Richter Sees Smaller 2015 Sales Drop on Russian, U.S. Demand

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Hungarian drugmaker Gedeon Richter Nyrt. posted a second-quarter profit jump and sees a smaller decline in sales this year as exports to Russia and the U.S. will help offset plunging revenue in conflict-torn Ukraine.

Revenue may shrink by as much as 2 percent in euro terms this year, compared with a 3.4 percent decrease last year, Chief Executive Officer Erik Bogsch told reporters in Budapest on Thursday. The company, which earlier forecast a drop of as much as 8 percent for 2015, may see no revenue decline if foreign-exchange developments remain favorable, he said.

The largest producer of contraceptive pills in Central and eastern Europe is relying on exports to western Europe, China and Latin America to counter its shrinking sales in Ukraine and other former Soviet states. While Richter’s business is suffering in Ukraine, which is locked in a separatist conflict, the company reported a 63 percent increase in second-quarter profit.

“In 20 years working on the Hungarian market I haven’t seen a company beat estimates by this margin,” Attila Vago, an analyst at Concorde Ertekpapir Zrt., said by phone. Vago said Richter’s sales in Russia were helped by higher stockpiling combined with price increases, and he sees the stock rising toward 5,000 forint by the end of the year.

Richter shares rose 2.4 percent to 4,485 forint by 11:07 a.m. in Budapest, extending this year’s advance to 27 percent.

Rising Profit

Richter’s second-quarter profit rose to 22.5 billion forint ($80 million), boosted by higher sales, a favorable foreign-exchange impact and financial gains. Sales rose 11 percent and the net financial gain totaled 5.7 billion forint against 5 billion forint a year earlier.

Bogsch raised the 2015 guidance for sales in Russia, the company’s largest export market, to 16 billion rubles ($271 million) from an earlier prediction of 15 billion rubles. The executive sees exports to China rising 15 percent in euro terms.

Richter will report “significantly” weaker profit growth in the second half of the year as Bogsch expects favorable base effect and foreign-currency developments to disappear.

Exports to Ukraine may plunge to $20 million from $73 million last year, while U.S. sales are expected to sink between 5 percent to 10 percent, compared with an earlier guidance for a 30 percent decline.

Revenue from Richter’s Esmya drug will probably rise to 47 million euros ($52 million) this year from 33 million euros in 2014, and the company’s operating margin is expected at 13 to 14 percent this year, Bogsch said.