Perbio Science AB Interim report January - September 2002

Perbio Science AB Interim report January-September 2002 Continued growth despite weaker US dollar · Net sales up 19 % to SEK 1,663 (1,396) million · Operating profit before amortisation of goodwill up 18 % to SEK 306 (260) million · Profit after financial items up 16 % to SEK 276 (237) million after exchange losses of SEK 4 million (gains of SEK 15 million) · Net profit up 17 % to SEK 168 (143) million · The lower growth in profits is because the third quarter experienced exceptionally high sales of amidites with low margins, high relative sales of Cell Culture products, weaker dollar and lower serum sales due to lower serum raw material supply Summary: January-September 2002 Perbio Science has continued to cement its position in the market. There was strong growth from the Cell Culture and Medical Device divisions and the Bioresearch division's protein chemistry business. Sales for the period climbed 19% to SEK 1,663 (1,396) million. The Cell Culture and Medical Device divisions posted growth of 32% and 28% respectively, while the Bioresearch division's sales were up 3% on last year with major variations between the different product areas. The Bioresearch division's protein chemistry business, which is the largest and most important part of Bioresearch, reported growth of 17% in local currency, which we estimate to be above the market growth. Sales from the molecular biology business in Milwaukee were down 1% on last year in local currency but grew strongly during the third quarter and were 50% up on the second quarter this year and 62% up on the third quarter last year. Sales of immunology products were 11% down on last year in local currency. Relative to last year, the USD was an average of 3 % down against the SEK over the period as a whole and 11.2% down during the third quarter. The group's gross margin was 1.5 percentage points lower than last year, due primarily to lower amidite prices and an increase in the Cell Culture division's share of the group's overall sales. The balance sheet has been affected by the weaker USD. The USD exchange rate of SEK 9.28 on 30 September 2002 was down 13% from SEK 10.66 a year earlier and SEK 10.67 at the beginning of this year. The weaker USD has had a positive impact on the return on both equity and capital employed. Profit before net financial items increased by 19% to SEK 290 (244) million. Net profit climbed 17% to SEK 168 (143) million. The operating margin fell slightly during the period, due partly to the lower gross margin following changes in the product mix and partly to higher R&D and selling expenses. R&D expenses increased by 39% to SEK 100 (72) million or 6.0% (5.5%) of the group's sales. The main benefactors have been the Bioresearch division and the Cell Culture division's BioProcess Container (BPC) and serum-free cell culture media businesses. All divisions have stepped up their marketing, and the takeover of amidite sales has required the sales and marketing organisation to be expanded. The board of Perbio Science AB has resolved to make CEO Mats Fischier its chairman and appoint Leland G Foster, currently head of the Cell Culture division, as CEO with effect from 1 November 2002. Leland Foster is a US citizen and approval has been received from the Swedish Companies Register to appoint him as CEO of Perbio Science AB. The reasoning behind this change is the fact that 80% of Perbio's business and workforce are to be found in the USA. A US- based CEO has long been considered a key factor for the group's global growth. Lynn Quilter, currently the division's financial controller and head of the serum business, has been appointed acting head of the Cell Culture division The divisions: January-September 2002 Bioresearch Sales totalled SEK 627 (606) million. Relative to last year, the division's strategically most important business - products for protein analysis - grew by 17% over the period as a whole and 13% during the third quarter in local currency. Sales of immunology products totalled USD 6.1 (6.9) million, down 11% on last year, due primarily to less profitable product lines being phased out to allow the business to concentrate on its most profitable lines. Sales from the plant in Milwaukee were around 1% down on the same period last year. Amidite prices remain low. Sales during the third quarter were no less than 50% up on the second quarter in local currency. This is expected to have a negative impact on quarter four sales. Sales from Milwaukee (USD m): Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 6.3 6.5 4.8 3.8 4.4 5.2 7.8 The division's gross margin decreased slightly relative to the same period last year because of the substantial drop in amidite prices. Margins on other products increased, due partly to a higher proportion of sales being channelled through subsidiaries directly to end-customers in Europe, and partly to new products accounting for a higher proportion of sales. Cell Culture Sales rose by 32% to SEK 900 (684) million. Sales continued to improve in all three-product areas: serum, cell culture media, and bioprocess containers (BPC's). Margins continued to improve in BPC's and cell culture media. Due to the declining supply of serum raw material the cost has increased causing a slight decrease in the margin percent. The high rate of growth is attributable to increased market share and growing demand for BPC's and production volumes of cell culture media for pharmaceutical production including other process liquids. The division has continued to step up its