Press room

Krka presents results for first half of 2010

Novo mesto, 29 July 2010 - At a press conference today the Krka Management Board presented the business results of the Krka Group and Company for the first half of 2010, which were studied by the Company's supervisory board at its meeting yesterday. Over the period the Group sold products and services worth EUR 500.0 million and generated a net profit of EUR 91.2 million, which is 17% more than for the same period last year. The Krka Company with sales worth EUR 477.5 million EUR recorded a profit of EUR 98.6 million, with growth of 19%.

Sales

Sales in the first half of the year totalled EUR 500.0 million, an increase of EUR 22.2 million or 5% on the same period last year. Sales on markets outside Slovenia contributed 90% of total sales.
Krka Company sales were worth EUR 477.5 million, which is EUR 58.8 million or 13% higher than last year's half year sales.

Krka Group sales by region 

Region Central Europe was Krka's leading sales region, with a 31% share of total Group sales. Product sales in the region in the first half of 2010 were worth EUR 155.6 million, growth of 14%. The second-ranking region by sales, which totalled EUR 119.7 million, was Region East Europe with a 24% share. This region, which recorded sales growth of 2%, includes Krka's largest single market, the Russian Federation, where sales were worth EUR 88.2 million, which is 2% more than in the same period of last year.

They are followed by Region Western Europe and Overseas Markets, where sales were worth EUR 105.1 million, 21% of overall Group sales. Sales in this region were somewhat lower than on the same period of last year. On the markets of Region South-East Europe Krka sold products worth EUR 68.7 million, representing a 14% share of total sales, achieving sales growth of 8%. Sales on the domestic market fell by 4%, compared to the same period last year, to EUR 50.8 million and represented one tenth of total Group sales. The reason for the fall in sales in Slovenia was the reduced sale of health and tourism services by the Terme Krka Group, as the Talaso Strunjan business unit was closed for almost four months due to renovation work.

Krka Group sales by product and service group

The Krka Group sold prescription pharmaceuticals worth EUR 420.5 million, achieving 4% sales growth compared to the same period last year. Sales increased most in Region Central Europe (15% growth) and Region South-East Europe (9%), while in Region Western Europe and Overseas Markets sales remained at the same level as last year. On Krka's larger markets, the highest growth in prescription pharmaceuticals compared to the same period in 2009 was achieved in Hungary (29% growth), France (28%) and Poland (21%). Krka's bestselling prescription pharmaceuticals were Enap (enalapril), Atoris (atorvastatin), Zyllt (clopidogrel), Lorista (losartan), Prenessa (perindopril), Nolpaza (pantoprazole), Lanzul (lansoprazole), Vasilip (simvastatin), Zalasta (olanzapine) and Valsacor (valsartan). The highest growth was for Valsacor (valsartan), Prenessa (perindopril), Zyllt (clopidogrel), Lorista (losartan) and Nolpaza (pantoprazole).

Self-medication product sales increased by 17% compared to the same period last year, reaching EUR 47.5 million. The lower purchasing power on individual markets led to sales of cosmetics falling by a bit more than a quarter, down to EUR 2.8 million. Animal health products sales were worth EUR 14.7 million, growth of 15%. Sales of health and tourism services were worth EUR 14.0 million, representing a fall of 14% on the same period last year. A fall was caused mainly by the renovations performed in Talaso Strunjan.

Business results

The Krka Group's operating profit of EUR 106.9 million represents a fall of 9% on the same period last year. The pre-tax profit was EUR 114.4 million, an increase of 11% on the same period last year, while the Group's net profit was EUR 91.2 million, which is 17% higher than the net profit for the first half of 2009. The Krka Company's net profit of EUR 98,6 million was 19% higher than the profit for the same period last year.

The Krka Group's net margin was 18.2% (Krka Company: 20.7%), the EBIT margin was 21.4% (Company: 23.5%), and the EBITDA margin 29.3% (Company: 29.8%). The Krka Group's ROE was 19.2% (Company: 20.5%), and the ROA was 13.1% (Company: 14.4%).

Research and development

In the first half of 2010 market authorisations were acquired for 10 new products in 22 forms. Over the same period 395 new market authorisations were acquired across a range of markets.

In the prescription pharmaceutical field market authorisations were acquired for 5 new products in 11 pharmaceutical forms and strengths. Authorisations were gained for two new products from the sartan range, an important pharmaceutical group used to treat cardiovascular disease. An EU decentralised procedure (DCP) was concluded for Candecor, with the active substance candesartan, in tablet form in four strengths, which acquired market authorisation for candesartan in 8 European states. A market authorisation for the entire European Union was acquired for the new product Tolura, with the active substance telmisartan (one of the modern sartans), in tablet form with 3 strengths. Authorisation was also acquired for a new form of the combined pharmaceutical, Co-Prenessa. The product contains a combination of the active substances perindopril and indapamide and is prepared using a new technological granulation process.

Our selection of gastrointestinal pharmaceuticals from the proton pump inhibitor group was expanded with the conclusion of decentralised procedures for two new products: esomeprazole in the form of gastroresistant capsules in 2 strengths and pantoprazole in powder form for preparation as an injection solution, which is a new pharmaceutical form, offering a new method for administering the established active substance, pantoprazole.

