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Higher sales, financial gain boost Richter earnings

Pharma

Image by Richter.hu

Fourth-quarter net income of Hungarian pharmaceutical company Gedeon Richter reached HUF 46.5 billion, more than doubling from HUF 21.6 bln in the base period on higher sales, improved margins and a financial gain, an earnings report released ahead of the opening bell on Monday shows.

Revenue rose 17% to HUF 176.3 bln. Direct cost of sales increased just 9% to HUF 79.2 bln, raising operating profit 28% to HUF 41.9 bln.

Richter booked a net financial gain of HUF 5.8 bln in Q4, compared to a net loss of HUF 5.7 bln in the base period.

Full-year earnings rise one-third

For the full year, Richter's net income climbed 33% to HUF 139.6 bln.

Revenue increased 11% to HUF 630.6 bln. Direct costs climbed at a faster clip, rising 13% to HUF 281.3 bln, but moderate increases in other costs boosted operating profit HUF 18% to HUF 135.8 bln.

Richter's sales and marketing expenses rose 9% to HUF 114.6 bln, while research and development spending increased 13% to HUF 61 bln.

The bottom line was boosted further by a net financial gain of HUF 7.6 bln - of which HUF 4.4 bln was unrealised - improving from a HUF 0.8 bln loss in the base period.

Earnings per share came to HUF 751 for the year.


Cariprazine top seller in 2021

The report shows sales in Hungary rose 6% to HUF 43.6 bln, making it Richter's third-biggest market, after the United States and Russia. U.S. sales climbed 13% to HUF 123 bln, boosted by turnover of Richter's antipsychotic cariprazine. Russian sales edged down 1% to HUF 85.1 bln.

Cariprazine, sold under the brands Vraylar and Reagila, was Richter's top-selling product in 2021. Turnover of the drug rose 17% to HUF 106.6 bln, edging over sales of oral contraceptives, which fell 4% to HUF 103.4 bln.

CEO Gábor Orbán pointed to "a balanced mix of organic and inorganic growth driven by a combination of our own commercial efforts and those of our partners" driving Richter's continued success.

Richter had equity and liabilities of HUF 1.145 tln at the end of 2021, up 21% from 12 months earlier. Non-current liabilities stood at HUF 99 bln. Retained earnings reached HUF 849.7 bln.


Guidance for 'similar' turnover

Orbán told journalists after the report was published that Richter expects 2022 turnover, calculated in euros, to be "similar" to revenue in 2021, provided "the Russian and Ukrainian markets do not collapse completely".

Revenue growth could have been in the double digits were it not for the outbreak of the war, he said.

Orbán said losses in CIS markets are "unavoidable" and only the scale of those losses remains in question, but added that higher sales of specialised products in Western Europe could act as a counterbalance.

Richter has reduced its exposure to the Russian market continuously for close to 20 years, he said.

The CEO said exchange rate changes affect this year's business plan first and sales volume second, noting that deliveries can't be made to CIS markets at present. He added that Russia's solvency is "highly questionable".

Orbán said he remained "optimistic", as conditions for financial transfers are in place for the time being, but conceded that the consequences of an exclusion from the SWIFT system of international bank transfers are unknown at present. If the convertibility of the rouble is damaged, international trade will be limited, he added.

Orbán said fixed-price products account for 40% of Richter's turnover in Russia.

Fielding questions, he said the state-owned Hungarian Export Credit Insurance Company (MEHIB) is covering about EUR 100 million of Richter's Russian receivables. He also said the possible nationalisation of Richter's plant in Russia could result in a one-off shock, but would "not cause much of a loss" if there is no change to product licence ownership.

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