STADA with development as planned in H1/2009: Sales: EUR 755.2 million, net income EUR 48.3 million ? outlook confirmed
Important items at a glance
- Sales development as planned in H1/2009:
- Group sales of EUR 755.2 million decreased by -8% due to disposals and currency effects, adjusted, however, increased by +1%
- Earnings development characterized by difficult environment as
- Earnings before interest, taxes, depreciation and amortization (EBITDA) EUR 124.0 million (-16%) or adjusted EUR 125.8 million (-16%)
- Net income EUR 48.3 million (-23%) or adjusted EUR 52.1 million (-20%)
- Clearly improved cash flow from operating activities: EUR 55.9 million (1-6/2008: EUR 2.4 million) or adjusted EUR 66.6 million (1-6/2008: EUR 22.8 million)
- Confirmation of open outlook for 2009: Growth in fiscal year 2009 continues to be possible – minimum goal of adjusted EBITDA EUR 250 million
- Initiated Group project “STADA – build the future” is aimed at additional earnings contributions in the double digit million area from 2010
Bad Vilbel, Germany, Aug. 12, 2009--With the key figures in this report on the first six months of 2009 published by STADA Arzneimittel AG today, August 12, 2009, sales and earnings of the Group remained to be below the figures of the same period of the previous year as planned. Significant reasons were in particular disposals and currency effects since then as well as the, as expected, difficult business environment also against the backdrop of the current economic and financial crisis.
In the outlook for 2009, the Executive Board, with an unchanged minimum goal of adjusted EBIDTA of EUR 250 million, continues to see, from today’s perspective, the opportunity, with a revival of business in the second half year, to overall still achieve and even exceed the sales and earnings level from the previous year in fiscal year 2009.
To sustainably improve the Group’s earnings structure, the Executive Board initiated the Group-wide project “STADA – build the future” in the second quarter of 2009. STADA’s Chairman of the Executive Board comments: “This project, in which we will also partly deploy external consultants, will contribute to streamlining our Group structures, to making our operating control more efficient and to accelerating our continuous cost optimization. We expect from it additional earnings contributions in the double digit million area from 2010.”
Sales development of the STADA Group
In the first six months of 2009, Group sales decreased, as expected, due to disposals and currency effects by 8% to EUR 755.2 million (1-6/2008: EUR 822.8 million). By considering the second quarter of 2009 alone, a sales decrease of 11% to EUR 379.3 million arose (second quarter of 2008: EUR 423.9 million). Overall, changes in the Group portfolio as well as currency effects burdened the sales comparison with the same period in the previous year by 9 percentage points in the first six months of 2009 and by 8 percentage points by taking the second quarter of 2009 alone into consideration.
Group sales adjusted for changes in the Group portfolio as well as for currency effects thus increased by 1% in the half year under review and decreased by 3% when taking the second quarter of 2009 alone into consideration.
In the two core segments, Generics and Branded Products, sales decreased by a total of 3% in the reporting period as compared to the first half year of 2008; adjusted, sales in these two core segments increased by 1%.
Sales of Generics, which continues to be the significantly larger core segment (share of sales 71.2%), decreased in the first half year of 2009 by 4% to EUR 537.8 million (1-6/2008: EUR 561.7 million); the sales decrease adjusted for portfolio changes and currency influences was only 1%.
In Branded Products (share of sales 24.8%), STADA recorded a sales increase of 1% to EUR 187.6 million in the first six months of 2009 (1-6/2008: EUR 186.4 million). By taking into account portfolio changes and currency influences adjusted sales of Branded Products even rose by 7% in the first six months of 2009.
Earnings development of the STADA Group
The development of earnings also continued to be characterized by difficult framework conditions as well as unfavorable exchange rate relations in individual national markets in the reporting period.
The key earnings figures for the first six months of the current fiscal year include both one-time special effects and non-operational effects from currency influences and interest rate hedge transactions. They had a net burden on the earnings development in the first half year of 2009 of EUR 4.6 million before or EUR 3.8 million after taxes (1-6/2008: net burden on earnings of EUR 3.1 million before or EUR 1.9 million after taxes); by taking the second quarter of 2009 alone these effects relieved the earnings development with a net of EUR 1.3 million before or EUR 0.3 million after taxes (second quarter of 2008: net burden on earnings of EUR 0.1 million before or EUR 0.1 million after taxes). These effects have already been subtracted from the adjusted key earnings figures disclosed in the following.