National procedures are also continually underway; these are important for supplying a good selection of new Krka products in eastern and southeastern European countries. New market authorisations were acquired on the Russian market for pharmaceuticals from the sartan group: Firmasta, film-coated tablets in three strengths including the active substance irbesartan, and the combined pharmaceutical Valsacor H 80, Valsacor H 160, Valsacor HD 160 with the active substances valsartan and hydrochlorothiazide in film-coated tablet form. Market authorisation was acquired in south-eastern European countries for the new Elicea product with the active substance escitalopram in film-coated tablet form.

Over the first half of the year in the self-medication range the market authorisation procedure was concluded for a new product, Septolete plus with strawberry flavour in pastille form and for Septolete Plus honey/lime pastilles in Bulgaria and the Czech Republic.

Notifications were acquired for the products Pikovit Omega 3 and Pikovit Prebiotik in the Russian Federation, where Duovit brand was expanded for Duovit Elegance, for the biological nutrition of skin during the day. The Duovit range was also supplemented in Ukraine and the Russian Federation with a new product, Duovit Sila (Power), in chewable tablet form. Notifications were acquired for the Orsoslim capsule product on the key markets of Kazakhstan and Ukraine. The product was aimed at helping people to reach and maintain a balanced body weight. Bilobil intense capsules were registered in Ukraine.

Market authorisations were gained for 4 new animal health products in 10 forms via a decentralised procedure. Development within cosmetic products was aimed on Fitoval products.

Investments

The Krka Group allocated EUR 44.5 million to investment in the first half of 2010, with EUR 32.0 million invested by the controlling company, and EUR 12.5 million by subsidiaries. Some of the investment activities that were put on hold in 2009 due to the uncertain conditions were added to the 2010 plan.

At the end of April we opened a modern plant for syrup production and biocides in Bršljin. The value of this investment was EUR 26 million.

The largest current Krka investment is the construction of a plant at Krka's Ločna complex for production of solid pharmaceutical forms, with a capacity of 2.5 billion capsules, tablets or coated tablets per year. Installation work started in January. Current work is focused on achieving pharmaceutically clean premises. The start of production on the first line in planned for 2^nd quarter of 2011. EUR 91 million will be spent on this investment.

In September 2009 work started to construct RKC-3 for research and development and control purposes and will include state-of-the-art laboratory equipment to monitor and control the quality of input materials, intermediate products and end products. The move to the new premises is planned for the second half of 2011. The estimated value of the entire investment is EUR 22 million.

The planning of new products in spray form led to the start of renovation works at the production facilities in September 2009 to ensure the required cleanliness and explosion-proofing standards. The renovation has been completed and production started in February 2010.

At present two warehouses are being renovated and modernised. In order to maximise the capacity of  the high-bay packaging warehouse at the existing location, the warehouse extension will be fitted with a photovoltaic system to utilise solar energy, an investment that is subsidised by government grants. The construction of four 40 m³-reservoirs will expand solvent warehousing capacity, the use of which has expanded with the start up of an extra production line in the Sinteza 4 plant.

In the Russian Federation Krka will upgrade and extend a logistics centre and a new factory for solid dosage pharmaceutical production. The design concept of the new factory permits flexible and modular construction of production capacity over several phases. Construction is planned to start in autumn, with the facility set for completion by the end of 2012 and production coming on line in early 2013.

The health and swimming pool areas underwent renovation at Terme Krka in Strunjan and hotel capacity was increased as part of an overall investment worth EUR 7.7 million. In spring the foyer and rooms in the Svoboda hotel and the health centre with specialist clinics and physical therapy were all renovated, with doors opening over the 1 May holidays to the renovated swimming pools, hydrotherapy rooms and Salia relaxation centre.

Employees

This year Krka has again primarily been recruiting in the fields of marketing and sales for its subsidiaries and representative offices abroad, and in research and development in Slovenia. The number of employees in the first half of the year increased by 159 in Slovenia, and by 211 in subsidiaries and representative offices abroad. At the end of June the Krka Group had 8345 employees, over 47% of them abroad. Furthermore, over half of all employees in the Krka Group have at least a university or higher professional degree.

At present 79 Krka employees are involved in specialisation, master's and doctoral studies with the company's support, while a total of 406 employees are involved in part-time studies alongside their work. In the first half of this year, 12 employees completed study programmes. At present there are 108 scholarships, mainly in the fields of pharmacy and chemistry.

Investor information 

Over the first half of 2010 the largest increase in ownership share by group was for international investors. The ownership share of Slovenian individuals, Slovenian investment companies and funds, and other Slovenian companies fell slightly over the period. At the end of June 2010 Krka had 81,493 shareholders.

In the first half of 2010 the Krka share price grew 2%, standing at EUR 65.51 at the end of June, while over the same period the main Slovenian index, the LJSE Composite, lost 13% in value. Krka's market capitalisation as at 30 June 2010 was EUR 2,320.8 million, while the average daily trading in Krka shares over the first half of 2010 was EUR 750 thousand. Over the period Krka shares were the most traded security on the Ljubljana Stock Exchange.

Next press conference of Krka Company will be held on 18 November 2010.