Meda AB (publ.) interim report January - March 2006
• Group sales reached SEK 1,316.2 million (335.7). • Operating profit increased to SEK 302.0 million (106.4) including a non-recurrent effect of SEK 76.4 million for a production facility sold. • Profit after tax rose to SEK 177.6 million (66.5). • Profit per share stood at SEK 1.70 (0.98). • The Group’s integration initiatives are continuing as planned. • Establishment of a marketing company in Poland.
BACKGROUND For comparison purposes, consider major increases in Group figures between Q1 2005 and Q1 2006 in light of the Viatris acquisition, which was consolidated in Meda starting 1 August 2005. SALES The Meda Group’s sales for Q1 2006 totalled SEK 1,316 million (336). Sales of Novolizer products continued to display robust growth, reaching SEK 85 million during Q1. This corresponds to a 62% increase, compared to Q1 2005. Figures for Betadine and Tramadol also showed good growth. In March, sales of allergy products accelerated. Recently acquired Parlodel is included in sales as of March. Markets in the Nordics, Benelux, and the UK accounted for the greatest growth during Q1, while growth was weaker in Germany and Italy. In Germany, authorities decided on lower reimbursement levels for pharmaceuticals in several product categories; this held back wholesalers’ purchase volumes. The reimbursement cuts for these categories may have an adverse impact of about SEK 40 million on German sales during the present year. PROFIT Operating profit The Group’s operating profit for Q1 2006 increased to SEK 302.0 million (106.4), yielding a 22.9% operating margin (31.7). Operating profit for the period was affected positively by the sale of a production plant in the Netherlands. This effect was SEK 76.4 million. Because the sale includes certain local products, the positive full-year pre-tax effect of the deal is estimated to be about SEK 30 million. Q1 operating expenses were SEK 532.8 million (106.6), of which depreciation and amortisation totalled SEK 93.2 million. Q1 2006 earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at SEK 395.2 million (137.5). Excluding the non-recurrent effect of the sale, EBITDA reached SEK 318.8 million. Financial items The Group’s net financial items for Q1 2006 reached SEK -65.2 million (-14.4). Interest-bearing net debt stood at SEK 5,482.8 million on 31 March after issue of a subordinated loan of SEK 700 million at the end of February. The Group’s profit after net financial items for the period was SEK 236.8 million (92.0). Net profit Group tax expense for Q1 amounted to SEK 59.2 million (25.5), corresponding to a tax rate of 25.0% (27.7). The tax rate for Q1 was cut due to lower taxation of the capital gain from the sold production plant. Net profit reached SEK 177.6 million (68.6) for the period, equivalent to profit per share of SEK 1.70 (0.98). FINANCIAL POSITION Cash flow from operating activities (before change in working capital) rose to SEK 167.6 million (80.5), despite an SEK -53.0 million effect on cash flow from implemented restructuring measures. Strong sales in March and stockpiling of products for the allergy season boosted working capital by SEK 180.1 million. So cash flow from operating activities amounted to SEK -12.5 million (1.8) for Q1 2006. The Group’s net investments in Q1 rose to SEK 301.6 million (1,058.1). In March, Meda acquired the European rights to the Parlodel product from Novartis, a Swiss pharma company, for SEK 375 million. Sale of the Dutch subsidiary generated SEK 83 million in Q1 2006. The remaining purchase sum of about SEK 85 million will be paid to the Meda Group during the forthcoming four-year period. Cash flow from financing activities was SEK 145.8 million (1,060.0) for Q1 2006. During the period, a subordinated loan of SEK 700.0 million was raised, while amortisation of other loans totalled SEK 552.5 million. Key persons subscribed for new warrants amounting to SEK 1.7 million. The Group’s cash and cash equivalents at the end of March were SEK 162.7 million, compared to SEK 331.4 million at the year’s start. Unused confirmed credit facilities stood at SEK 993.0 million. Net debt amounted to SEK 5,482.8 million, compared to SEK 5,260.8 million at the year’s start. The equity/assets ratio was 33.4% versus 32.7% at the start of 2006. Equity amounted to SEK 3,939.9 million on 31 March, compared to SEK 3,759.6 million at the year’s start, which corresponds to SEK 37.71 per share (35.98). CONTRACTS AND KEY EVENTS • INTEGRATION OF MARKETING AND CENTRAL UNITS PROCEEDING AS PLANNED All management functions are in place. Co-operation between the units is already working very well after such a short time. • SALE OF PRODUCTION PLANT During Q1, Meda completed the sale of Viatris Manufacturing BV, a production plant in Diemen, the Netherlands. Vemedia, a Dutch company, bought the plant. The sale price was SEK 168 million, and the transaction resulted in pre-tax capital gain of SEK 76.4 million. As a result of the sale, 83 employees will leave the Meda Group. Because the sale includes certain local products, the positive full-year pre-tax effect of the deal is estimated to be about SEK 30 million. • ESTABLISHMENT OF MARKETING COMPANY IN POLAND Meda decided to establish a wholly owned marketing company in Poland. Meda’s products are currently marketed by licensees and distributors, and sales of these products in the Polish market are estimated at about EUR 6-7 million. In phase I, the company’s sales organisation will employ about 20 persons. OUTLOOK As stated in the annual report, Meda expects to be able to use significant synergies to cut costs and boost revenue. The company’s ambition is also to continue pursuing its active acquisition strategy and further strengthen its position as a pan-European pharma company. Meda’s profitability goal is to reach an EBITDA margin of at least 25% in 2007. ACCOUNTING POLICIES Group Meda complies with the EU-approved IFRS standards and their interpretation (IFRIC). This interim report was prepared as per IAS 34 Interim Financial Reporting. The policy for reporting the primary segment was changed from business areas (Pharma and Medical Device) to geographic classification. In other respects, the Group’s accounting policies and calculation methods are unchanged from the 2005 annual report. FORTHCOMING INTERIM REPORTS IN 2006 January – June Thursday, 24 August January – September Thursday, 2 November Stockholm, 4 May 2006 Anders Lönner CEO
