ELANTAS Electrical Insulation

Bad Homburg, November 2, 2005

ALTANA: Double-digit increase in earnings as per the third quarter of 2005

  • Very positive development at the Pharmaceuticals division
  • Earnings forecast for 2005 increased
  • Re-organization of the Pharmaceuticals and Chemicals division

ALTANA AG (NYSE: AAA, FSE: ALT) increased consolidated sales in the first nine months of 2005 by 6% to almost €2.4 billion. Adjusted for currency and divestment effects in the Chemicals division, the operating growth was 7%. “With the first nine months behind us, we can again report a satisfactory increase in sales and especially in earnings of 12%. This is mainly attributable to the very positive development of our Pharmaceuticals business. On account of the outstanding business performance, we now expect a growth in pre-tax earnings for the whole of 2005 in the upper single-digit percent range,“ explained Dr. Nikolaus Schweickart, President and CEO of ALTANA AG. 

Approximately €2 billion of total sales were generated outside Germany. International sales now account for 82% of total sales. Mainly driven by a continuously strong pharmaceutical business, sales in Germany amounted to €415 million in the third quarter, 16% more than in the prior year. With an increase in sales of 13% the Latin American region showed the second strongest growth, followed by Europe and Asia with sales up by 8% respectively. In North America business volume slightly decreased, by -3% expressed in euros, and by -2% expressed in local currencies.

Operating earnings measured in terms of EBITDA in the first nine months of 2005 totaled €616 million, 11% more than in the prior year. The EBIT amounted to €522 million up 12% on the prior year. Earnings before taxes (EBT) also reached a growth rate of 12%, adding up to €533 million. Nine-months net income totaled €332 million, 14% more than in 2004.

The operating return (EBITDA) over the first nine months of 2005 was 26.1%; the return on sales before taxes (EBT) amounted to 22.6%. The earnings per share increased by 15% to €2.45.

In the period under review, ALTANA’s capital expenditure on property, plant and equipment and on intangible assets totaled €180 million. The company’s R&D expenses totaled €329 million. As of September 30, 2005, ALTANA employed almost 11,300 people worldwide, 4% more than in the first nine months of 2004. Of the total workforce, about 5,000 were employed in Germany and more than 6,000 abroad. 

ALTANA Pharma significantly increases sales and earnings

ALTANA Pharma AG, Constance, boosted its sales significantly by 10% to about €1.7 billion over the first nine months of 2005. Sales in the core area of Therapeutics rose by 10% to about €1.5 billion. Growth remains to be mainly driven by the unbroken dynamics of the innovative gastrointestinal drug Pantoprazole (Pantozol®/Protonix®). ALTANA Pharma’s own sales of the drug amounted to about €1 billion, corresponding to an increase of 10%. Including all sales partners worldwide sales of Pantoprazole in the first nine months totaled about €2 billion, corresponding to an increase of 11%. In the U.S. market, sales partner Wyeth achieved market sales of about U.S. $1.3 billion, 8% more than in the prior year. With a share of approximately 21% of prescriptions (as of September 30) Pantoprazole’s market position among proton pump inhibitors in the U.S. remains to be strong. 

Over the first nine months ALTANA Pharma was able to increase its earnings before taxes (EBT) by 17% to €469 million. At 27.0% ALTANA Pharma again achieved an excellent return on sales. The operating return (EBITDA) amounted to 30.6%. 

The novel inhaled corticosteroid Alvesco® (Ciclesonide) for the treatment of asthma is now approved in
32 markets worldwide; at present
it has been launched in 11 countries. As of September 30, sales amounted to €5 million. In view of further market launches and a steady increase in the market share, ALTANA Pharma expects to see sales of €8 million to €10 million for the whole of 2005.  

ALTANA Chemie closes acquisition of the ECKART group

ALTANA Chemie AG, Wesel, achieved sales of €624 million over the first nine months of 2005. On account of portfolio adjustments in the Coatings & Sealants division, sales were down 5% on the prior year’s figure. Excluding divestment and currency effects ALTANA Chemie achieved a growth of 3%. Sales in the largest division, Additives & Instruments, rose by 4% to €277 million. Electrical Insulation maintained the prior year’s level, generating sales of €219 million. Sales in the Coatings & Sealants division fell by 25% to €128 million due to the meanwhile completed divestment program in the area of industrial coatings.  

ALTANA Chemie achieved earnings (EBT) of €80 million in the first three quarters of 2005, 14% down on the prior year. Reasons for this decrease in earnings are one-off items in connection with the reorganization of the Coatings & Sealants division, and a weaker sales development attributable to inventory effects due to the rise of raw materials prices in the industry. Increased raw materials prices at ALTANA Chemie can fully be passed on to the market; however, positive effects will not be fully realized in the short term. At 18.2% ALTANA Chemie’s operating margin, measured in terms of EBITDA, remains one of the best figures compared to the industry as a whole.

On October 1, ALTANA Chemie completed the acquisition of the ECKART group, which had previously been announced in August. ECKART is a global leading manufacturer of metallic effect pigments and metallic printing inks. The company will become ALTANA Chemie’s fourth division, “Effect Pigments”. The purchase represents the largest acquisition in the ALTANA Group’s history to date. In the framework of the strategic reorganization of its Coatings & Sealants division, in October ALTANA Chemie also completed the acquisition of Kelstar International, a leading U.S. producer of overprint coatings for the paper and board packaging sector. In this business area ALTANA Chemie is planning further bolt-on acquisitions.

Earnings forecast for 2005 increased

Thanks to the very good business performance, in particular at ALTANA Pharma, we expect to achieve a sales growth of about 9% including acquisitions (and of about 7% excluding acquisitions) for 2005 as a whole. Earnings growth is anticipated to be in the upper single-digit percent range.

