10.11.2008:
Zentiva produces strong first nine month results
Successful Integration of the Turkish Business and Focus on Efficiency Lead to 61.7% increase in EBIT to CZK 2,361.2 million1
Prague, London, November 10, 2008 – Zentiva N.V. (‘Zentiva’ or the ‘Company’), a leading CEE pharmaceutical company that develops, manufactures and markets modern branded generic pharmaceutical products announces its results for the first nine months of 2008.
Zentiva’s results for the first nine months of 2008 clearly show that management is delivering on its two key targets, top line growth and enhanced profitability. During the period net sales have increased by 17.7%, driven by the Eczacibasi-Zentiva business, which was acquired in Turkey in July 2007. Higher sales were also achieved in Russia, the Ukraine, other countries of the CIS, and Bulgaria. First nine month sales would have been 28,1% higher on a constant exchange rate basis.
In the first nine months of 2008, Zentiva increased EBIT by 61.7% to CZK 2,361.2 million1 due to significant improvement in all operational aspects of our business, including integration of its new Turkish business. EBIT in Q3 2008 rose by 129.6% to CZK 803.7 million.
Zentiva has confirmed, based on these solid first nine month results, its full year guidance for 2008.
Financial Highlights
- Net sales CZK 13,096.9 million; +17.7% yoy, driven by the consolidation of the Turkish business Eczacibasi Zentiva, acquired in July 2007.
- Gross profit CZK 7,749.6 million; +14.6% yoy, due to the lower margins of Eczacibasi-Zentiva being only partially offset by the continued improvement of our product mix.
- EBIT CZK 2,361.2 million1, +61.7% yoy due to improved operating efficiencies, particularly in the commercial area. EBIT margin of 18.0%.
- EBIT CZK 2,167.4 million, +48.4% yoy, including CZK 193.8 million fixed assets impairment charge. EBIT margin of 16.5%;
- Net profit CZK 1,240.1 million1,2, +16.7% yoy negatively affected by decrease in FX gains and increase in effective tax rate. Net profit margin 9.5%.
- Net profit (including impairment of fixed assets) CZK 1,091.9 million; a 2.7% increase yoy. Net profit margin 8.3%;
- Capital expenditure during the first nine months of 2008 amounted to CZK 846.6 million representing 6.5% of sales
- Free cash flow (FCF) for the nine month period was of CZK 1,670.0 million representing 77.1% EBIT Cash conversion, compared to last year’s CZK 598.9 million and 41.0% respectively
- Net debt-to-equity ratio was reduced to 108,3% from 122,4% last year
- Net debt down 25.6% to CZK 11.6 billion vs. CZK 15.6 billion last year
Jiří Michal, Chairman of the Board and CEO, commenting today on the Company’s Nine Month results said:
“The results that we have announced today show that Zentiva is achieving sales growth, at constant exchange rates, in line with our expectations whilst at the same time making excellent progress in improving the efficiency of all aspects of our much enlarged business.
In Turkey, we are continuing to work on the integration of Eczacibasi-Zentiva into the Group. As a result of the integration we have taken a number of important steps to improve margins including substantially changing the products that are actively promoted, as well as significantly increasing our overall sales force efficiency. The results that we have already achieved to-date means that we are on track to deliver both improved sales and profits in Turkey in 2008 reinforcing our view that this market will be an important contributor to our growth over the next several years.
In the Czech Republic, our sales have been hit by market pressures such as the mandatory fees for physicians’ visits and prescriptions introduced at the beginning of the year. However we have been able to respond to these developments by placing more efforts in this market on our promoted prescription and CHC brands and continuing to work on maintaining our overall commercial efficiency.
In Romania, our business performance reflects the operational changes that we started to make in mid 2007. We now have a much leaner and more focused organization that based on progress in recent months is well positioned to deliver the higher sales and earnings that we expect.
Elsewhere our businesses have done well against a background of challenging market conditions and adverse currency developments. We have grown sales in Russia, and the Ukraine as well as in most of our newer markets including Bulgaria and Hungary.
Our progress in 2008 continues to demonstrate the attractions of the much enlarged, better balanced Zentiva organization that was created in 2007. This larger regional platform provides us with access to a much increased patient population and gives us important opportunities to generate economies of scale. Over the course of the last twelve months we have maintained a tight focus on efficiency and based on the numbers we have announced today I am confident that Zentiva will deliver our guidance for 2008 and is well positioned to successfully navigate our business through the tougher economic environment ahead of us.
