Richter held a conference call yesterday, and provided some guidance for 2007 indicating a difficult year ahead:
*Richter sees flat top line growth in 2007
*Domestic sales are expected to fall by 20% y/y in 2007
*Richter said 2007 Russian sales would fall to US$200-210m from US$218 m a year earlier
*DLO system sales are seen to decline by US$25m in 2007
*US sales are seen flat while in the EU sales are expected to grow by around 10 % or slightly more
*Research& Development to sales ratio is seen at 10-11% range due to a recently started clinical trial
*Operating margin is seen to dip below 20% in 2007
Our view: We see Richter’s sales guidance is far too conservative, we believe. We see lower sales slowdown and less pressure on margins, which would lead to an above 20% operating margin for 2007. However, we think there will be downgrades on the market, mainly on the back of the comapany's domestic sales guidance.