Pliva (not rated) has divested its German manufacturing plant to Menarini Group yesterday. The long-awaited sale reflects a key step in the process of optimising PLIVA’s manufacturing. Most of the German production will be transferred to Krakow, and some parts to their Zagreb manufacturing plant. Restructuring charges of USD 22m, mainly related to asset impairment, will be reflected in Q4 2005 results. Savings are expected to arise from 2007 from the rationalisation of the manufacturing plants as products need to be re-registered in those countries where the production is transferred to. However, PLIVA made an agreement with Menarini to supply PLIVA with some products during the re-registration period.
We see the news as neutral. It has been widely known that PLIVA wishes to rationalise its manufacturing plants, and plans to close the German factory. The Company expected material negative impact on the P/L from the sale, thus the current costs do not surprise us. The 2005 annual EBIT (USD 170-180m) and EBITDA (USD 260-270m) guidance of PLIVA should be lowered by the restructuring costs (USD 22) to reflect the Company's realistic full-year targets after the sale.