STADA: Operationally successful financial year 2011 – Increase in all adjusted key earnings figures – Reported key earnings figures decrease due to the high burdening one-time special effects – Positive outlook until 2014
Important items at a glance
- Good operating earnings development with high burdening special effects totaling EUR 136.3 million before taxes or EUR 124.5 million after taxes
- Group sales EUR 1.72 billion (+5% – adjusted +5%)
- Net income EUR 22.0 million (-68% – adjusted +10%)
- EBITDA EUR 223.2 million (-17% – adjusted +7%)
- Earnings per share EUR 0.37 (-68% – adjusted + 10%)
- Expansion of international business activities to 72% of Group sales
- Successful refinancing with promissory notes in the amount of EUR 400 million
- Dividend proposal of EUR 0.37 per STADA common share unchanged from the previous year
- Positive outlook for 2012: further growth in Group sales and opportunity for an increase of adjusted EBITDA in the high single-digit percent area – long-term targets for 2014 affirmed
Bad Vilbel, March 29, 2012 – Today, on March 29, 2012, STADA Arzneimittel AG published the final financial results for the year 2011 and thereby confirmed all preliminary results published on March 1, 2012.
“The sales and operating earnings development in 2011 was within the scope of our expectations. Not only did Group sales increase, but also all operational key earnings figures, i.e. without consideration of high burdening one-time special effects. We were able to generate pleasing developments with significant sales growth in some of our largest markets”, said Hartmut Retzlaff, Chairman of the Executive Board of STADA, commenting positively on the good operational financial year 2011. “We remain optimistic for the Group’s outlook and expect further growth in Group sales and adjusted key earnings figures”, said Retzlaff about STADA’s prospects.
Development of sales
In the financial year 2011, the STADA Group’s sales development was within the scope of expectations. With varying development in individual national markets, Group sales rose by 5% in the reporting year to EUR 1,715.4 million (previous year: EUR 1,627.0 million), thereby reaching a new record value in Company history. When effects on sales based on changes in the Group portfolio and currency effects are taken into account, Group sales increased by 5% in 2011.
Sales of Generics, which continues to be the significantly larger core segment, exhibited growth in 2011 of 6% to EUR 1,188.3 million (previous year: EUR 1,124.2 million). Generics thus contributed 69.3% (previous year: 69.1%) to Group sales. Adjusted, generics sales rose by 6%.
The Branded Products core segment showed a sales increase of 11 % to EUR 471.9 million in the reporting year (previous year: EUR 425.0 million). Branded Products thus had a share of Group sales of 27.5% (previous year: 26.1%). The Group recorded an increase of 12% in adjusted sales of branded products.
The focus of STADA’s business activities continued to be clearly on Europe in the reporting year. There, sales in the reporting year rose by 6% to EUR 1,645.1 million (previous year: EUR 1,553.6 million). In Western Europe, STADA reported a sales increase of 1% to EUR 1,164.2 million in financial year 2011 (previous year: EUR 1,148.1 million). In Eastern Europe, STADA achieved sales growth of 19% to EUR 480.8 million in 2011 (previous year: EUR 405.5 million).
In financial year 2011, the operational key earnings figures, i.e. without consideration of high burdening one-time special effects, were within the scope of expectations.
The reported key earnings figures in 2011 decreased significantly due to high burdening one-time special effects – primarily as a result of impairments on receivables from various Serbian pharmaceutical wholesalers – operationally, i.e. excluding one-time special effects, however, they all exceeded the key earnings figures, adjusted accordingly, of the previous year.
Operating profit decreased in the reporting year by 26% to EUR 120.1 million (previous year: EUR 161.8 million). Net income decreased by 68% to EUR 22.0 million (previous year: EUR 68.4 million). EBITDA recorded a decrease of 17% to EUR 223.2 million (previous year: EUR 268.8 million).
Adjusted for influences distorting the period comparison resulting from one-time special effects and non-operational effects from interest rate hedge transactions (previous year: 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 8% in 2011 to EUR 257.6 million (previous year: EUR 239.3 million). Adjusted net income recorded growth of 10% to EUR 146.6 million (previous year: EUR 133.3 million). Adjusted EBITDA increased by 7% to EUR 337.2 million (previous year: EUR 315.9 million).
One-time special effects amounted to a net burden on earnings of EUR 137.5 million before or EUR 125.4 million after taxes in financial year 2011 (previous year: net burden on earnings due to one-time special effects in the amount of EUR 79.9 million before or EUR 66.7 million after taxes). In financial year 2011, non-operational effects from interest rate hedge transactions amounted to a net relief on earnings of EUR 1.2 million before or EUR 0.9 million after taxes, which resulted from the measurement of these transactions (previous year: net relief on earnings as a result of non-operational effects from currency influences and interest rate hedge transactions of EUR 2.7 million before or EUR 1.9 million after taxes).
Taking into account these adjustments resulted in the following development of the reported and adjusted key earnings figures in 2011:
|In EUR million||2011||2010||+/-|
|Operating profit, adjusted||257.6||239.3||+8%|
|EBITDA (earnings before interest, taxes, depreciation and amortization)||223.2||268.8||-17%|
|EBIT (earnings before interest and taxes)||121.2||162.1||-25%|
|EBT (earnings before taxes)||69.5||109.0||-36%|
|Net income, adjusted||146.6||133.3||+10%|
|Earnings per share in EUR||0.37||1.16||-68%|
|Earnings per share in EUR, adjusted||2.49||2.27||+10%|
Balance sheet and cash flow
As of the reporting date December 31, 2011, the equity-to-assets ratio was 30.9% (December 31, 2010: 34.6%) and thereby remained above the intended minimum rate strived for by the Executive Board. Net debt amounted to EUR 900.3 million as of December 31, 2011 (December 31, 2010: EUR 864.1 million).
