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Hungary’s Richter Q2 net falls on financial loss

Hungarian drug maker Richter Gedeon’s Q2 net profit fell due to financial losses caused by the sharp appreciation of the forint currency.

Richter Gedeon said on Tuesday its first half unconsolidated net profit fell 32.8% to Ft 11.15 billion ($75.70 million) from Ft 16.595 billion a year earlier. The company did not provide separate unconsolidated Q2 figures, but according to Reuters calculations Q2 net profit fell almost 90% to just Ft 966 million from 9.41 billion a year ago.

Based on consolidated figures, Richter said its net income fell 72.4% to Ft 2.913 billion in the Q2. Unconsolidated net income came in well below analysts’ average forecast for Ft 4.23 billion in a Reuters poll.

The company said its unconsolidated operating profit was Ft 17.393 billion in the first six months, up 3% from the same period of 2007. Second-quarter unconsolidated operating profit was Ft 8.702 billion, according to Reuters calculations. This is only slightly below analysts’ projection for Ft 8.76 billion, according to a Reuters poll.

The company posted a financial loss of Ft 5.6 billion in the H1 due to the sharp firming of the forint versus the euro and the dollar in the second quarter which caused heavy revaluation losses on trade receivables and currency loans. “A higher net financial loss in the reported period resulted from unfavorable movements in exchange rates (strengthening of HUF) which occurred during the second quarter of 2008,” Richter said in its report. Richter’s CEO Erik Bogsch told Reuters last month, that the forint’s firming seriously hurt the company.

The forint, along with other currencies in central eastern Europe, hit record highs versus the euro in July after significant rise in June. In the first six months Richter’s domestic revenues fell 12.3% year on year in forint terms but sales to the former Soviet Union and central Europe continued to produce healthy growth.

Sales in Russia were up by 7.4% when calculated in euros, while European Union sales were up 9.2% in the H1 of 2008. Sales to the US fell 20.9% in euro terms. Sales and marketing expenses rose 5.4%, above Richter’s revenue growth rate of 2.5% in the first half of the year according to unconsolidated data. (Reuters)