EASTPHARMA LTD.
London, 23 August 2012 - EastPharma (EAST LI), a company active in the manufacturing and marketing of pharmaceutical products in Turkey and in other regional markets, announces its H1 2012 reviewed financial statements and a review of its main subsidiary DEVA Holding's financial statements for the related period.
Management comment on the financial performance of EastPharma is provided in the attachment, and a presentation of the results will be available on the EastPharma website www.eastpharmaltd.com on 24 August 2012.
A conference call to review the H1 2012 financial performance will be hosted by the management of EastPharma at 4:00pm London time on 29 August 2012 (11:00am New York time / 5:00pm Zurich time / 6:00pm Istanbul time). The dial-in details are provided below.
Conference call:
Dial-in Number (UK): + 44 (0)20 7162 0077
Dial-in Number (US): + 1 877 491 0064
Dial-in Number (Switzerland): + 41 (0)434 5692 61
Dial-in Number (Germany): + 49 (0)695 8999 0507
Conference ID: 921086
For further information, please contact:
Investor Relations:
email: ir@eastpharmaltd.com
SALES UPDATE AND MANAGEMENT REVIEW
TURKEY'S OVERALL H1 2012 MARKET PERFORMANCE COMPARED TO EASTPHARMA PERFORMANCE (According to IMS data)
According to IMS Health data, a total of 902.8mn units of drugs, worth TRY 7.4bn (USD 4.1bn), were sold in the Turkish Pharmaceutical market in H1 2012.
In unit sales terms the Turkish market grew by 3.3% in H1 2012, while EastPharma's unit sales declined by 10.0% compared to the previous period, falling to 45.9mn units sold according to IMS figures. With this reduction in unit sales Eastpharma's market share in unit terms decreased from 5.8% in H1 2011 to 5.1% in H1 2012 and the company maintained its 4th place ranking in the Turkish pharmaceuticals market.
By sales value in Turkish Lira, the national market declined by 5.9% in H1 2012 compared to H1 2011. According to IMS figures for H1 2012, EastPharma achieved sales worth TRY 272.3mn (USD 151.8mn), a decrease of 19.4% compared to the previous period. Consequently, EastPharma market share decreased by value from 4.3% in H1 2011 to 3.7% in H1 2012 and the company has moved down the national ranking from 5th to 6th place.
MANAGEMENT COMMENTS ON FINANCIAL PERFORMANCE FOR EASTPHARMA IN H1 2012 (IFRS):
According to EastPharma's IFRS results, revenue in H1 2012 was USD 117.1mn, down 18.1% from the same period in 2011 (USD 143.0mn). In TRY terms, the decrease in revenue was 6.1% for the same period (TRY net sales in H1 2012 was TRY 210mn vs TRY 223.6mn net sales in H1 2011).
DEVA Holding is EastPharma's primary operating subsidiary in Turkey. EastPharma's sales decrease was driven by decreased volumes in DEVA's Human Pharma Products businesses. In H1 2012 versus H1 2011, Human Pharma revenue decreased by 18.5% (from USD 130.8mn to USD 106.6mn).
Deva's Capital Markets Board (CMB) results show revenue in H1 2012 was TRY 212.1mn, down 6.2% from the same period in 2011 (TRY 226.2mn).
Deva's sales decrease in TRY terms was mainly due to decreased volumes at Deva's Human Pharma businesses. In H1 2012 versus H1 2011, Human Pharma revenue decreased by 6.8% (from TRY 207.2mn to TRY 193.2mn). Veterinary Products revenue decreased by 3.2% (from TRY 15.8mn to TRY 15.3mn)
EastPharma's gross profit in H1 2012 was USD 51.9mn, down from USD 59.7mn in H1 2011. The gross profit margin in H1 2012 was 44% vs 42% in H1 2011.
EBITDA in H1 2012 was USD 24.2mn vs USD 29.7mn in H1 2011 representing an EBITDA margin of 20.7% vs 20.8% in H1 2011. During H1 2011, the company booked some extraordinary items, notably a gain on the reversal of a tax penalty totaling to USD 5.8mn and a gain on the bargain purchase of Zentiva API Plant totaling to USD 6.0mn. After adjustment for these extraordinary items EBITDA was USD 17.9mn, which corresponds to an EBITDA margin of 12.5%.
Operating expenses in H1 2012 decreased by 29%, from USD 50.1mn to USD 35.6mn. The ratio of operating expenses to revenues decreased to 30.4% from 35.0% compared to prior period. Sales and marketing expenses in H1 2012 were 19% of revenues; general administrative expenses were 11% of revenues. These expenses were 25% and 10% in H1 2011, respectively.
Finance costs decreased by USD 4.1mn, from USD 23.8mn to USD 19.7mn in H1 2012 compared to H1 2011. This was primarily due to foreign exchange gain / losses on borrowings: EastPharma made a foreign exchange gain of USD 0.3mn in H1 2012, compared to a loss of USD 7.2mn in H1 2011. Average interest rates in H1 2012 were around 13%, compared to 8% in H1 2011.
The average USD/TRY exchange rate increased by 14.7% to 1.7935 in H1 2012, which compares with an average rate of 1.5641 in H1 2011. The USD/TRY exchange rate was 1.8889 on 31 December 2011, while it was 1.8065 as of 30 June 2012: this corresponds to a decrease of 4.4%.
Receivable days at 30 June 2012 were 125 days, compared to 124 days as at 31 December 2011.
Philipp Haas, EastPharma's Chairman and CEO, said; "The results of the first half of 2012 are very satisfying. Eastpharma has successfully restructured its operations in order to face the very challenging price reductions, dictated by the Turkish government in the last quarter of last year. Two factors were particularly important in the improvement of results at both EBITDA and net profit levels: First of all, a general reduction in head count by approximately 300 employees, with most of the reduction made in the sales and marketing area. The second important development was our decision to reduce the level of free goods in many products, which was supported by the general environment where all companies were striving for higher margins and not higher sales. Of course, both measures had a negative impact on our sales figure, while at the same time, our profitability increased significantly.
We currently see a continued difficult operating environment where promotional activities and discount and free goods levels have markedly increased, while price pressure on many products continues, partly due to increased competition, and partly due to reference pricing adjustments. As an example, our biggest product, Cefaks, just experienced a price decrease due to reference pricing of 15%.
On the positive side, we are currently introducing many new and very promising products to the market; most of these new generics are the result of our increased research and development activities and will continue to enhance profitability."