For 2005, ALTANA Pharma expects to achieve a sales growth of about 10%. The growth dynamic of Pantoprazole remains unbroken. We expect our main sales driver to provide a double-digit growth in market sales in 2005 and we expect our own sales of this product to develop at a similar rate. Despite higher expenditure associated with marketing and sales, as well as high research expenditure, we expect earnings to be substantially higher than in the prior year. 

Despite the continuing weak demand for specialty chemicals products resulting from the economic situation, ALTANA Chemie expects to achieve a sales growth in the single-digit percent range in 2005, with its most recent acquisitions contributing to this growth. We forecast earnings (EBT) to be below last year’s level due to business development and effects from acquisitions and divestments.

Re-organization of the Pharmaceuticals and Chemicals division

The acquisition of ECKART has now been completed and the company’s integration is running according to plan. The prerequisites for a separate operation of the Chemicals division have therefore been fulfilled and ALTANA will take the necessary steps to start the process for a listing on the stock exchange. Deutsche Bank is engaged to support the process which will lead to an independent operation of the ALTANA Chemie AG, headquartered in Wesel, in the course of 2006 as announced.

In order to safeguard the future of our Pharmaceuticals business and its employees in the long-term, the Management Board is of the firm conviction that it has to set the future course of the company now;  therefore, the following steps will be taken: On the one hand, there will be a strengthening of the Pharmaceuticals business through acquisitions, the purchase of products and the inlicensing of product candidates. For this purpose ALTANA has more than €1 billion at its disposal. On the other hand, the company will be opened for a strategic partner. These steps have to be regarded jointly.

Dr. Nikolaus Schweickart: “Within the framework of such an intended alliance, different structures are possible that I do not want to and cannot reduce to one single option. I do not exclude any possibility that aims at continuing and strategically developing the company, and that would consequently also secure jobs in domestic and international markets at ALTANA Pharma in the long term.

However, I do exclude a split or segmentation of the company. Neither do I accept an auction to sell off the company to the highest bidder. In the framework of an intended alliance, the Pharmaceuticals group’s shareholder structure may undergo a change, because without such a change a strategic alliance is hard to conceive. At present, we cannot predict what the future shareholder structure will exactly look like after opening the company to a strategic partner, as the outcome of the process is open.“

Over the upcoming months, ALTANA will carefully examine all options, and also directly contact potential pharmaceutical partners, which seem to be in a position to realize the company’s targeted aims. The investment bank Goldman Sachs was mandated to support ALTANA in this project.

Also with regards to its Pharmaceuticals division, ALTANA has planned – as with the independent operation of the Chemicals division – to implement the necessary steps in the course of 2006. At the end of this process today’s Pharmaceuticals and Chemicals divisions are meant to be based on solid foundations for a long-term and successful future development.

Key figures, 1-9 2005

ALTANA Group

January to September 2005

January to September 20041)

Change

 

 

 

 

 

in € million

in € million

in %

 

 

 

 

Sales

2,358

2,234

+ 6

 

 

 

 

Earnings before interest, taxes, depreciation and amortization (EBITDA)

616

557

+ 11

 

 

 

 

Earnings before interest and taxes (EBIT)

522

468

+ 12

 

 

 

 

Earnings before taxes (EBT)

533

476

+ 12

 

 

 

 

Return on sales (EBT) in %

22.6

21.3

-

 

 

 

 

Net income (EAT)

332

291

+ 14

 

 

 

 

Earnings per share in €

2.45

2.14

+ 15

 

 

 

 

Number of employees

11,265

10,781

+ 4

1) after adjustment to IFRS 2, “Share-based payment”

A press conference for journalists will take place today, November 2, at 10:00 a.m. (local time, CET) in Bad Homburg. There will also be an analyst meeting at 3:00 p.m. (local time, CET). More information on the relevant webcasts as well as this press release and the report on Q3 is available on our website www.altana.com.

This press release contains forward-looking statements, i.e., current estimates or expectations of future events or future results. The forward-looking statements appearing in this press release include revenue and earnings projections for the ALTANA Group, for ALTANA’s Pharmaceuticals and Chemicals divisions, and the pharmaceutical products Pantoprazole, and Alvesco®, as well as the intention to make further statements for further acquisitions in the packaging sector; furthermore, statements on the planned independent operation of ALTANA’s Chemicals division, and the strengthening of the Pharmaceuticals division and its future development in the framework of a strategic alliance. These statements are based on beliefs of ALTANA’s management as well as assumptions made by and information currently available to ALTANA. Many factors that ALTANA is unable to predict with accuracy could cause ALTANA’s actual results, performance or achievements to be materially different from those that may be expressed or implied by such forward-looking statements. These factors include ALTANA’s ability to develop and launch new and innovative pharmaceutical and chemical products, price regulations for pharmaceuticals and budgeting decisions of local governments and health care providers, the level of ALTANA’s investment in pharmaceuticals related R&D, the sales and marketing methods used by ALTANA to distribute its pharmaceuticals, the composition of ALTANA’s pharmaceuticals portfolio, ALTANA’s ability to maintain close ties with its chemicals customers, the business cycles experienced by ALTANA’s chemicals customers and the prices of the raw materials used in ALTANA’s chemicals business; furthermore they include the possibility to make acquisitions, to acquire product rights or to inlicense them and to find an appropriate strategic partner for the Pharmaceuticals division.

Forward-looking statements speak only as of the date they are made. ALTANA does not intend, and does not assume any obligation, to update forward-looking statements to reflect facts, circumstances or events that have occurred or changed after such statements have been made.