STADA records positive business development in the first half of 2012 – outlook remains positive to 2014
Important items at a glance
- Group sales EUR 885.2 million (+7 percent)
- Adjusted EBITDA and adjusted earnings per share both rise to EUR 176.7 million (+10 percent) and EUR 1.19 (+7 percent) respectively
- One-time special effects in the amount of EUR 25.7 million before taxes primarily due to the planned continuation of the cost efficiency program “STADA – build the future”
- Accelerated growth in emerging markets – especially in Russia
- Increase of international business activities to 74 percent of Group sales
- Expansion of the self-pay portfolio with strong growth in branded products
- Positive outlook for 2012 confirmed: further growth in Group sales and the opportunity for an increase in adjusted EBITDA to the high single-digit percent area – long-term targets for 2014 affirmed
Bad Vilbel, August 8, 2012 – Today, STADA Arzneimittel AG published the financial results for the first half of 2012. Accordingly, Group sales as well as all operational, that is, adjusted for one-time special effects, key earnings figures increased. In view of predominately planned burdening one-time special effects particularly in the first quarter of 2012 from the further implementation of the Group-wide cost efficiency program “STADA – build the future”, the accumulated reported key earnings figures in the first half of 2012 – except for reported EBITDA – decreased. In the second quarter of 2012 taken alone, however, all of the reported key earnings figures increased.
“In consideration of the recently made acquisitions, we were able to expand our international business activities to a share of nearly three quarters of Group sales, and have thereby again made ourselves a bit more independent of the heavily regulated German market”, explained STADA Chairman of the Executive Board, Hartmut Retzlaff. “Against this backdrop we remain optimistic in our outlook for the current financial year and expect to be able to reach the goals we have set.”
Development of sales
In the first six months of 2012, Group sales increased by 7 percent to EUR 885.2 million (1-6/2011: EUR 829.7 million). This increase was still based on sales achieved by STADA in the international business, which had a total share of Group sales in the half year under review of 74 percent (1-6/2011: 72 percent) and increased by 9 percent to EUR 652.0 million (1-6/2011: EUR 596.7 million). When effects on sales attributable to changes in the Group portfolio and currency effects are taken into account, Group sales were just above the corresponding period in the previous year at EUR 832.7 million in the first half of 2012.
Generics, which continues to be the significantly larger core segment, recorded a sales increase of 2 percent to EUR 585.1 million in the first half of 2012 (1-6/2011: EUR 572.1 million). Thus, Generics had a share of 66.1 percent in Group sales in the reporting period (1-6/2011: 69.0 percent). Adjusted, generics sales in the Group increased by 1 percent.
Sales of the core segment Branded Products showed a sales rise of 23 percent to EUR 284.5 million in the first six months of the current financial year (1-6/2011: EUR 231.0 million). Branded Products thus contributed 32.1 percent to Group sales in the reporting period (1-6/2011: 27.8 percent). Adjusted sales of branded products in the Group rose by 6 percent.
The focus of STADA’s business activities continued to be on Europe in the half year under review. There, sales in the first half of 2012 increased by 6 percent to EUR 843.3 million (1-6/2011: EUR 796.0 million). In Western Europe, sales increased in the same period by 3 percent to EUR 595.5 million (1-6/2011: EUR 579.8 million). In Eastern Europe, STADA achieved an increase in sales of 15 percent to EUR 247.8 million in the reporting period (1-6/2011: EUR 216.2 million).
The earnings development in the first half of 2012 was characterized by an increase in operating performance that was shown with growth in all of the Group’s operational, that is, adjusted for one-time special effects, key earnings figures. In view of burdening one-time special effects primarily in the first quarter of 2012 especially from the further planned implementation of the Group-wide cost efficiency program “STADA – build the future”, the accumulated reported key earnings figures in the first six months of the year – except for reported EBITDA – decreased. In the second quarter of 2012 taken alone, however, all of the reported key earnings figures increased.
Reported operating profit decreased by 6 percent in the first six months of 2012 to EUR 101.5 million (1-6/2011: EUR 107.6 million). In the second quarter taken alone, reported operating profit recorded an increase of 11 percent to EUR 55.2 million (second quarter of 2011: EUR 49.9 million). Reported net income was down by 14 percent to EUR 48.1 million (1-6/2011: EUR 56.1 million) in the half year under review. In the second quarter taken alone, reported net income increased by 9 percent to EUR 28.7 million (second quarter of 2011: EUR 26.3 million). In the first half of 2012, reported EBITDA rose by 5 percent to EUR 160.7 million (1-6/2011: EUR 153.5 million). In the second quarter taken alone, reported EBITDA grew by 13 percent to EUR 83.5 million (second quarter of 2011: EUR 73.7 million).
