EASTPHARMA LTD.
London, 10 March 2014 - EastPharma (EAST LI), a company active in the manufacturing and marketing of pharmaceutical products in Turkey and in other regional markets, announces its year end 2013 audited financial statements and 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 20 March 2014.
A conference call to review the 2013 financial performance will be hosted by the management of EastPharma at 4:00pm London time on 20 March 2014 (12:00pm New York / 5:00pm Zurich time / 6:00pm Istanbul time). The dial-in details are provided below.
Conference call:
Participant Std International Dial-In:
United Kingdom: +44 (0) 14 5255 5566
United States: +1 631 510 7498
Participant Local Dial-In:
Switzerland, Baden: 0565800007
Germany, Frankfurt: 06922224918
Conference ID: 7845772
For further information, please contact:
Investor Relations:
email: ir@eastpharmaltd.com
SALES UPDATE AND MANAGEMENT REVIEW
EASTPHARMA'S PERFORMANCE (According to IMS data) COMPARED TO TURKEY'S OVERALL 2013 MARKET PERFORMANCE
According to IMS Health data, a total of 1.779bn units of drugs, worth TRY 15.39bn (USD 8.09bn), were sold in the Turkish Pharmaceutical market in 2013.
In unit sales terms the Turkish market increased by 0.57% in 2013, while Eastpharma's unit sales increased by 2.74% compared to the same period of 2012, achieving sales of 93.47mn units according to IMS figures. With this growth in unit sales Eastpharma's market share in unit terms increased from 5.1% in 2012 to 5.3% in 2013 and the company maintained its 4th place ranking in the Turkish pharmaceuticals market.
By sales value in Turkish Lira, the national market increased by 6.48% in 2013 compared to 2012. According to IMS figures for 2013, EastPharma achieved sales worth TRY 583.55mn (USD 308.14mn), an increase of 5.86% compared to 2012. Consequently, Eastpharma maintained its 3.8% market share in the Turkish pharmaceutical market and its 6th place in the national ranking.
MANAGEMENT COMMENTS ON EASTPHARMA's FINANCIAL PERFORMANCE IN 12M 2013 (IFRS):
According to IFRS results, revenue in 12M 2013 was USD 217.1mn, down 6.4% from the same period in 2012 (USD 232mn). In Turkish Lira terms, revenue decreased by 1.3% in the same period (Net sales in 12M 2013 were TRY 410.4mn vs TRY 415.7mn net sales in 12M 2012).
The average US dollar exchange rate strengthened by 6.2% against the Turkish Lira to 1.9033 in 12M 2013, which compares with an average rate of 1.7922 in 12M 2012. The USD/TRY exchange rate was 1.7826 on 31 December 2012, while it was 2.1343 on 31 December 2013, which corresponds to an increase of 19.7%.
EastPharma's sales decrease was mainly due to the strengthening of the USD against the Turkish Lira. In 12M 2013 versus 12M 2012, Human Pharma revenues in US dollar terms decreased by 3.5% (from USD 214.4mn to USD 206.8mn).
Deva's Capital Markets Board (CMB) results show revenue in 12M 2013 was TRY 418.4mn, down 0.3% from the same period in 2012 (TRY 419.5mn).
Deva's sales decrease in TRY terms was mainly due to decreased volumes at Deva's Veterinary Products businesses. In 12M 2013 versus 12M 2012, Human Pharma revenue increased by 2.8% (from TRY 388mn to TRY 399mn). Veterinary Products revenue decreased by 51% (from TRY 25mn to TRY 12.3mn).
EastPharma's gross profit in 12M 2013 was USD 88.3mn, down from USD 99mn in 12M 2012. The gross profit margin in 12M 2013 was 41% vs 43% in 12M 2012.
EBITDA in 12M 2013 was USD 40.4mn vs USD 48.4mn in 12M 2012 representing an EBITDA margin of 18.6% vs 20.9% in 12M 2012.
Operating expenses in 12M 2013 increased by 6.1%, from USD 69.5mn to USD 73.8mn. The ratio of operating expenses to revenues increased to 34% from 30% compared to 12M 2012. Sales and marketing expenses in 12M 2013 were 21.5% of revenues; general administrative expenses were 11.6% of revenues. These expenses were 18.9% and 10.4% in 12M 2012, respectively.
Finance cost increased by USD 3.9mn, from USD 39.7mn to USD 43.6mn in 12M 2013 compared to 12M 2012. This was primarily due to foreign exchange gain / losses on borrowings: EastPharma made a foreign exchange loss of USD 5.4mn in 12M 2013, compared to a gain of USD 0.4mn in 12M 2012 on borrowings.
Receivable days at 31 December 2013 were 134 days, compared to 129 days as at 31 December 2012.
Philipp Haas, EastPharma's Chairman and CEO, said;
"Operationally, EastPharma achieved many of its goals in 2013. Further efficiency improvements were made, while R&D efforts continued to develop new products both for the Turkish and the exports markets. Unfortunately, the operating environment continued to markedly deteriorate. Price erosion continued in many products as price decreases in Spain and Greece translated through Turkey's reference pricing system into lower prices in Turkey, especially since the Euro exchange rate, used to calculate the reference price, was never adjusted and is still fixed at 1.9595, compared with a current exchange rate of around 3.05. As the exchange rate has not been updated for a very long time, our prices in real terms deteriorated further. For this reason, our gross profit margin experienced a certain contraction. In our veterinary division we suffered the effects of the loss of a major agency agreement; however, thanks to our R&D efforts, we expect that this loss will be compensated with the introduction of new products in the current year.
In the light of this adverse environment, we have further emphasized cost containment with rigorous cost control measures. It is thanks to these measures that we have been able to maintain a strong level of cash flow during 2013. It is also thanks to these measures that we look into 2014 with an albeit very cautious optimism. Turkey's political problems have, since December last year, led to extended Turkish Lira weakness, which results in extended margin pressure for the pharmaceutical sector; this will continue for as long as the authorities choose not to adjust reference prices with the new exchange rates. At the same time, political tensions have lead to higher interest rates, which will lead to increased finance costs. EastPharma is well positioned to confront the current difficulties. Most of our debt is in Turkish Lira, therefore, at least, there is little immediate damage from Turkish Lira devaluation onto our financial position. In addition, we hold a significant cash reserve in hard currencies as a safety net in case of further devaluations. Operationally, a lean cost structure is another defensive element. Many years of great efforts in new product development will add sales, in the short term especially in the Turkish market, where we will launch a newly developed ophthalmology line. In the medium term, the successful German audits of our manufacturing plants will enable us our first exports to Europe, while we continue to develop sales to emerging markets. In the long term, we are also targeting an entry to the US market.
We are well equipped for the great challenges, which we are currently facing, but of course these challenges will impact us. At the same time, we do have many opportunities and we will work hard to translate as many as possible into results for our company."