DGAP-News: STADA

STADA Group key figures

"With Group sales, EBITDA and net income, we were able to generate high growth rates in 2017 on an adjusted basis. In doing so, both the generics and branded product business developed very positively. Furthermore, the course for sustainable growth at STADA was charted beyond 2018," according to the Chairman of the Executive Board of STADA, Dr. Claudio Albrecht.

Strong growth in Group sales
The reported Group sales increased in the 2017 financial year by 8% to EUR2,313.9m. This rise was mainly due to the increase in the Belgian, Italian and Serbian Generics segment as well as in the Russian Branded Products segment. Group sales adjusted by currency and portfolio effects increased by 6% to EUR2,255.3m. In particular, this growth was based on an increase in sales in the Belgian and Italian Generics segment and the Russian Branded Products segment.

Strong product pipeline
In the 2017 financial year, STADA demonstrated its successful product development again with a total of 670 new product market launches in the Generics and Branded Products segment (previous year: 665). STADA continues to have a well-filled product pipeline with ongoing approval procedures as of December 31, 2017 totaling over 1,200 for more than 170 active pharmaceutical ingredients and active ingredient combinations for over 55 countries.

Key earnings figures influenced by special items
The key earnings figures reported were influenced by special items that, in particular, can be attributed to consultancy services in connection with the takeover by Bain Capital and Cinven completed in 2017 (acquiring company Nidda Healthcare Holding GmbH) and severance payments.

Adjusted EBITDA grows by 9%
The reported EBITDA increased in 2017 by 1% to EUR363.8m. This development was characterized by counteractive effects. On the one hand, improvements in the operating profit in the Belgian, German and Spanish Generics segment and strong sales development and positive translation effects in Russia could be achieved. On the other hand, there were burdens due to high consulting expenses in connection with the takeover completed in 2017. The adjusted EBITDA recorded an increase of 9% to EUR433.9m - essentially due to the improved operating profit in the Belgian, German and Spanish Generics segment and strong sales development, in particular in the Branded Products segment, and the positive translation effects in Russia.

Adjusted net income with 10% growth
The reported net income reduced in the 2017 financial year by 1% to EUR85.3m. Special items in connection with the takeover had detrimental effects. Furthermore, an increased tax rate influenced net income. The cause of this was a change in the composition of pre-tax earnings with a considerable increase in contributions to earnings in Germany and the Russian Federation in addition to disadvantageous effects from the deconsolidation of STADA Vietnam J.V. Adjusted net income showed growth of 10% to EUR195.6m, mainly as a result of the positive development of the operating profit in Belgium, Germany, Spain and Russia.

Dividend proposal
STADA targets to accelerate growth and increase its ranking position in the global pharma market in the coming years. To achieve this target the Executive Board and the Supervisory Board of STADA Arzneimittel AG consider it necessary, to significantly increase investments in R&D, new products, technologies and markets. Against this backdrop, both bodies suggest to the General Meeting on June 6, 2018, to pay a dividend for the 2017 financial year of EUR0.11 per STADA share (previous year: EUR0.72).

Declining cash flow
Cash flow from operating activities amounted to EUR262.9m in the reporting year (previous year: EUR333.5m), inter alia due to a decrease in factoring volume. Free cash flow amounted to EUR140.2m (previous year: EUR161.8m). The free cash flow adjusted by payments for significant investments or acquisitions and proceeds from significant disposals was EUR181.2m (previous year: EUR243.9m).

Net debt reduced
Net debt could be reduced on the reporting date to EUR1,054.7m (December 31, 2016: EUR1,118.2m). The ratio of net debt to adjusted EBITDA improved in 2017 to 2.4 (previous year: 2.8).

Outlook
The Executive Board expects further Group growth for financial year 2018 as compared to the prior year. Group sales adjusted for currency and portfolio effects are expected to be EUR2.495bn +/- 5%, representing a growth in the high single digits adjusted for currency and portfolio effects. Adjusted EBITDA is expected to be EUR480m +/- 5% and adjusted net income EUR230m +/- 5%.

With regard to the strategic outlook for 2019, the Executive Board expects to be able to achieve adjusted Group sales of EUR2.575bn +/- 5%, an adjusted EBITDA of EUR540m +/- 5% and adjusted net income of EUR275m +/- 5%.

STADA Generics segment key figures

Generics sales development
Sales reported in the Generics segment increased in the reporting year by 6% to EUR1,361.7m, mainly due to the initial consolidation of the Serbian wholesaler Velexfarm. Furthermore, the rise in generics sales in the Belgian and Italian market contributed to this increase. Sales adjusted by portfolio and currency effects increased by 4% to EUR1,324.4m. Overall, the share of the Generics segment in Group sales in 2017 was 58.8% (previous year: 59.9%).

