JSC PHARMSTANDARD REPORTS OUTSTANDING GROWTH IN 1H 2008

27.08.2008

 

OJSC PHARMSTANDARD REPORTS OUTSTANDING GROWTH IN 1H 2008


Moscow, 27 August, 2008 – Today OJSC Pharmstandard (“Pharmstandard” or the “Company”) published its interim consolidated unaudited IFRS financial statements for the six months ending June 30, 2008 (LSE: PHST LI, RTS: PHST RU). Net profit for the period amounted to RUR1,757 million (US$73[1] million) (1H 2007: RUR 962 million), a 83% increase over 1H 2007.


Other highlights included:

-          Revenue growth of 40%, to RUR 6,198 million (US$259 million)

-          EBITDA margin of 42%[2] to RUR 2,621 million (US$110 million)

-          According to approved plan to acquire minority interests in several subsidiaries, Pharmstandad acquired 5% interest in OJSC “Pharmstandard-Ufavita”, 4% interest in OJSC “Pharmstandard-Octyabr” and 7% interest in OJSC “TZMOI”, resulting in an increase in the Company’s interests in these companies to 99%, 97% and 96%, respectively. Total consideration due for the acquired minority interests was RUR 302,688.

-          Launched 8 new products including Mildronate® preparation in conjunction with Grindex. Sales of Mildronate® in the period was RUR 636 millions, resulting in 14% increase of company’s sales


Commenting on today’s announcement, Igor Krylov, CEO of Pharmstandard said:


“Today’s results showed that Pharmstandard is on the right track in implementing its strategy. Strong sales in our key products together with the launch of eight new products enabled us to grow organically by 26% in first half of the year. Strong growth in revenue and well-managed cost structure increased our EBITDA margin to 42%. 

Being the market leader within the Commercial segment, we are well positioned to take advantage of strong market growth and believe that the outlook for this business is excellent”.


Revenue

Pharmstandard’s sales for the first 6 months of 2008[3] increased by 40% to RUR6,198 million (US$259 million), which represents a gain of RUR1,772 million (US$74 million) compared to RUR4,426 million (US$170 million) reported in first half 2007. Pharmaceutical products sales contributed 92% while medical equipment and disposables sales contributed 8% of total Company sales.

The Company’s sales of pharmaceutical products achieved RUR5 672 million (US$237 million) for the first six months of 2008 and increased by 50% compared to the sales for the same period of 2007,  attributed to the increase in sales of the leading brands of the Company.

The sales of OTC products were RUR4,324 million (US$181 million) and increased by 41% in first half 2008. Increase in OTC products sales generally attributable to increase of sales of the leading OTC branded products such as Arbidol®, Pentalgin®, Complivit®, Flucostat®, Terpincod® and Codelac®.

The Company’s revenue from Prescription products amounted to RUR1,327 million (US$55 million) and increased by 98% compared to the same period of 2007. This increase in Prescription sales was attributed launch of Mildronate® as well as an increase in leading brands sales of Phosphogliv®, Amixin® and Biosulin®. The sales of Mildronate® was RUR636 million (US$26 million) in the first half 2008. The share of Prescription products sales in total pharmaceutical products sales increased from 18% in first half 2007 to 23% in the same period of 2008.

The Company launched 8 new products in the first 6 months of 2008 namely Bloctran®, Influnorm®, Combilipen®, Complivit® ophtalmo, Neipomax®, Neirocomplit®, Octolipen® and Pentalgin® Plus. The sales of the new products in first half 2008 achieved RUR50 million (US$2 million).

The Company reported revenues of RUR526 million (US$22 million) from its medical equipment business, which represents a 19% decline from the prior–year period and generally attributable to the tender sales in first half 2007.

Cost of sales

Cost of sales increased by RUR 657 million (US$27 million) or 35%, to RUR2,548 million (US$106 million) in first six months of 2008 from RUR1,891 million (US$79 million) in the same period a year earlier.

Gross profit

The increase in Pharmstandard’s sales enabled the Company to increase gross profit in first half 2008 by RUR 1,115 million (US$47 million) or 44% to RUR3,650 million (US$153 million) in first six month of 2008 from RUR2,535 million (US$97 million) in the same period a year earlier. As a percentage of revenue, gross profit remained increased to 59% from 57% in first six months of 2007.

