DGAP-News: STADA Arzneimittel AG / Key word(s): Quarter Results STADA: STADA 1-9/2011: Good development of sales and operating earnings - High burden on reported key earnings figures through one-time special effects - Confirmation of long-term growth targets 10.11.2011 / 07:25 --------------------------------------------------------------------- Important items at a glance - Sales and operating earnings development in 1-9/2011 positive as expected - but high one-time special effects in Serbia that burden earnings: - Group sales increases to EUR 1,251.7 million (+6%) - reported EBITDA declines to EUR 134.6 million (-26%), adjusted EUR 240.7 million (+7%) - reported net income decreases to EUR -6.5 million (-117%), adjusted EUR 99.9 million (+10%) - reported earnings per share decline to EUR -0.11 (-117%), adjusted EUR 1.70 (+10%) - International business activities expanded to 71% of Group sales - Cash flow from operating activities increases to EUR 143.6 million (+10%) - net debt records clear decrease to EUR 836.5 million (December 31, 2010: EUR 864,1 million) - Outlook 2011: reported net income in the double-digit million euro area and new record high for adjusted EBITDA - Long-term targets for 2014 confirmed Bad Vilbel, November 10, 2011 - Today, on November 10, 2011, STADA Arzneimittel AG published the financial results for the first nine months of 2011. According to these results, the sales and operating earnings figures were within the scope of expectations. In the third quarter of 2011, however, the Group recorded unexpectedly high one-time special effects in Serbia that burden earnings, so that the reported key earnings figures decreased significantly and were, in part, negative. Operationally, i.e. excluding one-time special effects, however, all key earnings figures for the Group exceeded the key earnings figures, adjusted accordingly, from the comparable period in the previous year. 'We are pleased that we were able to increase our international sales in the first nine months of this year by 14%, so that our activities abroad in the meantime contribute around 70% to Group sales', says Hartmut Retzlaff, STADA's Chairman of the Executive Board. 'Moreover, all of the adjusted key earnings figures for the Group increased - partly even to historic record highs. This shows that STADA remains operationally on a growth path, despite the high one-time special effects that burden earnings in Serbia due to the difficult economic framework conditions there. We therefore expect, regardless of the current Serbian burdens for the financial year 2011, that we will still achieve reported net income in the clear double-digit million euro area. In case of EBITDA adjusted for one-time special effects, we continue to anticipate growth in the high single-digit percentage area for 2011', is Retzlaff's optimistic comment on the business outlook. At the same time, Retzlaff confirmed the long-term prognosis, which, for the target year 2014, envisages reaching an adjusted EBITDA of approx. EUR 430 million, among other things. Development of sales Group sales recorded an increase of 6% in the first three quarters of 2011 to EUR 1,251.7 million (1-9/2010: EUR 1,177.8 million). The growth continues to be based on STADA's international sales, whose share in Group sales in the reporting period totaled 71% (1-9/2010: 67%) and recorded growth of 14% to EUR 892.6 million (1-9/2010: EUR 785.1 million). When effects on sales that were attributable to changes in the Group portfolio as well as currency effects are taken into account, Group sales rose by 6% in the first nine months of the current financial year compared to the corresponding period in the previous year. Sales of Generics, which continues to be the clearly larger core segment, showed growth in the first three quarters of the current financial year of 5% to EUR 857.4 million (1-9/2010: EUR 815.7 million). Generics thus achieved a share of 68.5% of Group sales in the first nine months of 2011 (1-9/2010: 69.3%). Adjusted, generics sales in the Group also increased by 5%. Sales in the Branded Products core segment increased by 12% to EUR 350.1 million in the reporting period (1-9/2010: EUR 311.4 million). Branded products thereby contributed 28.0% to Group sales in the first nine months of the current financial year (1-9/2010: 26.4%). Adjusted sales of branded products in the Group recorded a plus of 13%. STADA's business activities continued to focus clearly on Europe in the first three quarters of 