Turning to the improved offer for Zentiva of CZK 1,150 per share that was made by sanofi-aventis on October 1, 2008. I would like to confirm that the Board remains of the view that this Improved Offer is in the best interests of shareholders and all other stakeholders in Zentiva and recommends that the Company's shareholders accept the Improved Offer and tender their shares in the Improved Offer."
1 Excluding Impairment of fixed assets in amount of CZK 193.8 million
2 Net income attributable to the equity holders of the parent
IMPORTANT NOTICES
Forward-looking Statements
This document contains “forward-looking statements”. These forward-looking statements include all statements that are not historically known facts. They appear in a number of places throughout this document and include, but are not limited to, statements and underlying assumptions regarding Zentiva’s intentions, beliefs, projections, plans, objectives, estimates, and current expectations concerning, amongst other things, Zentiva’s results of operations, financial condition, liquidity, performance, prospects, growth, strategies, and the countries and industries in which Zentiva operates. Forward-looking statements are generally identified by the words "expects," "anticipates," "believes," "intends," "estimates," "plans" and similar expressions. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, many of which are difficult to predict and generally beyond the control of Zentiva. Forward-looking statements are not guarantees of future performance, and the actual results of Zentiva’s operations, financial condition, liquidity, performance, prospects, growth, strategies, and the development of the countries and the industries in which Zentiva operates may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. Other than as required by applicable law, Zentiva does not undertake any obligation to update or revise any forward-looking information or statements.
Other Important Notices
This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or global depositary shares in Zentiva, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision.
Recipients of this document, or any part or any copy of it, may not, directly or indirectly, take, or transmit into, or further distribute the document in, the United States, Canada, Australia, or Japan, or to any resident thereof. The distribution of this document in other jurisdictions may also be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of US, Canadian, Japanese, Australian or other securities laws.
Zentiva’s ordinary shares and global depositary shares have not been and will not be registered under the US Securities Act of 1933 (the “Securities Act”) and may not be offered or sold in the US except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
For the purpose of Section 21 of the Financial Services and Markets Act 2000 of the United Kingdom (the “FSMA”), any potential invitation or inducement to engage in any investment activity included within this document (which Zentiva believes there is none) is directed only at (i) persons who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) of the United Kingdom (the “Financial Promotion Order”); (ii) persons who fall within Articles 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Promotion Order; and (iii) any other persons to whom this document for the purposes of Section 21 of FSMA can otherwise lawfully be made (all such persons together being referred to as “relevant persons”), and must not be acted on or relied upon by persons other than relevant persons. Any potential invitation or inducement to engage in any investment activity included within this document (which Zentiva believes there is none) is available only to relevant persons and will be engaged in only with relevant persons.
This document is published in both English and Czech version, however, only its English version should be considered the official one. Its Czech version is published solely for information purposes, and no representation is made and no warranty is given as to the accuracy of the Czech translation. Should there be any difference between the English and Czech version of this document, the English version shall always prevail.
NOTE FOR EDITORS
Zentiva N.V. is an international pharmaceutical company focused on developing, manufacturing and marketing modern generic pharmaceutical products. The Company has leading positions in the pharmaceutical markets in the Czech Republic, Slovakia, Romania, and Turkey and is growing rapidly in Poland, Russia, Bulgaria, Hungary, the Ukraine and the Baltic States. Zentiva’s strategy is to further this growth by increasing patient access to modern medicines through primary care providers within the EU and Eastern Europe. This growth will be based on further organic development of Zentiva’s existing business and through selective acquisitions, whilst maintaining profitable growth.
The Company addresses a wide range of therapeutic areas but has a particular focus on cardiovascular disorders, inflammatory conditions, pain, infections and diseases of the central nervous system and the gastrointestinal and urology fields.
The Zentiva Group employs almost 6,000 people and has production sites in the Czech Republic, Slovakia, Romania, and Turkey.
Zentiva is listed on the Prague and London Stock Exchanges. Based on official notifications by shareholders to the Dutch regulator, the Company’s largest shareholders are Sanofi-Aventis (24.9%), PPF Group and Generali PPF Holding B.V. acting in concert (24.3%), Belviport Trading Ltd. (10.1%) and Fervent Holdings Limited (7.6%). Zentiva’s management holds 5.9% of the Company shares. Other institutional and private investors hold a combined 27.2% of Company shares.
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