Selling and distribution costs

Pharmstandard’s selling and distribution costs were RUR964 million (US$40 million) during the six months ended June 30, 2008, an increase of RUR212 million (US$9 million), or 28% from reported expense of RUR752 million (US$29 million) during the six months ended June 30, 2007.  The increase was due largely to increased advertising costs, as well as increased labour costs due to growing sales force to support a growing portfolio of products. As a percentage of revenue, selling and distribution costs declined to 16% from 17%.

General and administrative expenses

General and administrative expenses were RUR327 million (US$14 million) during the six months ended June 30, 2008, an increase of RUR78 million (US$3 million), or 31% from reported expenses of RUR249 million (US$10 million) during the six months ended June 30, 2007.  The increase was due largely to growing labour costs.  As a percentage of revenue general and administrative expenses decreased by 1 percentage point, from 6% to 5 %, as the Company’s higher revenues allowed for more leveraging of the fixed cost base.

Profit for the period

Profit for the period attributable to the shareholders of the Company increased RUR804 million (US$34 million) or 85% to RUR1,751 million (US$73 million) in 1H 2008 from RUR947 million (US$36 million) in the same period a year earlier. The increase was primarily attributable to the Company’s strong growth in revenue and continued cost effective management of expenses. As a percentage of sales, profit for the period increased to 28% from 22%.

EBITDA[4]

EBITDA increased RUR1,002 million (US$42 million) or 62% to RUR2,621 million (US$110 million) in 1H 2008 from RUR1,619 million (US$62 million) in the same period a year earlier.  As a percentage of revenue, EBITDA increased for 5% and achieved 42% in 1H 2008 due to growth of highly margin branded products sales.

Capital expenditure

In 1H 2008 the Company invested RUR 381 million (US$ 16 million) in property, plant and equipment. These investments were mainly related to production equipment upgrades in Ufa, Kursk and Tomsk.

Market Position

According to Pharmexpert data, Pharmstandard became #2 pharma company overall in Russia by sales value with market share of 4.0% and the leader of the commercial segment in first half of 2008 with market share of 5.3% and 40% growth in revenue for the period. Pharmstandard has 6 brands among top-20 best selling domestic brands in Russia: Arbidol®, Pentalgin®, Complivit®, Terpincod®, Codelac®, Flucostat®. Arbidol® was the largest selling pharmaceutical product, by sales, in the Russian pharmaceutical market with growth rate of 75%, according to Pharmexpert. Arbidol® also has won “Platinovaya Uncia” – a national pharmaceutical award.


The Company’s summary condensed consolidated statement of operations and balance sheet are presented below:


Summary Condensed Consolidated Statement of Operati ons



RUR millions 

12008

1H 2007

Change %

Sale of goods

6,198 

4,426 

40%

Pharmaceutical products

5,672

3,777

50%

Medical equipment and disposables

526

649

(19%)

Cost of sales

(2,548)

(1,891)

35%

Gross profit

3,650 

2,535 

44%

Selling and distribution costs

(964)

(752)

28%

General and administrative expenses

(327)

(249)

31%

Other income(expenses), net

131

(98)

-

Operating income

2,490

1,436

73%

Interest expense, net

(124)

(141)

(12%)

Profit before income tax

2,366

1,295

83%

Profit for the period

1,757 

962 

83%

Attributable to equity holders of the Company

1,750

947

85%

Attributable to minority interests

7

17

(56%)

Depreciation and amortization

272

258

6%

EBITDA[5]

2,621 

1,619

62%

Summary Condensed Consolidated Balance Sheet



 

30 June 2008

31 December 2007

 

(unaudited)

audited

Non-current assets

8,536,463

8,405,141

Current assets

8,025,656

6,730,129

Total assets

16,562,119

15,294,125

 

 

 

Total equity

10,837,665

9,602,693

Non-current liabilities

2,330,489

3,083,799

Current liabilities

3,393,965

2,607,633

Total liabilities

5,724,454

5,691,432

Total equity and liabilities

16,562,119

15,294,125

The conference call will take place on:

Wednesday, August 27, 2008

9:00 (EST)

14:00 (London)

17:00 (Moscow)

International Call-in Number:  +44 (0)20 7162 9961

Free Phone (US Only): +1 866 840 8824

Password: Russia

*We recommend that participants start dialling in 5-10 minutes prior to ensure a timely start to the conference call.

