Richter Rises to Month-High on Net Income, Putin: Budapest MoverMarton Eder and Edith Balazs
Gedeon Richter Nyrt., Hungary’s largest drugmaker, rose to the highest level since April 11 after first-quarter profit fell less than expected and tension in Ukraine eased even as the company’s sales prospects deteriorated.
The stock gained 3.5 percent to 3,928 forint by the close in Budapest. About 705,000 shares were traded, 32 percent more than the three-month daily average.
Net income for the first three months fell 51 percent to 9.3 billion forint ($42.2 million) due to a financial loss and lower sales in Russia and Ukraine, the company said in a statement today. That compares with an 8.6 billion-forint estimate in a Bloomberg survey of five analysts. The shares pared early gains intraday after the company lowered its sales guidance for the two eastern European countries before rising again as President Vladimir Putin said his country pulled back troops from Ukraine’s border.
The better-than-expected results could “temporarily incite some enthusiasm for the share,” Attila Vago, an analyst at Hungary’s largest brokerage Concorde Securities, said in an e-mailed report. Concorde maintained its underweight recommendation on the stock and lowered its end-2014 price target to 3,900 forint from 4,080 forint, citing “a dreary” earnings outlook.
Richter has slumped 11 percent this year as the crisis in Ukraine, a depreciation in Russia’s ruble and a delay in U.S. regulatory approval for its Cariprazine antipsychotic drug weighed on the company’s outlook.
In Ukraine, “we expect a gradual decline in economic performance and believe that the decline in drug sales is only beginning now,” Richter CEO Erik Bogsch told reporters in Budapest today.
Russian exports will probably fall 5 percent this year in ruble terms, Bogsch said, compared with a February guidance of 5 percent growth. Ukrainian dollar sales are forecast to decline 35 percent in 2014. Richter also lowered its operating margin outlook to 11 percent from 12-13 percent.
Total sales for the year will probably decline 6 percent, Bogsch said, refining a previous guidance for sales this year.
Russia is Richter’s largest market, accounting for 28 percent of total sales, while Ukrainian exports account for 6 percent of consolidated revenue.
Four analysts recommend buying the stock, five have a hold rating and three say sell, according to data compiled by Bloomberg.