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Gedeon Richter Profit Beats Estimates as Focus Shifts to China

Gedeon Richter Nyrt., Hungary’s biggest drugmaker, reported a first-quarter profit that beat analyst estimates as the company shifts its focus to China and the former Soviet Union while sales in the U.S. decline.

Net income rose 14 percent from a year earlier to 19.1 billion forint ($86 million), Richter said in a regulatory statement today. That exceeded the 14.3 billion-forint mean estimate for adjusted profit in a Bloomberg survey of four analysts. Sales rose to 85.8 billion forint from 82 billion forint a year earlier, with revenue from China climbing more than six-fold to 9.6 million euros ($12.6 million).

Richter kept its forecast for a group sales increase of 3 percent in euro terms this year, Chief Executive Officer Erik Bogsch told reporters today. The company cut its 2013 operating margin forecast about one percentage point to 14 percent on higher sales and marketing costs, he said.

While Richter “delivered a positive surprise” with a “more robust rise in the bottom line,” and jump in sales in China, the market reaction was mitigated by “persisting pressure” on operating margins, Vladimira Urbankova, a Vienna-based analyst at Erste Group Bank AG, said in a note.

Management sees as much as 35 million euros in annual sales from China, with Ukraine and former Soviet members representing other areas of growth, while U.S. revenue drops as much as a quarter, Bogsch said.

The shares rose 0.4 percent to 34,295 forint at 2:01 p.m. in Budapest, trimming this year’s drop to 5.4 percent.

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