Generics country development
Within the Generics segment, the development of the eight biggest countries in terms of sales in the 2017 financial year was as follows:

Germany: The decline in sales in the 2017 financial year was due to counteractive effects. While ALIUD PHARMA recorded an increase in sales due to the discount agreement tenders won, the sales of STADAPHARM were, as expected, below the level of the previous year. Development at STADAPHARM in both the 4th quarter and full year can mainly be attributed to the discount agreements that had almost fully expired in December 2016. Business outside of discount agreement tenders at STADAPHARM, which has also included sales by the former cell pharm since July 1, 2017, showed a positive development. This includes, inter alia, sales with oncology products. In regard to the 4th quarter ALIUD PHARMA recorded a slight decrease in sales compared to the previous-year quarter as a result of inventory correction of wholesalers. Italy: Regardless of the high degree of competition, the increase in full-year sales was achieved in particular due to positive volume growth, product launches and price effects. In the 4th quarter, the strong sales growth in this region was supported by new product launches and positive volume and price effects. Belgium: The increase in full-year sales in particular resulted from positive volume effects caused by the independent execution of distribution activities since January 2017 and a reduced discount rate following the termination of the previous distribution agreement. The decline in sales in the 4th^{quarter was caused by the changed discount strategy towards reduced discounts, which led to lower sales. Russia: Sales growth in the 2017 financial year was mainly characterized by positive volume effects with sales growth in the 4th quarter driven by strong positive volume effects particularly standing out on the back of a weak comparative quarter. Spain: Sales development at the previous year's level could be achieved regardless of an overall declining Spanish generics market. Serbia: The increase in sales for both the full-year and 4th quarter of 2017 was in particular due to the initial consolidation of the Serbian wholesaler Velexfarm and the changeover from the former distribution model. France: The decrease in full-year sales was essentially due to a continued high degree of price and discount competition. However, sales in the 4th quarter increased due to new product market launches. Vietnam: The reduction in full-year sales was, inter alia, based on the fact that only the sales from January to November 2017 are included for STADA Vietnam J.V. This is because since December 2017, STADA Vietnam J.V. has no longer been accounted for as a subsidiary pursuant to IFRS 10 but rather as an associate pursuant to IAS 28 as a result of the contract concluded in the 4th quarter of 2017 for the sale of the shares held by STADA in this company as of December 31, 2019. The sales increase in the 4th quarter was largely impacted by a one-time effect, which was explained by the delay of financial reporting of STADA Vietnam J.V. during the 3rd quarter of 2017. These sales were recognized with retroactive effect and thus, sales from July to November 2017 are included in the numbers of the 4th quarter.}

Generics EBITDA and margin development
The adjusted EBITDA of the Generics segment increased in 2017 by 14% to EUR302.8m. This development was mainly due to the improvement of the operating profit in the Belgian Generics segment - after the termination of the existing distribution cooperation with Omega Pharma in December 2016 - and the improvement of the operating profit in the German and Spanish Generics segment. The adjusted EBITDA margin was 22.2% (previous year: 20.7%).

STADA Branded Products segment key figures

Branded Products sales development
The reported sales of the Branded Products segment showed an increase of 11% in the 2017 financial year to EUR952.2m. This development was mainly due to strong growth in segment sales in Russia. Furthermore, this was also because of an increased sales contribution of the Serbian subgroup. Sales adjusted by portfolio and currency effects increased by 9% to EUR930.9m. Overall, branded products contributed 41.2% to Group sales in the reporting year (previous year: 40.1%).
Branded products country development

Within the Branded Products segment, the five biggest countries measured by sales developed in the reporting year as follows:

Russia: The strong double-digit increase in sales in the 2017 financial year and the 4th quarter primarily resulted from volume growth, especially of top branded products. Germany: The decline in full-year sales was due to counteractive effects. The brand business of STADA GmbH developed with increasingly greater success across 2017 and showed a slight rise compared to the previous year, which was also due to the two successful product launches of Hedrin and ViruProtect. The overall reduction in sales in this segment was in particular attributable to the development of the German business with the Parkinson's treatment APO-Go. Sales development in the 4th quarter competed against a high level of sales in the comparative quarter. United Kingdom: The reduction in full-year sales was mainly due to levels of stock in the supply chain in the 4th quarter of 2016 as well as a weak cough and cold season in the first half of 2017 and could be only partially compensated for by the sales contribution of the branded products company Natures Aid which was acquired in November 2016. The decline in sales in the 4th quarter was mainly attributable to a weaker business with prescription products of Thornton & Ross. In addition, sales performance also compared to a strong comparative quarter. Italy: The decline in sales in the full-year and 4th quarter 2017 was mainly due to a license agreement which ended in the second half of 2017 and the associated negative volume effects. Vietnam: The growth in full-year sales in particular resulted from positive volume effects, both in OTC as well as hospital business. The sales increase in the 4th quarter was largely impacted by a one-time effect, which was explained by the delay of financial reporting of STADA Vietnam J.V. during the 3rd quarter of 2017. These sales were recognized with retroactive effect and thus, sales from July to November 2017 are included in the numbers of the 4th quarter.

Branded products EBITDA and margin development
The adjusted EBITDA of the Branded Products segment increased in 2017 by 3% to
EUR207.4m. This development was mainly due to strong sales development and positive translation effects in Russia. The adjusted EBITDA margin of branded products was 21.8% (previous year: 23.4%). This development was based on more significantly increased selling expenses in comparison with the sales development, predominantly in Italy and in the United Kingdom.

STADA reconciliation - special items full-year 2017

1 Due to the presentation in millions of euros, there may be deviations due to rounding in the tables.
2 Affects additional depreciation/amortization and other valuation effects due to purchase price breakdowns and
significant product acquisitions assuming a basic level of the 2013 financial year.
3 Affects, inter alia, severance payments for former members of the Executive Board and restructuring measures, the
deconsolidation effect of a Vietnamese subsidiary and recognized tax deferrals within the profit and loss account.
 

Contact:
STADA Arzneimittel AG / Investor Relations / Leslie Iltgen / Stadastraße 2-18 / 61118 Bad Vilbel /
Tel.: +49 (0) 6101 603-173 / Fax: +49 (0) 6101 603-215 / E-Mail: leslie.iltgen@stada.de
Or visit our website at www.stada.de.