2011. There, STADA's sales in the first nine months of 2011 went up by 7% to EUR 1,201.7 million (1-9/2010: EUR 1,122.1 million). In Western Europe, STADA achieved an increase in sales of 2% to EUR 868.4 million in the reporting period (1-9/2010: EUR 852.1 million). In Eastern Europe, STADA posted sales growth in the first nine months of 2011 of 23% to EUR 333.3 million (1-9/2010: EUR 270.0 million). Earnings development In view of high one-time special effects that burdened earnings, primarily as a result of impairments on outstanding receivables from various Serbian pharmaceutical wholesalers in the third quarter of 2011, the reported key earnings figures for the Group in the reporting period decreased significantly and were, in part, negative; operationally, i.e. excluding one-time special effects, however, they all exceeded the key earnings figures, adjusted accordingly, of the comparable period in the previous year. Operating profit declined in the first three quarters of 2011 by 44% to EUR 59.2 million (1-9/2010: EUR 104.9 million). Net income decreased to EUR -6,5 million (1-9/2010: EUR 38.8 million) in the reporting period. EBITDA declined by 26% in the first nine months of 2011 to EUR 134.6 million (1-9/2010: EUR 182.9 million). After adjusting the key earnings figures for influences distorting the period comparison resulting from one-time special effects and non-operational effects from interest rate hedge transactions (1-9/2010: adjusted for one-time special effects as well as non-operational effects from currency influences and interest rate hedge transactions), adjusted operating profit recorded a plus of 10% in the first nine months of 2011 to EUR 182.1 million (1-9/2010: EUR 165.6 million). Adjusted net income recorded growth of 10% to EUR 99.9 million (1-9/2010: EUR 91.2 million) in the reporting period. Adjusted EBITDA increased in the first three quarters of the current financial year by 7% to EUR 240.7 million (1-9/2010: EUR 224.2 million). One-time special effects amounted to a net burden on earnings of EUR 122.9 million before or EUR 107.1 million after taxes in the reporting period (1-9/2010: net burden on earnings due to one-time special effects in the amount of EUR 63.1 million before or EUR 53.6 million after taxes). Non-operational effects from interest rate hedge transactions amounted, in the first three quarters of 2011, to a net relief on earnings of EUR 1.0 million before or EUR 0.7 million after taxes, which resulted from the measurement of these transactions (1-9/2010: net relief on earnings as a result of non-operational effects from currency influences and interest rate hedge transactions of EUR 1.8 million before or EUR 1.2 million after taxes). Taking into account the adjustments, the development of the reported and adjusted key earnings figures in the first nine months of 2011 as compared to the corresponding period of the previous year was as follows: |[![CDATA[|[pre|]]]|] in EUR million 1-9/2011 1-9/2010 +/- % Operating profit 59.2 104.9 -44% Operating profit, adjusted 182.1 165.6 +10% EBITDA 134.6 182.9 -26% EBITDA, adjusted 240.7 224.2 +7% EBIT 59.8 105.3 -43% EBIT, adjusted 182.7 166.0 +10% EBT 20.7 66.1 -69% EBT, adjusted 142.6 127.4 +12% Net income -6.5 38.8 -117% Net income, adjusted 99.9 91.2 +10% Earnings per share in EUR -0.11 0.66 -117% Earnings per share in EUR, adjusted 1.70 1.55 +10% |[![CDATA[|[/pre|]]]|] Balance sheet and cash flow As of the reporting date September 30, 2011, the equity-to-assets ratio was 34.1% (December 31, 2010: 34.6%) and thereby remained clearly above the intended minimum rate strived for by the Executive Board. Net debt amounted to EUR 836.5 million as of September 30, 2011 (December 31, 2010: EUR 864.1 million). The net debt to adjusted EBITDA ratio amounted in the first nine months of 2011 on linear extrapolation of the adjusted EBITDA of the first nine months on a full year basis to 2.6 (1-9/2010: 2.9) and thus continued to be significantly below the maximum value of 3 targeted by the Executive Board. Free cash flow in the first nine months of the current financial year was at EUR 44.8 million (1-9/2010: EUR 56.2 million). Free cash flow adjusted for payments for significant acquisitions and proceeds from significant disposals amounted to EUR 98.6 million in the first nine months of 2011 (1-9/2010: EUR 82.7 million). 