUF 3.9 bln.

Vraylar drives U.S. turnover

 Pharmaceutical sales in the United States, Richter's biggest market, increased 29% to HUF 31.6 bln, supported by turnover of the antipsychotic cariprazine, sold there under the brand Vraylar.

Vraylar sales in the United States rose 32% to HUF 27.5 bln during the period.

U.S. sales of Richter's emergency contraceptive Plan B were "virtually flat", Richter said.

Richter's domestic sales rose 4% to HUF 11.4 bln. Retail sales in Hungary climbed 8% to give Richter a market share of 4.5%, putting it in third place. On the market for retail prescription drugs, Richter was runner-up with market share of 7.4%.

A breakdown of sales by product shows cariprazine, also marketed under the brand Reagila, was Richter's biggest seller in Q1, generating turnover of HUF 29.2 bln.

Oral contraceptives were in second place, with revenue of HUF 25.2 bln, followed by sales of Bemfola, used in fertility treatments, which came to HUF 5.8 bln. Sales of Evra, a transdermal contraceptive patch, reached HUF 5.3 bln, sales of the muscle relaxant Mydeton came to HUF 4.4 bln, and sales of the nootropic Cavinton added up to HUF 4.3 bln.

2022 'won't be worse' than 2021, CEO says

At a press conference after the release of the report, CEO Gábor Orbán said the company, in a departure from the usual practice, would not offer guidance on revenue or earnings for the full year.

Calculated in forints, "this year won't be worse than last year", he added.

Orbán acknowledged "significant supply chain risks", looking forward, and said Richter didn't feel the "full scale" of their impact in the first quarter. He added that spillover from higher producer prices and energy prices is "continuous". 

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