Roche results worse than feared

Pharmaceuticals giant Roche this week reported a 28 per cent fall in net profits for the first half of the year. The Swiss company saw net profit fall from SF2.5billion to SF1.8billion (bn). However it stayed with its forecast of a return to double-digit growth in 2003 fuelled by new product launches, reported FT.com.

Roche said that sales would grow in the mid to high single digit sales growth in local currencies and operating profit and Ebitda margins would expand this year, but financial income would be much the same in the second half.

The result, which was worse than even the most pessimistic analyst's forecasts, was the result of a dramatic fall in financial income combined with 39 per cent drop in operating profit at the vitamins and fine chemicals unit, which Roche is seeking to divest, according to the report. Roche said that preparations for the sale are moving ahead as planned.

Operating income in the core pharmaceutical and diagnostics divisions rose 12 and 13 per cent respectively.

Earnings before interest, tax, depreciation and amortisation - which, excludes financial income, was off 6 per cent at SF3.2 billion.

Sales rose 2 per cent to SF14.7billion, slightly below analysts' forecasts.

Pharmaceutical sales were up 6 per cent at SF9.5billion, after slowing to 5 per cent in the second quarter, partly as a result of a tougher foreign exchange environment.

The pharmaceutical sector has usually proved to be a safe haven for investors in times of economic recession, reports the FT, but the industry is currently facing an unprecedented loss of sales as patents expire on some of its biggest-selling drugs. At the same time there is a dearth of new medicines in the pipeline to make up for the lost sales.

The industry also faces increased pressure on prices from governments and insurance groups which are trying to rein in their spiralling drugs bills. Earnings per share fell 27 per cent to SF2.14 against SF2.96 in the same period in 2001.