'Based on the good operating development of the first nine months, we were able to improve the cash flow from operating activities. With this, we have significantly reduced net debt', comments Helmut Kraft, STADA's Chief Financial Officer, and adds, looking ahead: 'We are confident to achieve the short- and long-term targets as planned through organic growth.' Regional development in STADA's two largest national markets In the first nine months of 2011, STADA's two largest national markets continued to be Germany and Russia. In Germany, STADA's largest national market, as expected, sales in the first nine months of 2011 decreased by 9% to EUR 359.0 million (1-9/2010: EUR 392.7 million). The sales decrease thereby amounted to only 5% in the third quarter of 2011. In view of good results in recent tenders for discount agreements, the Group's market share in the German generics market increased by volume to approx. 13.2% in third quarter of 2011. Overall, the German STADA activities had a share of 28.7% in Group sales in the reporting period (1-9/2010: 33.3%). The anticipated decrease in sales in Germany was still attributable to the difficult local framework conditions for generics. Thus, sales in the German Generics segment in the first nine months of 2011 decreased by 11% to EUR 265.1 million (1-9/2010: EUR 298.6 million). Sales generated with branded products, however, recorded a plus of 1% in the first nine months of 2011 to EUR 92.9 million (1-9/2010: EUR 92.1 million). For financial year 2011, the Executive Board expects, with a sales strategy that continues to be geared toward an appropriate local operating profitability, further sales decreases in the generics area and thus for the German business overall. In Russia, the Group's second most important national market in terms of sales, STADA recorded a significant sales increase in the first nine months of 2011 of 27%, applying last year's exchange rates. In euro, sales increased by a strong 24% to EUR 193.4 million (1-9/2010: EUR 156.0 million). Sales of branded products in Russia rose significantly by 38% to EUR 107.2 million (1-9/2010: EUR 78.0 million). With generics, the Group recorded a sales growth in the amount of 10% to EUR 85.4 million (1-9/2010: EUR 77.9 million). For financial year 2011, STADA continues to expect strong sales growth in local currency in the Russian market with operating profitability above Group average. The sales and earnings contributions of STADA's business in Russia as well as at the Group level will remain affected by the development of the currency relation of the Russian ruble to the euro. Also in STADA's next most important national market in terms of sales, significant increase could be achieved in the first nine months of 2011. So Group sales in this period grew in Italy by 8% to EUR 107.7 million (1-9/2010: EUR 99.9 million), in Belgium by 7% to EUR 105.8 million (1-9/2010: EUR 99.1 million) and in Spain by a very pleasing 35% to EUR 83.1 million (1-9/2010: EUR 61.8 million). In Serbia, local sales also increased in the reporting period in comparison to the extraordinarily low level of the previous year as expected. Applying the exchange rates of the previous year, sales increased by 36%. In euro, sales increased by 37% to EUR 72.2 million (1-9/2010: EUR 52.7 million). On September 21, 2011, the STADA Executive Board, however, came to the assessment that outstanding receivables due to Hemofarm from various Serbian pharmaceutical wholesalers are potentially, to a significant extent, not recoverable. In connection with this increased risk of default, the Executive Board decided to carry out corresponding impairments and unscheduled depreciation in the amount of EUR 96.9 million before taxes which were reported in the third quarter of 2011 as burdening one-time special effects in the Group. The resulting burden on earnings after taxes was EUR 87.2 million. The liquidity situation at STADA was not significantly burdened from this step because the impairments and depreciation had, for the most part, no effect on cash (see the Company's ad hoc release of September 21, 2011). Hemofarm and STADA, in discussions with all local market participants and with the Serbian state, continue to actively seek sustainable solutions for an improvement in the liquidity situation in the Serbian pharmaceutical market and thus also for the servicing of the outstanding Hemofarm receivables. If, as a result, the now extensive write-downs on outstanding receivables due to Hemofarm from Serbian pharmaceutical wholesalers be served to a better extent than anticipated, STADA will report such receipt of payments successively in the