After adjusting the key earnings figures for influences distorting the period comparison resulting from one-time special effects and non-operational effects from the measurement of derivative financial instruments, adjusted operating profit recorded a plus of 5 percent in the reporting period to EUR 127.2 million (1-6/2011: EUR 121.4 million). Adjusted net income increased by 7 percent to EUR 69.8 million in the first six months of the year (1-6/2011: EUR 65.5 million). In the first half of 2012, adjusted EBITDA rose by 10 percent to EUR 176.7 million (1-6/2011: EUR 160.2 million). Adjusted net income and adjusted EBITDA were thus in the upper end of the expectations of the Executive Board.
One-time special effects amounted to a net burden on earnings of EUR 25.7 million before or EUR 22.9 million after taxes in the first half of 2012 (1-6/2011: net burden on earnings due to one-time special effects in the amount of EUR 13.8 million before or EUR 10.5 million after taxes). Non-operational effects from the measurement of derivative financial instruments amounted, in the first half of 2012, to a net relief on earnings of EUR 1.7 million before or EUR 1.2 million after taxes (1-6/2011: net relief on earnings as a result of non-operational effects from derivative financial instruments in the amount of EUR 1.5 million before or EUR 1.1 million after taxes).
Taking these adjustments into account resulted in the following development of the reported and adjusted key earnings figures from January to June 2012 as compared to the corresponding period of the previous year:
|in Euro million||1-6/2012||1-6/2011||+/-|
|Operating profit, adjusted||127.2||121.4||+5%|
|EBITDA (earnings before interest, taxes, depreciation and amortization)||160.7||153.5||+5%|
|EBIT (earnings before interest and taxes)||103.9||107.9||-4%|
|EBT (earnings before taxes)||72.8||82.4||-12%|
|Net income, adjusted||69.8||65.5||+7%|
|Earnings per share in Euro||0.82||0.95||-14%|
|Earnings per share in Euro, adjusted||1.19||1.11||+7%|
Balance sheet and cash flow
As of the reporting date June 30, 2012, the equity-to-assets ratio was 29.7 percent (December 31, 2011: 30.9 percent) and was thereby satisfactory in the opinion of the Executive Board. In view of the very high payments in the first half of 2012 for the acquisition of companies and products for the short-term expansion of the portfolio in the total amount of EUR 377.5 million (1-6/2011: EUR 51.5 million), net debt rose to EUR 1,279.1 million as of June 30, 2012 (December 31, 2011: EUR 900.3 million). The net debt to adjusted EBITDA ratio amounted in the first half of 2012 on linear extrapolation of the adjusted EBITDA of the first half year on a full year basis to 3.6 (1-6/2011: 2.8) and was thus, as expected in view of the recently made acquisitions, above the value of 3 strived for by the Executive Board. The Executive Board continues to strive to return this key figure to a level of 3 by the end of 2013.
Free cash flow in the first half of the current financial year was at EUR -356.4 million resulting from cash flow from investing activities characterized by the high payments for investments (1-6/2011: EUR -2.4 million). Free cash flow adjusted for payments for significant acquisitions and proceeds from significant disposals amounted to EUR 24.6 million in the half year under review (1-6/2011: EUR 49.1 million).
“Against the backdrop of the difficult market environment in Western Europe, we are happy with the increase in the adjusted EBITDA margin in the first half of the year as compared to the previous year period. Synergies from the ongoing cost efficiency program “STADA – build the future” and once again the strong growth in Russia have more than compensated for the price pressure in Western Europe. In addition, the strong performance of Branded Products made it so that we have become more independent from governmental price regulations on the whole”, expressed Helmut Kraft, STADA’s Chief Financial Officer.
Regional development in STADA’s two largest national markets
In the first half of 2012, STADA’s two largest national markets remained Germany and Russia.
In Germany, STADA’s largest national market, sales were, with EUR 233.2 million in the reporting period (1-6/2011: EUR 233.1 million), at approximately the same level as the corresponding period of the previous year. Whereas sales in the German market were still down by 4 percent in the first quarter of 2012, sales in the second quarter of the current financial year reported growth of 4 percent. In total, STADA activities in Germany had a share of 26.3 percent in Group sales in the first six months of 2012 (1-6/2011: 28.1 percent).
The development in the German market was still attributable to the difficult local framework conditions for generics, which are characterized by intensive competition for tenders for discount agreements with public health insurance organizations. Nevertheless, sales of the German Generics segment – in consideration of partly high-volume discount agreements concluded in 2011 – in the half year under review at EUR 168.0 million (1-6/2011: EUR 169.7 million) were approximately the same as the corresponding prior-year period. Whereas the sales of generics from January to March 2012 reported a decline of 6 percent, sales achieved by STADA in the German market with generics increased by 5 percent in the second quarter of 2012. Sales achieved by the Group in Germany with generics had a share of 72 percent of total sales achieved in the German market in the reporting period (1-6/2011: 73 percent).
Sales of branded products in the first six months of 2012 increased by 3 percent to EUR 64.7 million (1-6/2011: EUR 62.8 million). Sales achieved in Germany with branded products had a total share of 28 percent (1-6/2011: 27 percent) of sales generated in the German market.