Net income decreased in the first half year of 2009 by 23% to EUR 48.3 million (1-6/2008: EUR 63.0 million); by taking the second quarter alone, this resulted in a decrease of net income of 26% to EUR 24.2 million (second quarter of 2008: EUR 32.6 million). Adjusted net income also decreased in the same period by 20%, reaching EUR 52.1 million (1-6/2008: EUR 64.9 million); by taking the second quarter of 2009 alone, this also resulted in a decrease of 27% to EUR 23.9 million (second quarter of 2008: EUR 32.5 million).
In terms of earnings per share the STADA Group achieved a value of EUR 0.82 in the first six months of the current fiscal year (1-6/2008: EUR 1.07). Earnings per share for the second quarter of 2009 alone amounted to EUR 0.41 (second quarter of 2008: EUR 0.56). In terms of adjusted earnings per share a value of EUR 0.89 resulted for the first half year of 2009 (1-6/2008: EUR 1.11) and a value of EUR 0.41 for the second quarter of 2009 alone (second quarter of 2008: EUR 0.55).
Operating profit decreased in the first six months of 2009 by 22% to EUR 85.4 million (1-6/2008: EUR 109.5 million) and by taking the second quarter of 2009 alone by 30% to EUR 36.8 million (second quarter of 2008: EUR 52.8 million). Adjusted operating profit went down in the first half year of 2009 by 23% to EUR 88.7 million (1-6/2008: EUR 115.4 million) and by taking the second quarter of 2009 alone by 32% to EUR 38.4 million (second quarter of 2008: EUR 56.5 million) The Group’s EBITDA amounted to EUR 124.0 million for the first six months of 2009 (1-6/2008: EUR 147.1 million), thus being by 16% below the corresponding value from the previous year; by taking the second quarter of 2009 alone a decrease of EBITDA by 20% to EUR 56.5 million resulted as compared to the same period in the previous year (second quarter of 2008: EUR 70.6 million). Adjusted EBITDA decreased by 16% to EUR 125.8 million in the first six months of 2009 (1- 6/2008: EUR 149.8 million) and by 21% to EUR 58.3 million when taking the second quarter of 2009 alone (second quarter of 2008: EUR 74.0 million).
To sustainably improve the Group’s earnings structure, the Executive Board initiated the Group-wide project “STADA – build the future” in the second quarter of 2009. Strategic goals of this project, in which external consultants are also partly deployed, are a reduction of the complexity of the Group structures, more efficient centralized control of Group companies as well as an acceleration of the continuous cost optimization with a focus on the fields of cost of sales/production locations as well as organizational, reporting and personnel structures. STADA’s Executive Board expects to achieve additional earnings contributions in the double digit million area from this project from 2010.
Regional development in the STADA Group
In Europe (share of sales 96%) the STADA Group recorded a sales decrease of 9% to EUR 724.6 million – in particular also due to disposals – in the first six months of 2009 (1-6/2008: EUR 796.1 million). Adjusted, European sales were at the level of the corresponding period in the previous year. In Western Europe (share of sales 74%) sales thereby decreased, primarily due to disposals since then, by 9% to EUR 558.9 million (1-6/2008: EUR 611.5 million); adjusted Western European STADA sales went down by 2%. In Eastern Europe (share of sales 22%), in the so-called CEE countries, sales went down by 10% to EUR 165.7 million (1-6/2008: EUR 184.6 million), particularly due to currency influences. The Group’s adjusted sales in Eastern Europe recorded a sales increase of 6%.
In Asia (share of sales 3%) STADA reported a sales decrease of 5% to EUR 22.0 million in the first half year of 2009 (1-6/2008: EUR 23.1 million). Adjusted sales in the Asian markets were at the level of the corresponding period in the previous year.
Group sales in the rest of the world (share of sales 1%) rose by 141% to EUR 8.6 million in the first half year of 2009 (1-6/2008: EUR 3.6 million). Here, adjusted sales growth amounted to 273%.
Local developments in the 5 most important STADA markets
In Germany (share of sales 37%), sales decreased by 5% to EUR 281.6 million (1- 6/2008: EUR 297.4 million) in the reporting period against the backdrop of very difficult framework conditions.
In the Branded Products core segment sales in Germany decreased by 4% to EUR 63.5 million in the reporting period (1-6/2008: EUR 65.9 million); the Group’s generics sales in Germany decreased by 5% to EUR 217.1 million in the first half year of 2009 (1-6/2008: EUR 227.9 million). According to market data of IMS Health, however, the STADA Group’s market share in terms of generics sold in German pharmacies increased to 14.0% in the first half year of 2009 (first half year of 2008: 13.4%).
