BUDAPEST May 7 Hungarian drugmaker Richter reported on Wednesday a 51 percent fall in first-quarter net profit, slightly higher than market expectations, as revenue from its key markets Russia and Ukraine plunged while costs inched higher.
Chief Executive Erik Bogsch warned in an interview with Reuters in early March that Richter's operating margin could plumb record lows in the first three months due to a fall in the value of the rouble.
Pressured by the conflict with Ukraine, the Russian currency fell some 16 percent to the euro compared to the first quarter of 2013, Richter said, slashing the value of exports to its single biggest market.
Net profit for the first three months came in at 9.34 billion forints ($42.42 million), down from 19.05 billion in the same period a year earlier but above analyst forecasts for 7.9 billion in a recent poll by financial news website portfolio.hu.
Operating profit was 10.26 billion forints, down by a third year-on-year but above market expectations for 8.7 billion. Operating profit margin plunged to 11.6 percent for the first quarter from 17.7 percent in the same period a year earlier.
In February, the company predicted its operating margin would drop to between 12 and 13 percent of revenue in 2014 from 13.8 percent last year and 14.9 percent in 2012.
Richter, which makes gynaecological, cardiovascular and central nervous system drugs, saw sales to Russia fall by 18.4 percent in the first quarter, while sales to Ukraine tumbled by 20.7 percent.
Richter had sales to Russia last year worth 337 million euros out of total revenue of 1.18 billion, with Russia and Ukraine together accounting for over a third of total turnover.
The company, which has a market capitalisation of $3.2 billion, had revenues worth 88.53 billion forints in the first quarter, above analyst forecasts for 86.5 billion, as sales to Hungary, the European Union, China and Latin America rose.
A year ago Richter had also received a one-off milestone payment worth about $15 million from U.S. partner Forest Laboratories Inc after a regulatory filing of Cariprazine, a new antipsychotic drug under development.
The lack of that income also weighed on Richter's bottom line in the first quarter, as did higher research and development spending, which rose by 6.8 percent from last year, partly driven by ongoing research with Forest.
In November the U.S. Food and Drug Administration (FDA)declined to approve Cariprazine, discovered by Richter and licensed to Forest in the United States and Canada, citing the need for more information.
Richter's shares have lost 5.4 percent of their value over the past three months according to Thomson Reuters data, underperforming the blue chip Budapest index, which dropped 2.4 percent over that period.
Four of 12 analysts tracked by Thomson Reuters rate the stock a 'buy', five rate it 'hold', while three have assigned various levels of 'sell' ratings. ($1 = 220.20 Hungarian Forints) (Reporting by Gergely Szakacs; Editing by Miral Fahmy)