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Prim Earnings May Fall Further as Spain Controls Costs

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Jan. 26 (Bloomberg) -- Prim SA, Spain’s only publicly traded supplier of medical products, said operating profit probably fell 10 percent last year and may continue to drop in 2011 as local Spanish governments force restraint on prices.

Sales were flat in 2010 as prices declined, Carlos Rodriguez, a board member and secretary general of the company, said in a phone interview.

Earnings before interest, taxes, depreciation and amortization “may fall even further in 2011,” Rodriguez said. “We’ll still post a profit but I don’t expect growth to resume until 2012.”

Prim declined 7 cents, or 1.4 percent, to 5.07 euros, its lowest closing price since Dec. 7, after losing as much as 2.3 percent earlier. The Madrid Stock Exchange General Index advanced 0.1 percent today.

Prim, whose main customers are Spanish regional governments, may report 2010 sales similar to the prior year’s 95.5 million euros ($131 million), Rodriguez estimated. Lower prices meant a smaller profit for each unit, he said.

Government agencies need to continue spending on health care even as budgets remain under tight control, Rodriguez said in the Jan. 24 interview. “We’re a privileged sector but times are tough.”

Pedro Prim started the company in 1870 as a maker of orthopedic shoes in Navarra, northern Spain. Prim, now based in Madrid, posted net income of 6.85 million euros on sales of 69.7 million euros in last year’s first nine months. The company’s products now include back supports and gynecological equipment.

Growth in 2012

Rodriguez predicted that Prim will not clearly surpass 100 million euros in sales until 2012. About 90 percent of sales are in Spain, with most of the rest from exports to other Organization for Economic Cooperation and Development countries.

Over the past few years, Prim declined offers to sell assets because “they were strategic,” Rodriguez said. Offers have tailed off in the last few months as the financial and economic crisis discourages bids, and the company won’t divest or buy any assets in the short term, he said.

The most significant potential risks for the company may come from payment defaults by regional administrations. “In 2010 they have paid very badly, but we are in a strong position as our debt remains very low,” Rodriguez said.

As the company will remain profitable, it may keep its dividend unchanged from last year’s payout of 19 euro cents a share, Rodriguez said.

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net.

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net.