Excerpts from their earnings report today. I urge you to read the report in its entirety: en.sanofi-aventis.com
Paris, March 1,2005
>Strong growth of 18.2% in 2004 adjusted1 proforma1 EPS to 3.89 euros per share
>Rapid integration, synergies on target
>R&D portfolio of 128 products of which 48 in phase II and phase III
YEAR ENDED DECEMBER 31, 2004:
•Adjusted proforma net sales: 25,418 million euros, up 4.6% (10.0% on a comparable basis’)
•Adjusted proforma developed sales’: 28,529 million euros, up 12.3% on a comparable basis
•12.5% growth in adjusted proforma operating profit, 2.2 points improvement in proforma operating margin
•17.9% growth in adjusted proforma net income, to 5,247 million euros
•2004 pre-tax synergies of 220 million euros, versus the 160 million euros announced when the offer was launched
•18.2% rise in adjusted proforma EPS to 3.89 euros, against 3.29 euros for 2003
OUTLOOK FOR 2005:
Barring major adverse events, sanofi-aventis expects:
• 2005 comparable-basis net sales growth ahead of world pharmaceuticals market growth
• Growth of adjusted full-year EPS in line with the rate achieved in 2004 at an average of
1.25 dollars to the euro. Sensitivity to fluctuations in the euro/dollar exchange rate is estimated at 0.5% of growth for a 1-cent fluctuation.
Sanofi-aventis confirms cumulative pre-tax synergies of 960 million euros at end 2005 and 1,600 million euros at end 2006.The main event of 2004 was the acquisition of Aventis by Sanofi-Synthelabo, which became sanofiaventis on August 20, 2004.
Comments on adjusted proforma statement of income (unaudited)
Unless otherwise indicated, the terms used in this press release are on an adjusted proforma basjs (unaudjted).
In 2004, sanofi-aventis generated net sales of 25,418 million euros, an increase of 100% on a comparable basis2. Currency fluctuations had an unfavorable impact of 4.1 points, more than two-thirds of which was due to the fall in the US dollar. Changes in Group structure (comprising products divested by Aventis in 2003 and the first half of 2004) had an unfavorable impact of 1.3 point After taking these items into account, net sales growth came to 46%.
Gross profit came to 19,376 million euros, 47% higher than in 2003. Gross margin ratio to sales was stable at 762%. The higher burden of pharmaceutical contributions in Europe was offset by increased net royalty income on Plavix® and Avapro® and a favorable product mix.
Research and development expenses were 26% lower than in 2003 at 3,961 million euros, representing 156% of net sales. The main reason was the lower level of milestone payments in 2004 (in 2003, milestone payments were made to Proskelia, Immunogen, Regeneron, etc).
Selling and general expenses amounted to 7,678 million euros, 22% higher than in 2003. This limited growth reflects the sharp cut back in recruitment implemented by both groups as soon as the deal was announced in early 2004.
Other operating income and expense, which comprises transfers of profits in respect of joint
operations with Bristol-Myers Squibb, our share of profits from the Actonel alliance with Procter &
Gamble, and our share of profits generated by our other alliances, represented net income of 426
million euros, compared with 324 million euros in 2003.
As regards the alliance with Bristol-Myers Squibb, our share of profits generated by Plavix® and Avapro® in North America, the territory managed by Bristol-Myers Squibb, amounted to 581 million euros (against 436 million euros in 2003). Conversely, profits passed on to Bristol-Myers Squibb in respect of the territory managed by sanofi-aventis came to 257 million euros, compared to 173 million euros in 2003.
Operating profit, including the 220 million synergies achieved in 2004, amounted to 8,163 million euros, 125% higher than in 2003. Operating margin advanced by 2.2 points to 32.1%.
Net financial expense was 599 million euros, compared with 633 million euros in 2003 (note that the acquisition debt is positioned on January 1, 2003, in accordance with the principles of the proforma financial statements). This improvement was mainly due to a reduction in the level of debt as a result of cash flow generated in the year and to lower interest rates, partly offset by the write-down to market value of investments in companies such as Rhodia, Genta and Millenium (total write-down of 76 million euros, against 2 million euros in 2003).
Exceptional items showed a net gain of 29 million euros in 2004, against a net loss of 41 million euros in 2003. The 2004 figure includes 420 million euros of gains on disposals (2003: 428 million euros), Aventis bid defense costs of 156 million euros, the cost of restructuring programs initiated by Aventis prior to the acquisition (140 million euros, versus 218 million euros in 2003), and costs relating to divested activities of 63 million euros (221 million euros in 2003).
Income taxes were 2,355 million euros, compared with 1,813 millions in 2003. The effective tax rate was 315% in 2004, compared with 281% in 2003, when the rate reflected the impact of favorable exceptional items in Aventis accounts.
The contribution from equity investees represented net income of 176 million euros, against a net loss of 151 million euros in 2003.
In 2004, this line mainly comprised the Group’s share in the profits of joint ventures with Merck & Co in vaccines in Europe (Sanofi Pasteur MSD) and in animal health (Merial), and of Wacker (chemicals) and Yves Rocher.
The negative contribution from equity investees in 2003 was due partly to the losses of Rhodia (equity-accounted until May 2, 2003), and partly to losses associated with Dystar (investment sold in 2004) and Wacker.
Net income came to 5,247 million, 179% higher than in 2003.
Earnings per share (EPS) was 389 euros, 182% up on the 2003 figure (329 euros), based on a total of 1,347,480,482 shares in 2004 (1,352,146,319 in 2003).
Net debt
At end December 2004, the Group had net debt of 14.2 billion euros, compared with 2.4 billion euros at end 2003 (2003 position calculated on the basis of the consolidated balance sheet of each of the two groups, after including quasi-equity instruments in debt, and after excluding treasury shares held for the purpose of stock option plans and listed equity investments from liquid assets). The Group’s net debt at end 2004 includes the impact of the cash outflow of 15.9 billion euros3 for the cash portion of the offer for Aventis. The net debt to equity ratio stood at 39.8% at December31, 2004.
The Group confirms that it expects to repay the acquisition debt within 5 years from the closing of the deal.
2004 dividend
The Board of Directors, at its meeting of February 28, 2005, decided to request a General Meeting of Shareholders to be held on May 31, 2005 to approve a dividend of 1.20 euros per share, an increase of 17.6% on the 2003 dividend of 1.02 euros. Based on adjusted proforma earnings per share, this represents a payout of 30.8%.
The dividend will be paid on June 7, 2005.
Integration
The integration process is progressing more rapidly than initially expected. The commitment of the Group’s employees to the project has been the key factor in this success.
The decision has been taken to merge headquarters operations in each subsidiary and country; management teams are now in place, and sales forces are fully integrated and operational.
The successful integration of the Research and Development teams has enabled us to carry out a full review of the portfolio, leading to the selection of 128 compounds, including 20 vaccines. 48 projects are in phase II and phase III, 29 compounds are in phase I, and 51 projects are at the pre-clinical stage. |
