For the first half of 2009 the Siegfried Group (SIX: SFZN) achieved sales of CHF 121
million, a 24.2% decline from the previous year. Revenues for the Siegfried Actives
Division, a supplier of active pharmaceutical ingredients and intermediates, reached
CHF 90.8 million in difficult market conditions; this was CHF 4.3 million (4.6%) less
than in the previous year. Siegfried Generics Division sales fell by half to CHF 30.3
million. Overall, the Siegfried Group recorded a net loss of CHF 6.0 million for the
first half of 2009. The EBITDA of CHF 13.2 million (excl. restructuring costs)
corresponds to a margin of 10.9%. EBITDA includes investments of CHF 5.9 million
in the development of a new inhalation technology, which was booked against
earnings.
Various one-time effects marked the first half of 2008 (sale of the pharmaceutical production facility in Zofingen and licensing income from a previous bio-generics project); this makes a comparison with 2008 difficult.
Siegfried Actives: Slightly improved profitability
Despite the demanding economic situation in the market for active pharmaceutical ingredients (API) the Siegfried Actives Division achieved sales of CHF 90.8 million during the first half of 2009, only slightly below last year’s results (2008: CHF 95.1 million). Siegfried Actives made initial improvements in profitability; while EBITDA declined slightly from CHF 17.5 million in 2008 to CHF 16.4 million for 2009, the operative results (EBIT) improved from CHF 1.7 million in 2008 to CHF 3.4 million in the current year.
This improvement is also a result of our ongoing “Deliver” restructuring program that looks to increase the efficiency of internal processes and identify Group-wide savings potentials. “Deliver” is set to be completed by November 2009 and will help significantly improve operative results by delivering sustainable annual savings of CHF 20 million. The Division’s order situation will enable higher revenues for the rest of the year, even though two clients still await authorization from the FDA (U.S. regulatory agency) for their new products. The Division acquired five new development projects and also won a contract for an intermediate product that went directly into production. Generics sales under pressure
In addition to the economic situation, the Siegfried Generics Division also felt the effects of changes in the German market. The first half of the year was characterized by widespread reluctance in the market and a significant reduction of inventories; downward pressure on prices increased further. These developments led to a 50% drop in sales during the first six months of 2009 – to CHF 30.3 million. The results for 2008 (CHF 64.6 million) also included a one-time income of CHF 13 million for licensing fees.
EBITDA was CHF minus 1.1 million, including inhalation technology investments. Without these investments, which were charged against earnings, the Division achieved an EBITDA of CHF 4.7 million and a 15.7% EBITDA margin. Results for the previous year comprise various special effects of about CHF 27 million. When adjusted for these factors, EBITDA margin shrank by approximately 5 percentage points.
Operative cash flow is positive
During the first six months of 2009, the Siegfried Group achieved an operative cash flow of CHF 16.4 million, an improvement of CHF 1.0 million. This improvement is mainly due to a noteworthy reduction of net working capital of CHF 8.3 million. When adjusted for the special effects noted for the first half of 2008, operative cash flow actually improved by CHF 10 million in 2009. These numbers confirm the successful efforts in the management of net working capital. Capital expenditure was reduced from CHF 18.2 million in 2008 to CHF 7.8 million for the current year.
Implementing the strategy
Dr. Rudolf Hanko, Siegfried CEO, adds: “Siegfried possesses the personnel and the technology know-how needed for success. It’s key that we clearly articulate our long-term strategy to the market, which includes our focus on active pharmaceutical ingredients as our core business, complemented by our high level of competence in finished formulation. This is a unique combination in our markets and opens new market opportunities – especially for technically demanding active pharmaceutical ingredients and finished dosage forms. However, faced with a volatile economy and demanding market conditions, it is mandatory that Siegfried maintains a clear focus on cost and cash management.”
Outlook
The Board of Directors and Group Management expect improved revenues for the second half of the current year. Siegfried Actives will achieve higher sales and Siegfried Generics will be able to maintain current sales levels. This positive trend is expected to continue through 2010. Operative results for the second half of 2009 will be affected by restructuring costs and slightly increased expenditures for the inhalation project, which is financed solely by Siegfried until the beginning of the next year. Noticeably improved operative results are expected for 2010.
About Siegfried
Active in Life Science markets, the Siegfried Group is a global manufacturer of pharmaceutical products. With production facilities located in Switzerland, Germany, Malta and the USA, Siegfried currently has approximately 820 employees and achieved annual sales of approx. CHF 290 million in 2008.
