Roche posts flat earnings

August 15, 2001 Posted: 0706 GMT

LONDON (CNN) -- Drug maker Roche Holdings said on Thursday first-half profit was unchanged from a year ago, even as European rivals posted strong growth.

Roche's static earnings could increase pressure on CEO Franz Humer and the firm's founding families to give up control. In May, Roche's rival Novartis bought a 4.83 billion Swiss franc ($2.9 billion) stake in the company.

Basel-based Roche said net income for the half-year ended June 30 came in at 2.98 billion francs, or 3.52 francs a share, right in line with the 2.97 billion francs earned a year earlier.

That falls short of the 13 percent rise in second-quarter profit reported last month by GlaxoSmithKline, Europe's biggest drug company. UK-based AstraZeneca has reported that profit rose 4 percent.

Novartis bought its Roche stake from BZ Gruppe Holding, an investment company run by Swiss financier Martin Ebner, who repeatedly expressed dissatisfaction with the way Roche was managed. Ebner had said it lacked strategic focus.

The Hoffman and Oeri-Hoffman families hold 50.1 percent of Roche's voting shares. The most frequently traded class of Roche stock consists of shares that don't entitle the holder to a vote on company matters.

Roche said first-half sales rose 6 percent to 14.5 billion francs. Its Pharmaceuticals business achieved a 5 percent rise in sales to 9.3 billion francs, but revenue at the Vitamins and Fine Chemicals unit slipped 2 percent after it sold its medicinal feed additives business in May 2000.

Restructuring to cut costs

The company said it is restructuring its pharmaceutical business to "restore growth and reduce the division's cost structure in order to improve its operating profit margin to 20-25 percent over the next two to three years."

Restructuring costs in the first half totaled 669 million francs, of which 249 million francs related to the loss of 3,000 jobs and 204 million to the closure of some operations. The total restructuring cost is expected to be 1 billion francs, the company said.

The restructuring programme is forecast to deliver savings of about 300 million francs in the first 12 months (between April 2001 and March 2002). From 2003 onwards the company predicts cost savings of about 600 million francs.

"Sales in the pharmaceuticals division gained momentum in the second quarter, and we anticipate good single-digit growth for the full year, fuelled both by established and by new products", Roche said.

"Barring unforeseen events, Roche expects its full-year operating result for 2001 to be similar to that in 2000," the company said.

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