ALIUD PHARMA, the largest of the Group-owned sales labels in the German generics market, made a particularly strong contribution to generics sales. With sales growth of 5% to EUR 128.4 million in the first half year of 2009 (1-6/2008: EUR 122.0 million) ALIUD PHARMA continued to occupy position 3 in the German generics market. The second Group-owned German generics line STADApharm has not yet fully offset its aggressive price policy which was launched at the beginning of the year to complete a new sales alignment by means of growth in volume. Against this backdrop sales of this label, as expected, still clearly decreased by 22% to EUR 74.9 million in the half year under review (1-6/2008: EUR 96.3 million). The Generics sales label cell pharm, a special supplier for the indication areas oncology and nephrology, recorded a sales increase in the amount of 43% to EUR 13.0 million (1-6/2008: EUR 9.1 million) in the first half year of 2009 also due to the further market penetration of the Group’s first biosimilar SILAPO® (active ingredient Epo-zeta – sales 1-6/2009: EUR 5.5 million).
As of June 1, 2009 new discount agreements by the Allgemeinen Ortskrankenkassen (AOK) with numerous generics suppliers took effect in the German generics market. Thereby, the STADA sales companies, as is known, received awards adding up to a total of approx. 18% of the annual sales potential granted; STADA’s previous market share had been below 12% here. As expected, there are signs that increases can be reckoned with for the products awarded over the contractual period of two years, however at reduced margins, while decreases will be recorded for products where the Group did not receive any awards in the context of the new AOK discount agreements. A final assessment of the consequences of the AOK discount agreements will only be possible in the further course of the second half year of 2009 and will also significantly depend on the extent to which doctors will, in view of the many medication changes actually required due to the new AOK discount agreements, make use in the long term of the exceptional rule to ban substitution as well as on the outcome of a legal discussion about the restricting framework conditions for substitution that is currently controversially led by various market participants.
In the German generics market, further tenders for discount agreements have been initiated or announced by various health insurance organizations, partly with the same or similar structures as the AOK’s discount agreements, which have just become effective, partly also with new structural elements (such as graduated discounts depending on the degree of implementation of the discount agreement). As the STADA Group’s previous market share in these new tenders is mostly below STADA’s average market share, the Executive Board sees a good opportunity, also in this case to achieve again a strong, i.e. improved result as compared to the previous market share. For all these processes, another lengthy period and comprehensive examinations with regard to tender regulations can be assumed so that agreements awarded in this context cannot be expected, from today’s perspective, to take effect in the current fiscal year.
Overall, in Germany, the Group has the goal to achieve stable sales in fiscal year 2009; operative profitability will thereby be, as planned, below the Group average.
In Russia (share in sales 10%) the Group recorded – regardless of the ongoing difficult economic situation there – pleasing sales growth in the amount of 24% in local currency. The sales increase in euro was only 2% to EUR 77.8 million (1- 6/2008: EUR 76.1 million). In the Generics segment, the gross margin was thereby significantly burdened in the second quarter as a result of a local tender business with a sales volume of EUR 3.4 million; in order to maintain the good business relations, temporarily negative contribution margins were accepted in this tender business. Due to significant improvements in procurement prices achieved in the meantime, the contribution margin in this ongoing business will be positive again in the second half year of 2009.
In view of this development STADA continues to expect a clear expansion of business activities in Russia for fiscal year 2009 with an operating profitability which continues to be above Group average. However, the further development of the currency relation of the Russian ruble to the euro will also continue to significantly influence sales and earnings contributions of the Russian business at Group level.
In Belgium (share in sales 8%), sales generated by STADA in the first six months of the current fiscal year increased by 10% to EUR 61.5 million (1-6/2008: EUR 55.7 million). Apart from new products, a moderate regulatory stimulation of generics launched at the beginning of the year particularly contributed to this. From today’s perspective STADA expects a significant sales increase in Belgium for the remaining fiscal year with an operating profitability which continues to be at Group average.
In Italy (share in sales 7%), sales decreased by 2% to EUR 54.0 million in the first half year of 2009 (1-6/2008: EUR 54.8 million). As in this market a reduction of inventories in the distribution channels, which could be observed approximately simultaneously to new regulatory changes, seems to gradually expire, moderate sales growth with an operating profitability which continues to be at about Group average can, from today’s perspective, still be expected overall in Italy for fiscal year 2009.