respective reporting period as earnings improving one-time special effects. In consideration of stable demand for Hemofarm products in the Serbian market, the Group continues to expect a sales increase in the local currency in Serbia for financial year 2011 and the following years. The extensive value adjustments in Serbia in the third quarter of 2011 gave reason to examine the value of goodwill in the Hemofarm Group throughout the year. The respective impairment test as of September 30, 2011 on the basis of the current sales and earnings prognoses of the local Serbian management revealed no necessity for an impairment on goodwill for the subgroup Hemofarm. Product development Research and development costs, which exclusively comprise costs for product development at STADA due to its business model focused on off-patent active pharmaceutical ingredients, amounted to EUR 36.6 million in the first nine months of the current financial year (1-9/2010: EUR 39.1 million). Furthermore, the Group capitalized development costs for new products in the amount of EUR 8.3 million in the first three quarters of 2011 (1-9/2010: EUR 9.3 million). Overall, STADA launched 437 individual products worldwide in the reporting period (1-9/2010: 442 product launches) in individual national markets. In view of the product pipeline, which remains well-filled, the Executive Board expects a continuous flow of new product launches to continue in future, with a focus on generics in EU countries. In addition, important contracts for the long-term development of biosimilars could be concluded in the third quarter. 'Through a collaboration with Gedeon Richter, agreed in the third quarter of 2011, for the development and marketing of two biosimilar products for the two monoclonal antibodies Rituximab and Trastuzumab, we have secured marketing access to two biosimilars with very high sales potential for our European core markets, and that at substantially more favorable conditions than with a development of our own,' comments Dr. Axel Müller, STADA's Chief Production and Development Officer, on the promising outlook of this strategic decision in the area of product development. Progress with acquisition policy STADA Arzneimittel AG and the shareholders of Spirig Pharma AG, a Swiss pharmaceuticals company based in Egerkingen, Canton Solothurn, in the current fourth quarter, signed a contract on the purchase of Spirig's generics business including the respective sales structures by STADA (see ad hoc update as of November 9, 2011). The purchase price for this generics business totals approx. CHF 97 million (at the current exchange rate approx. EUR 78 million) and also includes the right to continue marketing the acquired products under the Spirig umbrella brand. The acquired portfolio includes 56 prescription (RX) and 15 non-prescription (OTC) and discretionary prescription (OTX) products. With regard to the acquired products STADA estimates the current annual sales volume to be approx. CHF 42 million (at the current exchange rate approx. EUR 34 million) and EBIDTA, adjusted to the business structure being spun off, to be approx. CHF 9.5 million (at the current exchange rate approx. EUR 7.7 million). The acquisition does not include any production facilities. The transaction is subject to usual completion conditions as well as the condition that Spirig hive off the target business to a separate independent business unit. The purchase is strived to be completed in the first quarter of 2012. Payment of the purchase price will be made at the time of completion. In addition, in the third quarter of 2011, STADA and Grünenthal GmbH, a globally active research pharmaceuticals company located in Aachen, Germany, signed the contracts on the purchase of a branded product portfolio including the associated sales structures for numerous national markets in Central and Eastern Europe as well as in the Middle East. The purchase price for the branded product portfolio including sales structures and various pipeline products amounts to a total of approx. EUR 360 million in cash. The products, which include, among others, the branded products Tramal(R), Zaldiar(R), Transtec(R) and Palexia(R) in the relevant countries, are for the most part prescription drugs and positioned primarily in the pain area of indication. Expected sales in the current financial year 2011 for the existing product package in the respective markets amounts to approx. EUR 68.6 million. The expected EBITDA in the same period should