STADA: Excellent start in Q1/2012 – Increase in all adjusted key earnings figures – Reported key earnings figures burdened by planned one-time special effects – Positive outlook until 2014 confirmed
Important items at a glance
- Sales development in 1-3/2012 within expectations – Profitability further increased – Gross margin rises to over 50%:
- Group sales EUR 443.4 million (+6%)
- Net income EUR 19.4 million (-35% – adjusted +18%)
- EBITDA EUR 77.3 million (-3% – adjusted +12%)
- Earnings per share EUR 0.33 (-35% – adjusted +20%)
- Expansion of international business activities to 72% of Group sales
- Cash flow from operating activities increases to EUR 46.1 million (+9%)
- Due to the implementation of the cost efficiency program “STADA – build the future”, planned burdening one-time special effects in the amount of EUR 18.9 million before tax
- Integration of acquired business activities according to plan
- Positive outlook for 2012 confirmed: further growth in Group sales and the opportunity for an increase of adjusted EBITDA in the high single-digit percent area – long-term targets for 2014 affirmed
Bad Vilbel, May 10, 2012 – Today, on May 10, 2012, STADA Arzneimittel AG published the financial results for the first quarter of 2012. Accordingly, Group sales as well as all operational, i.e. adjusted for one-time special effects, key earnings figures increased. In view of the largely planned, burdening one-time special effects, which were particularly attributable to the further implementation of the Group-wide cost efficiency program “STADA – build the future”, the reported key earnings figures recorded an expected decrease in the reporting quarter.
“Overall, STADA's business development was operationally good in the first quarter of 2012. Adjusted for largely planned, burdening one-time special effects, EBITDA and net income even met our highest expectations”, according to Hartmut Retzlaff, Chairman of the Executive Board of STADA Arzneimittel AG. “In addition, we made significant progress in the context of our accelerated acquisitions policy to complement our organic growth. The integration of business activities that we have just recently acquired is also progressing according to plan”, said Retzlaff, satisfied with the successful progress of integration management.
Development of Sales
In the first three months of 2012, Group sales increased by 6% to EUR 443.4 million (1-3/2011: EUR 418.3 million). The increase continued to be attributable to growth in STADA’s international sales, whose share in Group sales in the reporting quarter totaled 72% (1-3/2011: 70%) and recorded growth of 10% to EUR 320.6 million (1-3/2011: EUR 291.0 million). In consideration of sales influences, which are based on changes in the Group portfolio and currency effects, Group sales recorded growth of 2% in the reporting period as compared with the corresponding period of the previous year.
Sales of Generics, which continues to be the clearly larger core segment, recorded an increase of 2% to EUR 299.3 million (1-3/2011: EUR 292.8 million) in the first quarter of 2012. Generics thus contributed 67.5% to Group sales in the reporting period (1-3/2011: 70.0%). Adjusted, generics sales in the Group increased by 1%.
The Branded Products core segment recorded growth in sales of 18% to EUR 135.2 million in the first three months of the current financial year (1-3/2011: EUR 114.6 million). Branded Products thus had a share of 30.5% in Group sales in the first quarter of 2012 (1-3/2011: 27.4%). The Group recorded growth of 6% in adjusted sales of branded products.
The main focus of STADA's business activities continued to be clearly on Europe in the reporting period. Here, STADA Group sales increased by 6% to EUR 425.2 million (1-3/2011: EUR 401.8 million) in the first quarter of 2012. In Western Europe, STADA recorded an increase in sales in the first three months of 2012 of 4% to EUR 314.5 million (1-3/2011: EUR 301.8 million). In Eastern Europe, STADA achieved a sales increase of 11% to EUR 110.7 million in the reporting quarter (1-3/2011: EUR 100.0 million).
The earnings development in the first quarter of 2012 was characterized by an increase in operating performance that was shown with growth in all of the Group’s operational, i.e adjusted for one-time special effects, key earnings figures. The reported key earnings figures, however, recorded a decline, which was attributable to the burdening one-time special effects, in particular from the further planned implementation of the Group-wide cost efficiency program “STADA – build the future”.
Reported operating profit thus declined in the first three months of 2012 by 20% to EUR 46.3 million (1-3/2011: EUR 57.6 million). Reported net income reduced by 35% to EUR 19.4 million (1-3/2011: EUR 29.8 million) in the reporting quarter. Reported EBITDA showed a decrease of 3% to EUR 77.3 million in the first quarter of 2012 (1-3/2011: EUR 79.8 million).
After adjusting the key earnings figures for influences distorting the period comparison resulting from one-time special effects and nonoperational effects from interest rate hedge transactions, adjusted operating profit recorded growth of 7% to EUR 67.9 million (1-3/2011: EUR 63.6 million) in the first three months of 2012. Adjusted net income recorded growth of 18% to EUR 39.3 million (1-3/2011: EUR 33.2 million) in the reporting period. Adjusted EBITDA increased in the first three months of the current financial year by 12% to EUR 92.3 million (1-3/2011: EUR 82.5 million). Adjusted net income and adjusted EBITDA thus met the highest expectations of the Executive Board.
One-time special effects recorded a net burden on earnings of EUR 21.6 million before or EUR 20.0 million after taxes in the first quarter of 2012 (1-3/2011: net burden on earnings due to one-time special effects in the amount of EUR 5.9 million before or EUR 4.5 million after taxes). Non-operational effects from interest rate hedge transactions amounted, in the first quarter of 2012, to a net relief on earnings of EUR 0.1 million before or EUR 0.1 million after taxes, which resulted from the measurement of these transactions (1-3/2011: net relief on earnings as a result of non-operational effects from interest rate hedge transactions of EUR 1.5 million before or EUR 1.1 million after taxes).
