Richter posted quarterly net profit of HUF 8.1bn for 4Q06 (down 42.2% y/y and 30.7% q/q), 18.3% below consensus. The net result came 22.8% below our forecast, due to surprisingly high financial losses. We expect positive trading reaction to the release on the back of significantly lower operating expenses and mainly unrealized FX losses which seem to reverse in 1H07.
Domestic sales came at HUF 8.7bn in 4Q06 down 25.4% y/y and 6.0% q/q) 23.3% below our expectation. We see the difference is due to underestimation of the difficult domestic market situation.
CIS sales came in at US$ 72.4m in 4Q06, up 46.9% y/y and 4.8% q/q. The figure came 29.7% above our estimate, a big positive surprise to us, as we have significantly underestimated Richter’s private market sales for the quarter. Richter booked US$ 45.8m (up 74.8% y/y and 34.7% q/q) sales on the Russian private market, 42.7% our own forecast. It is also quite positive that the Russian subsidy (DLO) sales showed no negative surprise (US$ 2.8m), beyond what is implied by the DLO list changes.
CEE sales came in at US$ 35.5m, up 11.3% y/y but down 6.3% q/q. The figure is 8.3% below our expectation as we have slightly overestimated the positive impact of strengthened doctor visitor system of the company in the region.
US sales came in at US$ 25.7m (up 34.6% y/y, and 7.1% q/q). The figure beat our forecast of US$ 24.5m, as we have slightly underestimated quarterly shipments to Barr Labs.