STADA: Record results in 2002 confirm clear growth course
04/08/2003 . Press Release
Group sales in 2002: EUR 633.5 million (up +18%)
Earnings before taxes in 2002: EUR 61.0 million (up +77%)
Earnings per share in 2002: EUR 1.83 (up +151%)
Proposed dividend increase to EUR 0.65 (up +10%)
Optimistic forecast for 2003
Seventh record year in a row
STADA Arzneimittel AG is today presenting its results for fiscal 2002, the seventh record year in a row. The targets for 2002 were raised significantly in the course of the year and yet were clearly achieved.
Consolidated sales increased by +18% in the past financial year to EUR 633.5 million (previous year: EUR 537.8 million). For the first time, the core segments (generics, branded products, and special pharmaceuticals) contributed 90% of sales. The rise in sales was especially strong in the core segments, where a +34% increase to EUR 572 million was recorded (previous year EUR 425.3 million). Of this total, 17% represented organic growth. “We are proud of our strong growth, above all in the core segments, and we are confident that we will be able to continue this development in the next few years,” said CEO Hartmut Retzlaff in describing the goals he associates with the claim “STADA – designed for growth.”
All of STADA’s earnings figures (calculated according to IAS since the beginning of 2002) rose significantly since 2001. The pleasing growth rates relate both to the retroactively adjusted IAS results and the original results under German accounting standards or HGB in 2001. Individually, the following indicators increased at STADA in 2002:
- Earnings before interest, taxes, depreciation and amortization (EBITDA) reached EUR 96.5 million (up +42% according to IAS or +29% vs. HGB).
- Earnings before interest and taxes (EBIT) improved to EUR 73.2 million (up +71% according to IAS or +34% vs. HGB).
- Earnings before taxes (EBT) rose to EUR 61.0 million (up +77% according to IAS or +28% vs. HGB).
- The consolidated net profit climbed to EUR 35.1 million (up +168% according to IAS or +42% vs. HGB).
- Earnings per share increased to EUR 1.83 (up +151% according to IAS or +33% vs. HGB/DVFA).
These results already include the following one-time-effects: EUR -4.8 million in expenses for restructuring, EUR -1.4 million for pension reserves and EUR +1.2 million in income from valuation adjustments.
This means that in comparing the respective IAS results to consolidated sales, the EBITDA margin was 15% (previous year: 13%), the EBIT margin 12% (previous year: 8%), the EBT margin 10% (previous year: 6%) and the net return on sales 6% (previous year: 2%). “The increase of these key indicators demonstrates that STADA clearly improved its profitability in 2002,” comments CFO Wolfgang Jeblonski.
The Executive Board and Supervisory Board will therefore propose at the shareholders’ meeting on June 24, 2003 that the dividend be increased by +10% to EUR 0.65 per share. Due to the higher number of shares in 2002, total distributions would increase by +18% to EUR 13.0 million as a result.
Growth strategy honored
The positive trend at the Company is also reflected in the share price, which for several years has been developing significantly more favorably than the benchmark indexes. In the course of the first quarter of 2003, the STADA share price reached EUR 45.11 on March 19, 2003, an all-time high since the initial public offering in 1998. In the newly structured MDAX index, STADA is now in the eighth place by index weighting. STADA has also been listed in the EuroSTOXX 600 index since December 2002.
The dynamic and profitable growth of the Company confirms the strategy “STADA: The Health Company.” The product portfolio is clearly focused on patent-free active ingredients (multisource products), the conscious avoidance of cost-intensive and risky active ingredient research and an international alignment, above all in Europe. For years now, STADA has been concentrating on the three core segments generics (drugs that are offered in the same quality but for a significantly lower price after patent expiration), branded products for the health market and special pharmaceuticals (oncological products and, in the future, biogenerics).
STADA was able to achieve considerable growth in all three core segments. Sales of generics rose by +36% to EUR 444.5 million, of branded products by +29% to EUR 107.6 million and of special pharmaceuticals by +24% to EUR 19.9 million. This means generics contributed 70% to total sales (previous year: 61%) and branded products 17% (previous year: 15%) while the contribution of special pharmaceuticals remained unchanged at 3%. In the non-core commercial business segment, sales declined as planned in 2002 by -48%; this development was concurrent with the completion of restructuring efforts in the Netherlands. This segment contributed only 9% to consolidated sales in 2002, down from 20% in 2001.
The development of operating results was also pleasing in all core segments. The corresponding margins (operating result according to IAS in relation to sales per segment) were increased significantly from the previous year, rising 15% in generics (previous year: 13%), 11% in branded products (previous year: 6%) and 24% in special pharmaceuticals (previous year 16%).
STADA generated 88% of its sales in the countries in the European Union; in the previous year the share had still been 95%. In fiscal 2002, STADA generated 12% of its sales outside of the EU (previous year: 5%). An important change was the acquisition of the operations of MOVA Laboratories Inc., Cranbury, New Jersey, USA, effective January 1, 2002, which for the Group meant the operational startup with its own sales company in the USA, STADA Inc.. In the year 2002 on the whole, 8% of sales were already generated in the United States. The growth in sales outside of the EU therefore climbed to +181%. Within the EU, the total growth was +9%, or +25% in the core segments.