Siegfried integrates two pharmaceutical divisions. Siegfried Actives develops and produces both exclusive and standard active pharmaceutical ingredients for the pharma industry and standard APIs. Siegfried Generics produces demanding generic products.
Siegfried Holding AG is listed on the Swiss Exchange in Zurich (SWX: SFZN).
Various one-time effects marked the first half of 2008 (sale of the pharmaceutical production facility in Zofingen and licensing income from a previous bio-generics project); this makes a comparison with 2008 difficult.
Siegfried Actives: Slightly improved profitability
Despite the demanding economic situation in the market for active pharmaceutical ingredients (API) the Siegfried Actives Division achieved sales of CHF 90.8 million during the first half of 2009, only slightly below last year’s results (2008: CHF 95.1 million). Siegfried Actives made initial improvements in profitability; while EBITDA declined slightly from CHF 17.5 million in 2008 to CHF 16.4 million for 2009, the operative results (EBIT) improved from CHF 1.7 million in 2008 to CHF 3.4 million in the current year.
This improvement is also a result of our ongoing “Deliver” restructuring program that looks to increase the efficiency of internal processes and identify Group-wide savings potentials. “Deliver” is set to be completed by November 2009 and will help significantly improve operative results by delivering sustainable annual savings of CHF 20 million. The Division’s order situation will enable higher revenues for the rest of the year, even though two clients still await authorization from the FDA (U.S. regulatory agency) for their new products. The Division acquired five new development projects and also won a contract for an intermediate product that went directly into production. Generics sales under pressure
In addition to the economic situation, the Siegfried Generics Division also felt the effects of changes in the German market. The first half of the year was characterized by widespread reluctance in the market and a significant reduction of inventories; downward pressure on prices increased further. These developments led to a 50% drop in sales during the first six months of 2009 – to CHF 30.3 million. The results for 2008 (CHF 64.6 million) also included a one-time income of CHF 13 million for licensing fees.
EBITDA was CHF minus 1.1 million, including inhalation technology investments. Without these investments, which were charged against earnings, the Division achieved an EBITDA of CHF 4.7 million and a 15.7% EBITDA margin. Results for the previous year comprise various special effects of about CHF 27 million. When adjusted for these factors, EBITDA margin shrank by approximately 5 percentage points.
Operative cash flow is positive
During the first six months of 2009, the Siegfried Group achieved an operative cash flow of CHF 16.4 million, an improvement of CHF 1.0 million. This improvement is mainly due to a noteworthy reduction of net working capital of CHF 8.3 million. When adjusted for the special effects noted for the first half of 2008, operative cash flow actually improved by CHF 10 million in 2009. These numbers confirm the successful efforts in the management of net working capital. Capital expenditure was reduced from CHF 18.2 million in 2008 to CHF 7.8 million for the current year.
Implementing the strategy
Dr. Rudolf Hanko, Siegfried CEO, adds: “Siegfried possesses the personnel and the technology know-how needed for success. It’s key that we clearly articulate our long-term strategy to the market, which includes our focus on active pharmaceutical ingredients as our core business, complemented by our high level of competence in finished formulation. This is a unique combination in our markets and opens new market opportunities – especially for technically demanding active pharmaceutical ingredients and finished dosage forms. However, faced with a volatile economy and demanding market conditions, it is mandatory that Siegfried maintains a clear focus on cost and cash management.”
Outlook
The Board of Directors and Group Management expect improved revenues for the second half of the current year. Siegfried Actives will achieve higher sales and Siegfried Generics will be able to maintain current sales levels. This positive trend is expected to continue through 2010. Operative results for the second half of 2009 will be affected by restructuring costs and slightly increased expenditures for the inhalation project, which is financed solely by Siegfried until the beginning of the next year. Noticeably improved operative results are expected for 2010.
About Siegfried
Active in Life Science markets, the Siegfried Group is a global manufacturer of pharmaceutical products. With production facilities located in Switzerland, Germany, Malta and the USA, Siegfried currently has approximately 820 employees and achieved annual sales of approx. CHF 290 million in 2008.
Siegfried integrates two pharmaceutical divisions. Siegfried Actives develops and produces both exclusive and standard active pharmaceutical ingredients for the pharma industry and standard APIs. Siegfried Generics produces demanding generic products.
Siegfried Holding AG is listed on the Swiss Exchange in Zurich (SWX: SFZN).
