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Richter Q4 profit slips 24%; Russian sales likely culprit

Hungarian drugmaker Richter Gedeon's consolidated Q4 net income fell 23.8% to HUF 10.2 billion from the same period a year earlier, likely dropping on a decline in sales in Russia, the company’s biggest export market, Richter’s IFRS report for the period shows.

Fourth-quarter revenue fell 15.1% to HUF 59.6 billion, likely dropping because of purchases moved forward in Russia in the previous quarter. In Q3 sales jumped 25.5% to HUF 78.5 billion as sales in Russia were boosted by purchases made before regulatory changes took effect on September 1, 2010.

Richter said in the report that Russian sales were “negatively impacted by certain one-off pre-shipments made during the third quarter” but did not give any firm figures for sales to the country in Q4.

Net income was in line with an estimate by analysts polled by portfolio.hu adjusted for a one-off licence fee. (The analysts put net income at HUF 6.8 billion, but did not include a $17 million – HUF 3.5 billion – license fee from US –based Watson.)

Basic earnings per share came to HUF 550 compared to HUF 722 in Q4 2009.

Fourth-quarter cost of sales fell 22.8% to HUF 35.7 billion. Gross profit dropped 9.1% to HUF 35.7 billion.

Sales and marketing expenses rose 21.6% to HUF 15.3 billion and administration and general expenses jumped 85.5% to HUF 7.6 billion.

Operating profit dipped 27.7% to HUF 9.8 billion. Pre-tax profit was down 26.0% at HUF 10.8 billion.

The acquisitions of PregLem and the oral contraceptive product line of Grünenthal were presented for the first time in this quarterly report.

Full-year profits lifted by higher revenue, narrowing margin.

Richter's full-year consolidated net income climbed 32.7% to HUF 67.7 billion, lifted by higher revenue and a favourable sales mix.

Sales were up 3.0% at HUF 275.3 billion. Cost of sales fell 7.7% to HUF 107.5 billion, raising gross profit by 11.2% to HUF 167.8 billion.

In a breakdown of pharmaceuticals sales - making up HUF 238.1 billion of all sales - by region, Richter said domestic sales were up 6.2% at HUF 32.3 billion.

Pharmaceuticals sales in other EU member states inched up 1.0% to HUF 63.3 billion, dropping 11.1% to HUF 18.3 billion in Poland but rising 10.8% to HUF 8.1 billion in Romania. Pharmaceuticals sales in the CIS were up 21.0% at HUF 100.1 billion, climbing 16.2% to HUF 70.3 billion in Russia and jumping 47.7% to HUF 12.9 billion in Ukraine.

US sales slipped 17.7% to HUF 29.4 billion.

Sales and marketing expenses were up 9.7% at HUF 59.0 billion, and administration and general expenses rose 26.7% to HUF 21.9 billion. R+D costs were up 15.4% at HUF 27.2 billion.

Operating profit rose 21.2% to HUF 63.6 billion.

Net financial income jumped 87.7% to HUF 8.2 billion, nearly all of it realized. About half of the item was from exchange rate gains on receivables and the rest was from interest income, the report shows.

Capital expenditures came to HUF 88.4 billion, up from HUF 24.2 billion in 2009. CAPEX included HUF 65.4 billion of expenditures linked to the acquisition of the contraceptive portfolio of German peer Grunenthal, Richter said. Spending on developments at R+D facilities reached HUF 7.4 billion.

Pre-tax profit rose 26.3% to HUF 71.9 billion.

Basic earnings per share came to HUF 3,635, up from HUF 2,740 in 2009.

Richter had total assets of HUF 583.8 billion on December 31, 2010, up 35.8% from twelve months earlier. Net assets were up 16.2% at HUF 440.0 billion. Current assets were down 3.7% at HUF 245.4 billion at the end of 2010 while non-current assets almost doubled to HUF 338.4 billion as intangible assets rose from HUF 11 billion to HUF 150.1 billion and investments rose 150% to HUF 22.4 billion.

The balance sheet showed HUF 41.7 billion in long-term borrowing and HUF 40.0 billion in other non-current liabilities, compared to HUF 700m and nil, respectively, a year earlier. The jump was the result of acquisitions, Richter said.

In November, Richter said it signed an agreement for a €150m club credit facility with the Hungarian affiliate of ING Bank, K&H Bank and Raiffeisen Bank. The credit will “assist the company meet its general operational objectives”, Richter said at the time.

Richter announced earlier that it made two acquisitions in the autumn, agreeing to pay CHF 445 million for PregLem, including CHF 150 m in cash and CHF 295 million based on performance, and paying €236.5 million for the oral contraceptive portfolio of Grunenthal. Richter borrowed to pay part of the Grunenthal purchase price to avoid depleting its stock of cash, the company said at the time.

The balance sheet showed retained earnings of HUF 400.4 billion, up 15.3% from twleve months earlier. Cash and cash equivalents was down 19.0% at HUF 75.6 billion. (MTI – Econews)