Siegfried Holding AG: Basis set for continued growth

Half Year Report

03-Sep-2012 - Switzerland

During the first half of 2012 the Siegfried Group successfully maintained revenue growth and increased profitability while progressing with the company strategy. Net sales increased by 2.9% (3.3% in local currencies) over 2011, to CHF 178.7 million. Sales of Drug Products rose markedly after the launch of new drugs in the first half year. The impact on revenue growth of the entire company was only partial since in Drug Substance business lower costs for raw materials were passed on to customers. That led to a disproportionate increase of earnings before interest, taxes, depreciation and amortization (EBITDA) by 32.3% to CHF 21.3 million, corresponding to a 12% margin. The company is optimistic that the current positive trend will continue through the second half of the year.

Growth was 2.1% when adjusted for the AMP acquisition. EBIT grew by 113% to CHF 9.0 million and a 5.1% margin. Net profit for the first half of the year was CHF 13.2 million, 7.4% of net sales.

Continued robust cash situation – impact of FX moderate

The company’s net debt after the acquisition of Alliance Medical Products, Inc. at the end of the first six months was CHF 2.4 million (excl. financial assets), which is still a robust financial situation. The negative foreign currency effect of CHF 0.6 million on operating results for the first half of 2012 remained moderate. The company maintains a ‘natural hedge’ (a combination of US dollars and Euros) of just over 80%.

AMP strengthens technology base

The acquisition of Alliance Medical Products, Inc. (AMP) in Irvine, California is a further step in Siegfried’s overall corporate strategy. AMP strengthens the company’s competencies in the area of pharmaceutical production / sterile fillings and ads to Siegfried’s USP of offering comprehensive know-how in both chemical and pharmaceutical production. AMP represents not only a technology win but also complements the Siegfried company culture very well. In addition, Siegfried can open the European market to AMP, which was previously active only in the U.S.A. Discussions are now being held with Siegfried clients.

New suite for high potency drugs starts up in Zofingen

In the first half of 2012, a new suite for the development of high potency drugs was set up and began operation after authorization by Swissmedic, the Swiss regulatory agency. This enhancement also positions Zofingen to offer know-how for both chemical and pharmaceutical production of highly active ingredients – being our USP.

Production facility planned for China

Siegfried plans to further improve its competitiveness with a new production facility in the modern Nantong Industrial Park northwest of Shanghai, China. In an initial phase, Siegfried is investing in the construction of a production facility for active pharmaceutical ingredients and intermediates. The available property will also allow expansion in a second phase and the possibility of adding a production line for finished drug products. The Nantong Industrial Park features many well-known companies. The location has numerous advantages. Our partner, NETDA (Nantong
Economic & Technological Development Area) will provide a fully-functional industrial park infrastructure. Production start is set for 2014.

Continuing a positive trend

Barring unexpected developments, such as volatility in the currency and raw materials markets, the Siegfried Group expects the current positive trend to continue. The company anticipates growth rates in the high single-digit for the rest of the year (including the contribution from AMP) and an EBITDA margin consistent with the first half of 2012.

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