Equity 5 November 2004, 1:17pm

Update 1 - Richter ups net profit 12% yr/yr in Q3

Portfolio

The operating profit of Hungarian drugs firm Richter was 4% above analysts' consensus in the third quarter of the year, while its net profit came only slightly above expectations. The growth of exports diminished and not only because of high basis figures. The management cut forecasts for US sales. Investors are likely to take Q3 numbers badly, as in the past few days the market automatically priced in a positive surprise from Richter.

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Revenues in spotlight.

Firstly, let's see the 12-month trailing data for consolidated sales.

The minor downfall in the quarter is to be blamed on lower US sales and high basis figures (USA, CIS).

While the management earlier said that US revenues would grow by 5%-10% year on year in 2004, in their flash report they said sales would grow only marginally.

Export growth in the CIS (Commonwealth of Independent States) should not have decreased, but it did - to our surprise, as well. Export growth went down 7% in Q3 from Q2.

The CEE region, however, proved to be the best sales area for the company, with Poland, Slovakia and the Czech Republic on top of Richter's export sales list.

There has not been too many changes on Richter's home market, but it hints favourable changes that the company introduced three new products in Hungary in October and by the end of the third quarter it also came out with a new emergency contraceptive.