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Egis cuts 2009 forecasts, sees trouble in Ukraine

  Hungarian drug maker Egis cut its fiscal 2009 sales growth forecast on weakness on both its home and some key export markets, but said turnover could still rise on the softness of the Hungarian forint.

Egis lowered its full-year volume term sales growth forecast to 3%, from 5%, but said the weakness of the forint against the dollar and the euro could raise the value of some imports and lift overall revenues, CFO László Marosffy told reporters on Tuesday.

Analysts said the domestic target is conservative, possibly too cautious, but there was significant downside risk in the Egis’ projection for Russia, Ukraine and other former Soviet states.

In Hungary, the generic drug maker’s biggest market, volume-term sales are seen up 2%, at half the earlier projected pace. In Russia, the company’s biggest export market, 10% growth remains achievable, Marosffy told a news conference.

“Our best prediction right now is 3% volume term growth,” Marosffy said. "Exchange rates move so fast that it’s too hard to attach a revenue figure to this; every time we look at the exchange rate, it’s vastly different," Marosffy said.

Ukraine will be Egis’ most difficult market, where the company now projects a 10% sales drop for the fiscal year that ends on September 30, after earlier forecasting 15% growth. “Our sales (in Ukraine) are still not going, they were down in January and are still down,” Marosffy said. “Ukraine is a difficult market and we expect to remain so this year.”

RUSSIA, UKRAINE OPTIMISTIC

Deutsche Bank analyst Gergely Várkonyi said Egis’ forecasts for Russia, Ukraine and other former Soviet states is a cause for concern and the company’s projections may still be too rosy. “The CIS (Commonwealth of Independent States) forecasts are too optimistic,” Várkonyi said.

“In Ukraine, sales could drop much more sharply, to half of last year’s level while given the Russian ruble’s drop, 10% dollar-term growth means a 40% increase in rubles, which is too aggressive.”

Várkonyi said he was comfortable with the domestic forecasts and saw a potential for upside while he also considered the Polish target realistic. For Poland, one of the fastest growing markets in central Europe, Egis sees 20% growth in zlotys, slightly better than an earlier projection, but in the rest of Central Europe, it cut its forecast to 12% growth from 15%.

Egis on Monday said its Q1 net profit doubled to HUF 5.625 billion ($25.17 million), from 2.8 billion a year earlier, partly due to one-off factors. By 1218 GMT, Egis, which is majority owned by France’s Servier, was down 0.2%, while the benchmark BUX was down 1.4%. (Reuters)