In connection with the planned internationalization of business, pleasing growth was not only achieved in the USA, but above all in the emerging generics markets in the EU: In France to a +99% increase to EUR 23.1 million, in Italy, total growth increased by +186% to EUR 37.5 million and in Spain, the Company achieved a +1,443% increase to EUR 21.6 million, partly due to acquisitions. But growth was also highly satisfactory in Denmark and Austria at +66% and +38% respectively. In the Netherlands, the core segments grew by +9% after making adjustments for restructuring effects, while total sales declined there by -48% due to the reduction of commercial business activities.
Consolidated sales in the key EU market Germany rose +18% from the previous year and reached EUR 330.8 million. The Company's generics products exhibited especially strong growth in Germany, increasing by +23%. In consideration of the fact that growth for the entire German pharmaceutical market was about +8% and about +11% for the German generics market, this development is especially gratifying. On the whole, sales in Germany still represented about half of STADA's total sales.
Investing in growth
In the past financial year, STADA increased its investments considerably to EUR 185.9 million (previous year: EUR 65.6 million), a +183% rise from the previous year. Of this amount, EUR 163.7 million were invested in intangible assets (previous year EUR 52.7 million); this figure above all reflects the successful acquisition activities that supplemented organic growth in 2002. The focus of acquisitions was once again on the expansion of sales competence and the product portfolio. On an annual basis, the acquired sales volume was about EUR 92 million. The acquisition of production facilities was avoided. In the course of these investments, financial liabilities increased by +112% to EUR 259.8 million, or 35% of total assets. However, shareholders' equity also increased by +16% to EUR 324.1 million due to the strong result in 2002 and due to the fact that nearly all investors exercised their 1997/2002 warrants. At 43.7% (previous year 53.2%), the equity ratio is good and from the perspective of the Executive Board makes it unnecessary for the time being to take advantage of the possibility of increasing the capital stock unless an especially sizeable investment should have to be financed.
Concurrent to the expansion of its diversified international sales competence, STADA once again confirmed its leading position in product development in 2002. The Executive Board member in charge of this area, Dr. Klaus-Peter Reich, was able to report a total of 213 new products in 2002 (previous year: 209). Among the EMEA statistics of the European approval procedure (so called MR procedure) for generics, STADA was still in the lead at year-end 2002 with 681 approvals (previous year: 486).
STADA's extensive product pipeline puts it in an excellent position to profit from the sales volumes that will come off patent in the next few years. In the EU alone, the volume until 2006 is about EUR 6.0 billion. In addition, STADA expects its first biogenerics sales by no later than 2006. Various external cooperation partners are now working on the development of three biogenerics, a project that was started in 2001 using private venture capital. First clinical testing is planned for this year.
Expenses efficiently controlled
The pleasing earnings situation in the STADA Group is the result of sales achievements and the reduction of expenses. The gross margin rose +36% to EUR 322.7 million from the previous year and now represents 51% of consolidated sales (previous year: 44%). The gratifying +18% increase in sales combined with an increase in the cost of sales of only +3% contributed to this development. Another factor was the replacement of weak margin commercial sales with more profitable business in the core segments.
The Group is adhering to its strategic decision to utilize the capacities in the market for contract manufacturers in addition to in-house production, which covers about 40% of the Company's needs. “Our successful, lean structures are predominantly based on our continuous review of make or buy,” emphasized Chief Production and Technology Officer Peter Niemann. He also underscored the significance of the Company’s flexible production strategy for the continued efficient international expansion of STADA.
Selling and general administrative expenses developed according to plan. Selling expenses rose by +25% to EUR 180.2 million, or 28.4% of consolidated sales, while general administrative expenses increased by +26% to EUR 41.8 million, or 6.6% of consolidated sales. Compared to the previous year, these percentages are slightly higher in relation to consolidated sales, but lower in relation to sales in the core segments. Research and development expenses were consciously raised at an above-average rate of +55% and reached EUR 16.1 million or 2.5% of consolidated sales and 2.8% of sales from the core segments. STADA is taking the higher market opportunities into consideration that not least arise from the growing number of patent expirations.
Growth creates jobs
The growth course also creates attractive jobs. In fiscal 2002, STADA created 304 new jobs (previous year: 288), of which 42 were in German locations. The Group had an average total of more than 2,100 employees worldwide, up +17% from the previous year. The growing number of employees outside of Germany reflects the Company’s continuing internationalization. Some 56% or just under 1,200 STADA employees now work outside of Germany. About half are active in marketing and sales. About 120 employees work on research and development. Nine out of ten STADA employees surveyed rated their workplace with excellent scores in a study called Deutschlands Beste Arbeitgeber 2003 (Germany’s Best Employers in 2003).
Designed for growth
In the current year, STADA is planning to continue its successful growth and once again projects double-digit growth rates for sales and earnings. The acquisitions made in the current financial year, of Schein Pharmaceuticals (Generics sales line Genus Pharmaceuticals) in the United Kingdom and New Pharma Ajani in Italy, have made it possible for STADA to further tighten its European sales network. STADA has thus created the ideal conditions to translate the anticipated market growth to internal growth, above all in the generics core segment. In addition, STADA will continue to pursue an attractive acquisition policy in order to further accelerate the earnings-oriented growth of the Company.
In the current financial year 2003, consolidated sales increased by +17% by mid-March while sales in the core segments even improved by about +32% from the same period in the previous year. “This puts us right on course in the first months of 2003 to achieve the eighth record year in a row,” says CEO Hartmut Retzlaff. “This is why we can say that STADA is designed for growth,” he concluded.
For more information, please contact:
STADA Arzneimittel AG
D-61118 Bad Vilbel
Tel.: +49 6101 603-113
Fax: +49 6101 603-506