Russian ruble's depreciation hits Richter

The exchange rate of the ruble is one of the most important factors affecting Richter’s profitability. Russia has been the company’s largest market for a long time and contributes more than 30% of group revenues.

Speaking of specific markets, sales to Russia and Ukraine could be of a significant importance at this time. Following the previous quarterly earnings report, Richter lowered its estimates for both countries for 2014. Analysts predict Russian sales revenues will disappoint again, especially as the base period showed a relatively strong performance. Conversely, Western Europe fared relatively well in the third quarter.

Analysts agree that Richter will report 61.5% gross margin for Q3, which would mark a 1% year-on-year deterioration. The detoriation is mainly attributed to the easing of the ruble.

As for Richter’s EBIT, the market forecasts a large year-on-year contraction of about 30%, partly as a consequence of the ruble's depreciation. Analysts also likely factored in a further rise in operating costs, since clinical trials continue to absorb large funds; add to that the expansions in China and Latin America.

The market sees Richter’s Q3 operating margin at around 11%, decreasing about 4% compared to the same period in 2013.

Richter’s net profit is seen even more drastically down in the annual comparison than its EBIT and it is also likely that the market expects negative financial income.The end-quarter EUR/HUF exchange rate was similar to the end-Q2 figure. Consequently, the key factor here was the ruble as well. The HUF was around 6% stronger to the RUB at the end of September than at the end of June, which could have led to unrealised losses at the revaluation of assets booked in RUB.