be approx. EUR 25.6 million. Both values do not yet consider the sales and earnings of the licensed product Palexia(R) from the acquired product pipeline, which will be gradually introduced in the contract area in the next two years and from which thereafter an additional annual sales contribution of EUR 20 to EUR 25 million is expected. This acquisition still requires the approval of the responsible anti-trust authorities, so that the implementation of the transaction and the consolidation of product sales is expected for the current fourth quarter. Payment of the purchase price will be made at the time of completion of the acquisition. Outlook The Executive Board confirms the outlook for the future development of the STADA Group already given at the beginning of the year. The sales and earnings development of the STADA Group will thereby indeed be characterized in 2011 and 2012 and in the future by differing and partially contradictory factors in the various national markets. In the overall assessment of influence factors, the Executive Board, however, continues to expect an increase in Group sales for financial year 2011, as well as in 2012, from today's perspective. In view of all factors to be considered that influence the Group's earnings development, the Executive Board expects - despite the negative net income reported after the first nine months of 2011 due to the high burdening one-time special effects - from today's perspective, nevertheless, a significantly positive reported net income in the double-digit million euro area for the full year 2011. For 2012, the Executive Board once again expects a significantly higher reported net income. At the same time the Group expects positive effects on earnings as a result of the implementation of the 'STADA - build the future' project for EBITDA adjusted for one-time special effects and the correspondingly adjusted net income in the coming years. By 2013, from today's perspective, project-related investments of a total of approx. EUR 20 million as well as project-related expenditures for special write-offs, personnel expenses and consultancy services of a total of approx. EUR 50 million are expected (in each case including the past financial year 2010). The Group will recognize each of these project-related costs as one-time special effects according to progression of the project. In the case of the sale of production facilities in Ireland and Russia, currently evaluated in the context of 'STADA - build the future', a significant expense in the low net double-digit million euro area would be expected for financial year 2012 from today's perspective. The STADA Executive Board continues to expect growth in the key earnings figures adjusted for one-time special effects in the Group for both 2011 and 2012. For 2011, the Executive Board continues to see, from today's perspective, the opportunity for an increase in the high single-digit percent area in EBITDA adjusted for one-time special effects. Furthermore, the Executive Board continues to hold to the long-term forecast envisaged for 2014, according to which Group sales of approx. EUR 2.15 billion, at an adjusted level, EBITDA of approx. EUR 430 million and net income of approx. EUR 215 million - on the basis of a largely organic business - should be reached. Additional information: STADA Arzneimittel AG / Corporate Communications / StadastraÃe 2-18 / D - 61118 Bad Vilbel / Phone: +49 (0) 6101 603-113 / Fax: +49 (0) 6101 603-506 / E-mail: communications@stada.de Or visit us in the Internet at www.stada.com. End of Corporate News --------------------------------------------------------------------- 10.11.2011 Dissemination of a Corporate News, transmitted by DGAP - a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: STADA Arzneimittel AG StadastraÃe 2-18 61118 Bad Vilbel Germany Phone: +49 (0)6101 603- 113 Fax: +49 (0)6101 603- 506 E-mail: communications@stada.de Internet: www.stada.de ISIN: DE0007251803, DE0007251845, WKN: 725180, 725184, Listed: Regulierter Markt in Düsseldorf, Frankfurt (Prime Standard); Freiverkehr in Berlin, Hamburg, Hannover, München, Stuttgart End of News DGAP News-Service --------------------------------------------------------------------- 145482 10.11.2011
DGAP-News: STADA: STADA 1-9/2011: Good development of sales and operating earnings - High burden on reported key earnings figures through one-time special effects - Confirmation of long-term growth targets
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