Zentiva should report 13% y/y growth in earnings in 2005

Zentiva reports its FY2005 figures today at 12.00pm. For the first time, Zentiva will consolidate its Romanian subsidiary Sicomed for 2 months in the 4Q05. We expect Zentiva to show an 11.4% growth of the top line helped by strong growth in its exports markets, in particular Russia and Poland and of course Romania. Sales in the Czech Republic should show a slight growth of 2% y/y while we expect a slight drop in Slovakia due to local adverse market conditions following the recent healthcare reform. Zentiva’s consolidated gross margin should reach 61% against 60.3% a year ago on the back of its increasing focus on high margin products and increasing proportion of exports on total sales as Zentiva exports mostly high margin drugs. This should be marginally offset by consolidation of Sicomed in the 4Q05. We may see several one-off items booked in the 4Q05 relating to the acquisition of Sicomed, which may negatively effect the EBIT. On the other hand, lower interest payments due to debt reduction and lower tax-rate should support the bottom line growth. Zentiva holds a conference call at 16.30 CET; dial in: +44 207 162 0025. We would be looking for more information regarding the integration of Sicomed, potentially further acquisitions and shareholders structure and/or plans of Warburg Pincus holding c20% stake in Zentiva after expiration of a lock up period on January 20.