Conference call participants can register in advance by following the link below:

https://eventreg3.conferencing.com/webportal3/reg.html?Acc=468970&Conf=460864

PHARMSTANDARD will be represented by:

Igor Krylov                              CEO

Elena Arkhangelskaya              CFO

The conference call replay will be available through August 29, 2008.

International Replay Number: +44 (0) 20 7031 4064

Toll Free Replay Number (US only): + 1 888 365 0240

Replay Access Code: 807555

Contacts:

OJSC Pharmstandard

Maxim Stetsyuk

Anton Golubok

Tel: +7 495 970 0030

E-mail: pr@pharmstd.ru

www.pharmstd.ru

***

Notes to the editors:

Pharmstandard is the leading domestic pharmaceutical company in Russia and the third largest pharmaceutical company operating in Russia overall, by sales value. Pharmstandard is a leader of the biggest commercial segment of the Russian pharmaceutical segment. The Company develops, manufactures, markets and sells generic and, to a lesser extent, original pharmaceutical products in various formulations, primarily in Russia.  Pharmstandard’s product portfolio includes market-leading brands (7 brands among top-15 best selling domestic brands in Russia), such as Arbidol® (antiviral for systemic use), Pentalgin® (analgesics), Terpincod® (cough and cold), Complivit® (vitamins), Codelac® (cough and cold) and Flucostat® (antifungal), Amixin® (antiviral). In 2007, Arbidol® was the largest selling pharmaceutical product at the commercial segment of the Russian pharmaceutical market, according to pharmacy audit data by Pharmexpert.

Pharmstandard operates five manufacturing facilities in Russia and, with a production capacity of 1.3 billion packs as of December 31, 2007, has one of the largest production capacities among domestic pharmaceutical companies in Russia. The Company has invested approximately RUR2.8 billion in capital investments in its manufacturing facilities since the start of 2004. Pharmstandard’s flexible production capacity distinguishes it from its competitors by allowing it to quickly and efficiently adjust production based on input from its distributors and sales force.

In addition to its pharmaceutical business, the Company also develops, manufactures, markets and sells medical equipment, such as sterilizing and distilling machines, and disposable medical products.

www.pharmstd.ru



[1] All data in US dollars calculated based on average exchange rates as follows: for the 6 months 2007 1USD = 26,10 RUR and for the 6 months 2008 1USD = 23,93RUR



[2] Excluding forein exchange gain



[3] Unaudited



[4] Excluding foreign exchange gain



[5] Excluding foreign exchange gain









 

 

 

OJSC “Pharmstandard”
Interim Condensed Consolidated Balance Sheet at 30 June 2008
(in thousands of Russian Roubles)

 



 

30 June 2008

31 December 2007

 

(unaudited)

audited

ASSETS

 

 

Non-current assets

 

 

Property, plant and equipment

3,913,355

3,691,266

Intangible assets

4,377,710

4,468,477

Long-term financial assets

245,398

245,398

 

8,536,463

8,405,141

Current assets

 

 

Inventories

2,094,991

1,760,195

Trade receivables

3,704,370

4,176,200

VAT recoverable

344,612

358,767

Prepayments

104,387

130,479

Income tax prepayment

185,677

-

Short-term financial assets

575,354

111,899

Cash and cash equivalents

1,016,265

192,589

 

8,025,656

6,730,129

Non-current assets classified as held for sale

-

158,855

 

 

 

Total assets

16,562,119

15,294,125

 

 

 

EQUITY AND LIABILITIES

 

 

Equity attributable to equity holders of the parent

 

 

Share capital

37,793

37,793

Retained earnings

10,628,837

9,004,021

 

10,666,630

9,041,814

Minority interest

171,035

560,879

Total equity

10,837,665

9,602,693

 

 

 

Non-current liabilities

 

 

Long-term borrowings and loans

1,241,194

1,954,576

Deferred tax liability

983,038

1,047,799

Derivative financial instruments

71,052

44,598

Other non-current liabilities

35,205

36,826

 

2,330,489

3,083,799

 

 

 

Current liabilities

 

 