In Serbia (share in sales 6%), STADA’s sales decreased by 20% in local currency in the first half year of 2009 and by 31% to EUR 45.2 million in euro (1-6/2008: EUR 65.4 million). This development was primarily due to local weakness in demand in the course of the global financial and economic crisis. In the second quarter of 2009 taken alone, however, sales thereby increased by 2% in local currency, after in the first quarter of the current fiscal year a decrease of 41% in local currency still had to be recorded there.
It remains unclear in the Serbian market if and when clear growth will occur again. Therefore, from today’s perspective, sales at the level of the previous year will hardly be sustainable in Serbia. Against the backdrop of this macroeconomicinfluenced development the Group is thus focused on achieving further savings in operating business activities. With such targeted measures, the operating profitability should reach a level above Group average in fiscal year 2009 again, which is the traditional level for the entire subgroup managed from Serbia. However, the sales and earnings contributions of this subgroup will still largely depend on the development of the currency relation of the Serbian dinar to the euro.
Research and development
STADA’s research and development costs amounted to EUR 22.2 million in the half year under review (1-6/2008: EUR 22.7 million). Overall, STADA launched 236 individual products worldwide in the first six months of 2009 (1-6/2008: 216 product launches) in individual national markets. This also included generics with the active pharmaceutical ingredient Pantoprazole in time with the patent expiry in several EU countries, also including Germany.
Financial position and cash flow
In the Executive Board’s view, the STADA Group’s financial position continues to be stable. Thus, the equity-to-assets ratio was 33.9% as of June 30, 2009 (December 31, 2008: 34.0%) and thereby remains clearly in a, from the Executive Board’s perspective, satisfying area of above 30%.
Net debt amounted to EUR 1,062.8 million on June 30, 2009 (December 31, 2008: EUR 1,015.7 million) and continues to be mainly financed via long-term promissory notes from various international and national banks with maturities in the area of 2010-2015. Beyond that, STADA continues to have open credit lines in the amount of approx. EUR 500 million – also for financing acquisitions.
The cash flow from operating activities amounted to EUR 55.9 million in the first six months of 2009, adjusted for influences from other accounting periods to EUR 66.6 million (1-6/2008: EUR 2.4 million, adjusted for influences from other accounting periods at that time EUR 22.8 million). The improvement of the cash flow from operating activities which already became apparent in the past fiscal year 2008 was thus continued in the first half year of 2009.
Acquisitions and Disposals
In the second quarter of 2009, there were only minimal increases of shareholdings in Serbia and Bosnia-Herzegovina with a total investment volume of EUR 2.8 million.
In the current third quarter of 2009 STADA, by making use of a local opportunity, took over the production facilities for ointments and gels of the Japanese pharmaceutical group Daiichi Sankyo in Pfaffenhofen close to Munich with over 30 employees and an annual production volume of over 600 tons. The takeover of the production facilities guarantees long-term production capacities for an important Group product and takes effect on January 1, 2010. The total investment volume amounts to approx. EUR 0.1 million.
The Executive Board confirms the outlook and risk report published for the Group in STADA’s Annual Report 2008.
Accordingly, the further development of the STADA Group is, on the one hand, characterized by the existing structural and operative growth opportunities; on the other hand there is a continued operationally challenging environment and significant burdens due to the global financial and economic crisis.
The Executive Board continues to constantly align the Group to this operationally challenging environment. In view of the strategic focus on growth markets, the established operating success factors and the intended supplementing of organic growth by means of additional external growth impulses in the context of a cautious acquisition policy, opportunities open up which, in the Executive Board’s assessment, generally allow for the operating challenges and risks in individual national markets to be successfully coped with.
Against this backdrop the Executive Board continues to deem STADA’s operative business model sustainable and viable for the future and sees, from today’s view, the fundamental opportunity to achieve growth in terms of sales and net income in the years to come regardless of conditions which remain challenging.
Whether STADA, however, under the especially difficult framework conditions of the global financial and economic crisis can also grow in fiscal year 2009 is, from today’s perspective, still open and depends, in addition to the operative development in important key markets such as Germany, Russia and Serbia, also to a significant degree on non-operational factors like interest rate level and currency relations.
From today’s perspective of the Executive Board, too, the minimum goal of adjusted EBITDA of EUR 250 million in the STADA Group for fiscal year 2009 should be achievable. Regardless of the sales and earnings decrease in the first half year of 2009, the Executive Board continues to see the opportunity that STADA, with a revival of business in the second half year, can overall still achieve and even exceed the sales and earnings level from the previous year in fiscal year 2009.
For more information, please contact:
STADA Arzneimittel AG
D-61118 Bad Vilbel
Tel.: +49 6101 603-113
Fax: +49 6101 603-506
Posted: August 2009