Taking into account these adjustments resulted in the following development of the reported and adjusted key earnings figures in the first quarter of 2012:
|in EUR million||1-3/2012||1-3/2011||+/-|
|Operating profit, adjusted||67.9||63.6||+7%|
|EBITDA (earnings before interest, taxes, depreciation and amortization)||77.3||79.8||-3%|
|EBIT (earnings before interest and taxes)||47.3||57.6||-18%|
|EBT (earnings before taxes)||31.9||45.5||-30%|
|Net income, adjusted||39.3||33.2||+18%|
|Earnings per share in EUR||0.33||0.51||-35%|
|Earnings per share in EUR, adjusted||0.67||0.56||+20%|
Balance sheet and cash flow
As of the reporting date March 31, 2012, the equity-to-assets ratio was 30.6% (December 31, 2011: 30.9%) and thereby satisfactory in the opinion of the Executive Board. Against the backdrop of the very high payments in the first quarter for the acquisition of companies and products for the expansion of the portfolio in the short term in the total amount of EUR 338.0 million (1-3/2011: EUR 1.1 million), net debt rose to EUR 1,217.0 million as of March 31, 2012 (December 31, 2011: EUR 900.3 million). The net debt to adjusted EBITDA ratio amounted in the first quarter of 2012 on linear extrapolation of the adjusted EBITDA of the first quarter on a full year basis to 3.3 (1-3/2011: 2.5) and was thus, as expected in view of these recently made acquisitions, above the maximum value of 3 strived for by the Executive Board. The Executive Board still aims to once again reduce this figure to a maximum value of 3 within a period of 12 to 18 months.
Free cash flow in the first quarter of the current financial year was at EUR -311.1 million resulting from cash flow from investing activities characterized by the high payments for investments (1-3/2011: EUR 31.2 million). Free cash flow adjusted for payments for significant acquisitions and proceeds from significant disposals amounted to EUR 30.4 million in the reporting quarter (1-3/2011: EUR 32.4 million).
“With growth of 12% in adjusted EBITDA, we have had an excellent start in the new financial year despite continuing difficult market conditions in Germany and the conversion of the distribution model in Serbia which temporarily curb sales. In addition to ongoing improvement in margins, a particular highlight is the positive trend in operating cash flow, among other things, supported by an improved credit management and an optimized cost structure in Serbia. The implementation of our efficiency program “STADA – build the future” is moving ahead according to plan”, said Helmut Kraft, STADA's Chief Financial Officer.
Regional development in STADA’s two largest national markets
STADA's two largest national markets remained Germany and Russia in the reporting quarter.
In Germany, the largest national market for STADA, sales in the reporting period decreased by 4% to EUR 122.8 million (1-3/2011: EUR 127.3 million). Overall, STADA’s German business activities contributed 27.7% to Group sales in the first three months of 2012 (1-3/2011: 30.4%).
The decrease in sales 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. In view of this, sales in the German Generics segment in the first three months of 2012 recorded a decrease of 6% to EUR 87.0 million (1-3/2011: EUR 92.5 million). Sales generated by STADA in the German market with generics in the reporting period amounted to 71% (1-3/2011: 73%) of total sales generated in the German market.
Sales generated with branded products recorded growth of 3% in the first three months of 2012 to EUR 35.5 million (1-3/2011: EUR 34.5 million). Sales achieved by STADA in Germany with branded products had a total share of 29% (1-3/2011: 27%) of sales generated in the German market.
For financial year 2012, the Executive Board still 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, the Group’s second most important national market according to sales, sales increased in the first quarter of 2012 by a strong 16% applying the exchange rate of the previous year. In euro, STADA recorded even more significant sales growth of 19% to EUR 64.8 million (1-3/2011: EUR 54.5 million), to which a positive currency effect of the Russian ruble also contributed.
With generics, the Group recorded strong sales growth in Russia of 18% to EUR 28.0 million (1-3/2011: EUR 23.7 million), so that their share of STADA’s sales achieved in the Russian market amounted to 43% (1-3/2011: 44%). Sales of branded products rose significantly by 19% to EUR 36.3 million (1-3/2011: EUR 30.4 million) and thereby to 56% of STADA’s sales in Russia (1-3/2011: 56%).
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 significantly affected by the development of the currency relation of the Russian ruble to the euro.
Research and development costs amounted to EUR 13.1 million in the first three months of the current financial year (1-3/2011: EUR 11.8 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. In addition, the Group capitalized development costs for new products in the amount of EUR 3.3 million in the first quarter of 2012 (1-3/2011: EUR 2.6 million).
Overall, STADA launched 181 individual products worldwide in the reporting quarter (1-3/2011: 147 product launches) in individual national markets.
“As concerns Group-owned production capacities, we have achieved significant growth in the context of “STADA – build the future” over the recent years with the introduction of previously externally awarded production orders to in-house production as well as with the preference for in-house production of new products. In the area of product development, we were able to conclude contracts to award a total of four projects to external developers in India in the current financial year”, positively commented Dr. Axel Müller, STADA's Chief Production and Development Officer.
In view of the product pipeline, which remains well-filled, the Executive Board expects an ongoing flow of new 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 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 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 incurred from the sale of the factory in Ireland in the first quarter of 2012, as well as potential burdens in the higher single-digit million euro area from the evaluated sales of two production facilities in Russia.
Despite these earnings burdening one-time special effects from the further implementation of the "STADA – build the future" program, the Executive Board expects a 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