“We are pleased with the increase in operational key earnings figures achieved in a difficult market environment as well as the continual expansion of margins. At the same time, we succeeded in refinancing the Company in the past months and smoothing out our debt maturity profile. We place a great value upon sufficient liquidity and a stable financial structure. Increasing internationalization, supported by the acquisitions concluded in the first quarter of 2012, continuous investments in branded products and synergies from our cost efficiency program “STADA – build the future” provide a solid basis for the sustainable growth in our operating cash flow”, according to Helmut Kraft, STADA’s Chief Financial Officer.
For larger acquisitions or cooperations with capital investments, appropriate capital measures are generally imaginable as long as the burden on the equity-to-assets ratio is not too high from such acquisitions or cooperations.
Free cash flow amounted to EUR -18.1 million (previous year: EUR 102.4 million). Free cash flow adjusted for payments for significant acquisitions and proceeds from significant disposals decreased to EUR 123.3 million (previous year: EUR 135.0 million).
On March 1, 2012, STADA Executive Board already proposed to distribute a dividend unchanged from the previous year of EUR 0.37 per common share for financial year 2011 despite the reduced net income reported due to the high burdening one-time special effects. Should the Annual General Meeting follow this proposal on May 30, 2012, this would result in total dividend payments of EUR 21.8 million (previous year: EUR 21.7 million).
In this dividend proposal, the Executive Board was guided by the estimation that the high burdens on earnings in Serbia reported in 2011 were of a one-time character, and that STADA’s sustainable earnings and dividend potential is not influenced by this.
Regional development in STADA’s two largest national markets
In financial year 2011, STADA’s two largest national markets continued to be Germany and Russia.
In Germany, STADA’s largest national market, the sales in financial year 2011 went down by 7% to EUR 479.9 million (previous year: EUR 516.4 million). Whereas the sales decrease still amounted to 9% in the second quarter in the German market, sales decreased in the third quarter by 5% and in the fourth quarter only by 2%. In total STADA’s German activities contributed 28.0% to Group sales in 2011 (previous year: 31.7%). This anticipated decrease in sales in Germany was still attributable to the difficult local framework conditions for generics. Sales in the German generics segment in the reporting year thus decreased by 9% to EUR 366.7 million (previous year: EUR 401.7 million).
The sales achieved with branded products in Germany in the reporting year approximately amounted to the same level of the previous year at EUR 112.2 million (previous year: EUR 111.9 million). The total share achieved by STADA with branded products in the German market amounted to 23% in 2011 (previous year: 22%).
Overall for financial year 2012, the Executive Board expects the German business has a moderate chance for growth on the whole with operating profitability continuing at only just under the Group average. In view of partly high-volume discount agreements concluded in 2011, the STADA Executive Board expects that the Group’s market share by volume will continue to grow in the German generics market.
In Russia, which continues to be the Group’s second most important national market according to sales, STADA generated a significant sales increase of 29% in financial year 2011, applying the exchange rate of the previous year. Sales in euro increased by a strong 26% to EUR 279.6 million (previous year: EUR 221.2 million).
With generics, the Group recorded sales growth in the amount of 22% to EUR 124.9 million (previous year: EUR 102.6 million), so that their share of STADA’s sales in the Russian market amounted to 45% (previous year: 46%). Sales of branded products rose significantly by 30% to EUR 153.5 million (previous year: EUR 118.2 million) and thus to 55% of STADA’s Russian sales (previous year: 53%).
In financial year 2012, STADA expects further strong sales growth in local currency in Russia 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.
In 2011 the average number of employees in the STADA Group decreased to 7,826 (previous year: 8,080). This reduction is predominantly due to the continuous implementation of the “STADA – build the future” project and the associated planned staff reductions.
Research and development costs, which at STADA exclusively comprise costs for product development due to the business model that focuses on products with off-patent active pharmaceutical ingredients, were EUR 50.4 million in 2011 (previous year: EUR 54.9 million) in the reporting year. The sales-related ratio of research and development costs amounted to 2.9% (previous year: 3.4%). In addition, development costs for new products in the amount of EUR 12.3 million (previous year: EUR 13.3 million) were capitalized in 2011.
“In financial year 2011, we launched 600 individual products worldwide and, with this record number, the highest in our Company’s history, again proved the sustainable and successful development and approval activities of the Group”, said Dr. Axel Müller, Chief Production and Development Officer, in full satisfaction of this pleasing result.
The significant importance of the successful product development is also shown in a share in sales of 9%, that the Group achieved with products introduced by STADA in the last two years (previous year: 10%).
Overall, the Group continues to have a well-filled product pipeline. This assessment is confirmed by, among other things, the high number of running approval procedures as of December 31, 2011 totaling over 1,100 for over 130 active pharmaceutical ingredients and active ingredient combinations for more than 50 countries. This applies in particular to generics in the EU markets.
In the Annual Report published today, the Executive Board confirms the positive outlook for the future development of the STADA Group already given on March 1, 2012. Thereby, sales and earnings development of the STADA 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 current acquisitions, the purchase of the branded product package from Grünenthal for various national markets as well as the purchase of Spirig Healthcare’s Swiss generics business. 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 the mid and long-term earnings potential, STADA will continue to implement the Group-wide cost efficiency program “STADA – build the future” scheduled for the period of 2010 to 2013. Thereby, the expected project-related costs will continue, as planned, 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 incurred from the sale of the factory in Ireland in the first 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.
Furthermore, the Executive Board affirms its long-term prognosis 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 should be reached. The Group’s recent acquisitions, which STADA finances organically, i.e. 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