For the financial year 2012, Executive Board expects that the German business will remain relatively stable overall. Operating profitability will remain just below the Group average. In consideration of partly high-volume discount agreements concluded in 2011, the Executive Board expects that the Group’s market share by volume will continue to grow in the German generics market.
In Russia, the Group’s second most important national market according to sales, sales increased significantly in the first half of 2012 by 22 percent applying the exchange rate of the previous year. In euro, STADA recorded even stronger sales growth of 24 percent to EUR 149.5 million (1-6/2011: EUR 120.9 million) due to a positive currency effect of the Russian ruble.
Generics recorded substantial sales growth for the Group in the Russian market of 26 percent to EUR 66.3 million (1-6/2011: EUR 52.8 million), so that their share of STADA’s sales achieved in Russia amounted to 44 percent (1-6/2011: 44 percent). Sales of branded products increased by 22 percent to EUR 82.7 million (1-6/2011: EUR 67.7 million) and their share of STADA’s Russian sales amounted to 55 percent (1-6/2011: 56 percent).
In the course of the restructuring of the Russian production facilities according to “STADA – build the future”, the STADA Executive Board and the STADA Supervisory Board agreed at a joint meeting on August 7, 2012 to a sale of both Russian production facilities, OOO Makiz Pharma, Moscow, and OOO Skopin Pharmaceutical Plant, Ryazanskaya obl., in the context of a partial management buyout to LLC DMN Invest (see the Company’s ad hoc release of August 7, 2012.) After the decision by STADA’s boards, the contract as well as associated temporary service agreements are expected to be signed promptly in the current third quarter of 2012.
In financial year 2012, STADA expects unchanged 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 both 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.
Research and development costs amounted to EUR 25.7 million in the first six months of the current financial year (1-6/2011: EUR 23.5 million). Since STADA does not carry out any research into new active pharmaceutical ingredients due to its business model, it is only a matter of development costs. Furthermore, the Group capitalized development costs for new products in the amount of EUR 6.9 million in the first half of 2012 (1-6/2011: EUR 5.4 million).
Overall, STADA launched 367 individual products worldwide in the half year under review (1-6/2011: 253 product launches) in individual national markets.
“With an impressive growth rate of 45 percent in the number of new product launches in the first half of 2012 as compared to the corresponding period of the previous year, we were once again able to prove the strength of our development and registration activities”, said Dr. Axel Müller, STADA’s Chief Production and Development Officer.
In view of the product pipeline, which remains well-filled, the Executive Board expects a steady flow of product launches to continue in the future with a focus on generics in EU countries.
The Executive Board confirms the outlook for the future development of the STADA Group already given at the beginning of the year. Thereby, sales and earnings development of the Group will indeed continue to be characterized by partially stimulating, but also in part very challenging framework conditions in the various national markets in which STADA is active. In the overall assessment of opposing influence factors, the Executive Board, from today’s perspective, nevertheless expects a further clear increase in Group sales for 2012, in particular with the inclusion of the recent acquisitions of the current financial year. Here, according to the estimation of the Executive Board, the Branded Products segment is expected to grow at a disproportionate rate in 2012, so that the share of the generally higher margin branded products in Group sales will thereby continue to grow.
In order to strengthen mid and long-term earnings potential, STADA will continue in the implementation of the Group-wide cost efficiency program “STADA – build the future” scheduled for the period of 2010 to 2013. Thereby the expected planned project-related costs will continue to be reported as one-time special effects according to the progress of the project in each case. This also includes the one-time burden in the amount of approximately EUR 9.0 million before or approximately EUR 7.2 million after taxes from the sale of both Russian production facilities as approved by the Executive Board and the Supervisory Board of STADA Arzneimittel AG in the current third quarter of 2012.
Despite these earnings burdening one-time special effects from the further implementation of the “STADA – build the future” program, the Executive Board expects a very significant increase in reported net income for 2012 as compared to 2011.
The STADA Executive Board also expects continued growth in the key earnings figures adjusted for one-time special effects in the Group for 2012 and also sees, from today’s perspective, the opportunity for an increase in the high single-digit percent area in EBITDA adjusted for one-time special effects for 2012. This means that record results are once again targeted for these key figures in 2012.
In addition, the Executive Board affirms its long-term forecast envisaged for 2014, according to which Group sales of approximately EUR 2.15 billion, at an adjusted level, EBITDA of approximately EUR 430 million and net income of approximately EUR 215 million should be reached. The Group’s current acquisitions, which STADA finances organically, that is, without a capital increase, give the Executive Board a high level of confidence that these long-term growth targets will, at a minimum, be reached despite the operating challenges that still remain in individual national markets.
For more information, please contact:
STADA Arzneimittel AG
D-61118 Bad Vilbel
Tel.: +49 6101 603-113
Fax: +49 6101 603-506