Trade and other payables and accruals

1,959,464

1,046,520

Current portion of long-term borrowings

1,252,245

1,310,374

Income tax payable

-

37,934

Other taxes payable

182,256

212,806

 

3,393,965

2,607,633

 

 

 

Total liabilities

5,724,454

5,691,432

 

 

 

Total equity and liabilities

16,562,119

15,294,125

 

 

 

 

 

Interim Condensed Consolidated Statement of Operations 
for the six months ended 30 June 2008
(in thousands of Russian Roubles)

 

 



 

 

 

6 months 2008

6 months 2007

 

-----------(unaudited)--------

 

 

 

Revenue - sale of goods

6,198,044

4,426,283

Cost of sales

(2,547,596)

(1,890,839)

 

 

 

Gross profit

3,650,448

2,535,444

 

 

 

Selling and distribution costs

(963,792)

(752,425)

General and administrative expenses

(326,717)

(249,403)

 

 

Other income

212,083

86,653

Other expenses

(81,219)

(184,174)

Financial income

7,109

502

Financial expense

(131,360)

(141,256)

 

 

 

Profit before income tax

2,366,552

1,295,341

 

 

 

Income tax expense

(609,618)

(333,118)

 

 

 

Profit for the period

1,756,934

962,223

 

 

 

Attributable to:

 

 

Equity holders of the Parent

1,750,040

946,575

Minority interests

6,894

15,648

 

 

 

 

1,756,934

962,223

Earnings per share (in Russian roubles)

 

 

- basic and diluted, for profit of the period attributable to equity holders of the parent

46.31

25.05

 

Interim Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2008
(in thousands of Russian Roubles)

 



 

6 months 2008

6 months 2007

 

----------(unaudited)---------

Cash flows from operating activities:

 

 

Profit before income tax

2,366,552

1,295,341

 

 

 

Adjustments for:

 

 

 

 

 

Depreciation and amortization

272,309

257,989

Allowances for impairment of receivables, inventories and financial assets

54,014

46,214

Loss recognised on non-current assets classified as held for sale

13,891

-

Gain from disposal of property, plant and equipment and non-current assets classified as held for sale

(25,148)

(9,642)

Foreign exchange gain

(142,209)

(75,175)

Loss from revaluation of short-term financial assets

2,985

-

Financial income

(7,109)

(502)

Financial expense

128,375

141,256

 

 

 

Operating cash flows before working capital changes

2,663,660

1,655,481

Decrease in trade and other receivables

439,215

486,027

Increase in inventories

(346,750)

(298,402)

Decrease (increase) in VAT recoverable

14,155

(54,964)

Decrease in prepayments

26,092

53,704

Increase in trade payables and other payables

491,766

118,917

Decrease (increase) in taxes payable other than income tax

(30,550)

5,388

 

 

 

Cash generated from operations

3,257,588

1,966,151

Income tax paid

(897,988)

(524,684)

Interest paid

(103,578)

(138,790)

Interest received

1,562

 506

 

 

 

Net cash from operating activities

2,257,584

1,303,183

 

 

 

Cash flows from investing activities:

 

 

Purchase of property, plant and equipment

(381,313)

(193,257)

Cash paid to settle the obligation for OJSC “TZMOI” shares acquired in 2005

-

(824,723)

Cash paid for minority interest acquisition

(140,755)

-

Cash received from sale of short-term financial assets

84,914

32,853

Cash paid for short-term financial assets

(556,474)

(64,900)

Cash received from sale of non-current assets classified as held for sale

141,086

34,133

Cash received from sale of property, plant and equipment

42,814

3,210

Loans provided

-

(3,000)

Loans repaid by related parties

5,121

25,153

Net cash used in investing activities

(804,607)

(990,531)

 

 

 

Cash flows from financing activities:

 

 

Repayment of loans and borrowings

(629,301)

(22,170)

 

 

 

Net cash used in financing activities

(629,301)

(22,170)

 

 

 

Net  increase in cash and cash equivalents

823,676

290,482

Cash and cash equivalents at the beginning of the period

192,589

192,966

 

 

 

Cash and cash equivalents at the end of the period

1,016,265

483,448


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Media Contacts



Marina Bortnikova


Press & Public Relations Unit

+7 (495) 970 0032
pr@pharmstd.ru
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