investment in research and development in BPC's and specialty cell culture media. During the third quarter the construction of a new plant for the production of cell culture media in powder form started. The investment increases the production capacity as well as reduces the manufacturing costs. The plant is due to be completed in the second quarter of 2003 at a total cost of around USD 3 million. A very high number of concrete enquires about the new single-use production system for sterile liquids including cell culture media based on BPC technology were received during the quarter. The new technology offers a strong alternative to traditional production plants and enables customers to rationalize their own production through increased flexibility and reduced capital costs. Sales of cell culture media from the new plant based on BPC technology are expected to commence in the fourth quarter. Medical Device Sales climbed 28% to SEK 136 (106) million. The division continued to report strong growth in voice prostheses/heat & moisture exchangers (HMEs) and contract production of obesity products. HMEs were the fastest-growing product group. The products FreeHands® and TrachPhone® were approved for sale in the USA during the quarter. Sales Net sales Perbio Science recorded net sales for the period of SEK 1,663 (1,396) million, an increase of 19% relative to the same period last year. The USD exchange rate averaged SEK 9.93 during the period, down 3.1% from SEK 10.24 last year. A combination of all exchange rates reduced sales by 2.4%. During the third quarter the USD was an average of 11.2% down on last year. A combination of all exchange rates reduced sales by 9.4%. Net sales and sales growth 2002 Jan-Sep Jul-Sep Net sales, SEK 1,663 555 m Sales growth, 264 55 SEK m Sales growth, % 19 11 Of which Volumes, % 19 15 Acquisitions, 0 0 % Exchange 0 -4 rates/prices, % Growth in local 22 20 currency Earnings Operating profit before amortisation of goodwill Operating profit before amortisation of goodwill rose 18% to SEK 306 (260) million, corresponding to an operating margin of 18.4% (18.6%). Exchange rates impacted on operating profit in the same way as on net sales. Research and development expenses increased by SEK 23 million to SEK 100 (77) million, equivalent to 6.0% (5.5%) of net sales. One time cost of SEK 3 million for CEO Mats Fischier has been included in the third quarter result. Profit after financial items Profit after financial items was SEK 276 (237) million, an increase of 16%. The net financial items figure of SEK -14 (-7) million includes exchange rate losses of SEK 4 million (gains of SEK 15 million). Net profit The net profit for the period was SEK 168 (143) million, an increase of 17%. Tax The tax rate for the period was an estimated 38.5%, which is currently also expected to be the group's tax rate for the 2002 financial year as a whole. Other information Accounting policies This interim report has been prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation on interim reporting (RR20). The accounts are based on the same accounting policies as the last annual report and on the recommendations from the Swedish Financial Accounting Standards Council entering into force on 1 January 2002. Previous acquisitions have not been restated when applying recommendation RR 1:00. Investments Investments in fixed assets, excluding acquisitions, totalled SEK 94 (69) million. Of this, around SEK 55 (26) million was attributable to plant and buildings under construction. SEK 46 (2) million was invested in acquisitions. Depreciation totalled SEK 53 (54) million. Cash flow Perbio Science generated net cash flow of SEK 66 (58) million and cash flow from operations of SEK 204 (284) million during the period. Liquidity The group had liquid assets of SEK 152 (81) million and unused credit facilities of SEK 361 million at the end of the period. Net interest- bearing debt totalled SEK 320 (427) million. Equity Shareholders' equity increased by SEK 41 million to SEK 1,134 (1,093) million during the period. This breaks down into a reduction of SEK 140 million due to translation differences offset by an increase of SEK 13 million from the exercise of warrants and the net profit for the period of SEK 168 million. The equity/assets ratio was 60% at the end of the period. Personnel The group had 1,241 (1,041) employees at the end of the period. Acquisitions during the period brought in 30 new staff. Parent company The parent company generated net sales of SEK 14 (13) million and a loss after financial items of SEK 8 million (profit of SEK 14 million). It had liquid assets of SEK 105 (46) million and unused credit facilities of SEK 347 (184) million at the end of the period. The company made no investments in equipment during the period and had five employees. The parent company has injected fresh equity of SEK 66 million into HyClone Laboratories Inc so far this year. Stock options The extraordinary general meeting of 27 August 2002 resolved to introduce an incentive scheme for senior officers in the USA involving the issue of 210,000 warrants, equivalent to maximum dilution of 0.6% when fully subscribed. These warrants will entitle the holders to purchase shares in Perbio Science AB in August 2003 at a price of SEK 156.50 each. Financial information 11 February 2003 Year-end report 2002 10 April Annual general meeting 28 April First-quarter interim report Helsingborg, 23 October 2002 The board of Perbio Science AB ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/10/23/20021023BIT00170/wkr0002.pdf The full report