DGAP-News: Celesio AG / Key word(s): Quarter Results Celesio AG: Pilot phase for European Pharmacy Network close to completion 13.11.2013 / 07:00 --------------------------------------------------------------------- Celesio: Pilot phase for European Pharmacy Network close to completion * Net profit for the period of 120.8 million euro * On-going discount competition weighs on operating result * Adjusted full-year forecast affirmed Stuttgart, 13 November 2013. Celesio generated net profit of 120.8 million euro in the first nine months of the year (prior-year period: -182.5 million euro). Because of the on-going discount competition in the German wholesale market and due to currency effects, however, sales and adjusted operating earnings (EBIT) were down year-on-year. In the first three quarters of 2013, Group sales declined by 4.2 per cent compared to the prior-year period to around 16 billion euro. Adjusted by currency and deconsolidation effects, sales increased by 0.5 per cent. Adjusted operating earnings amounted to 312.0 million euro. Compared to the adjusted prior-year value, this means a decrease of 6.6 per cent, and compared to the prior-year EBIT adjusted for currency effects, the drop amounts to 2.5 per cent. 'We are really pleased to have returned to high net profit this reporting period,' said Marion Helmes, speaker of the Celesio AG management board and CFO. 'On a less positive note, the on-going fierce discount competition in the German wholesale market is a heavy earnings burden,' according to Helmes. 'We were only able to counteract the negative environment to some extent through cost and efficiency measures. We anticipate that the irrational discount competition in Germany will continue at least until the end of the current financial year.' Helmes continued: 'Nevertheless, we were able to make substantial progress with the pilot phase of our European Pharmacy Network »LloydsPharmacy«. To the present day, we have opened around 80 pilot pharmacies and therefore nearly reached our objective of 95 pilot pharmacies by the end of the year. The implementation of the Operational Excellence Program (OEP) was just as successful and leveraged substantial savings. Not least we managed to cut further costs through our procurement initiative (Top-in-Class-Procurement). On balance, we are confirming our forecast, which we had revised after the first half-year, and expect adjusted EBIT of between 405 and 425 million euro.' On 24 October 2013, the US American company McKesson announced its intention to submit a takeover offer to the shareholders of Celesio AG. At the same time, McKesson and Celesio signed an agreement pertaining to the merger of the two companies. The two partner companies thus intend to create the largest and leading integrated pharmaceutical wholesale group in the world, with leading market positions in America and Europe. 'The planned merger focuses on growth,' Marion Helmes said. 'We thus create the basis for long-term success for the benefit of all Celesio stakeholders. Through this merger two market leaders with complementary geographic activities will cooperate in an increasingly global market.' Performance in the divisions The Consumer Solutions division, the pharmacy business, generated sales of 2,514.8 million euro and was therefore slightly down by 2.2 per cent compared to the previous year's value of 2,571.0 million euro. The sales performance in the reporting period was hampered by currency effects, the deconsolidation of the Czech activities as well as state intervention measures. Adjusted for currency and consolidation effects, mainly due to the disposal of the operations in the Czech Republic, sales increased by 2.5 per cent. EBIT adjusted for one-off effects fell 11.3 per cent to 144.5 million euro (unadjusted: -7.8 per cent) in the first nine months of 2013. Currency effects were again one of the earnings burdens. Adjusted for these effects EBIT went down by 7.9 per cent. In the UK, which is the most important pharmacy market for Celesio, LloydsPharmacy showed a positive operating performance in the first nine months of 2013. The closer integration of the pharmacy and wholesale businesses, which is enabled by the new group structure, is proving effective. Moreover, the procurement initiative TIC and the OEP also made significant contributions to the cost reduction effort. Negative effects from state intervention measures as well as negative currency effects due to the weak pound Sterling could not, however, be fully offset. In Sweden, both sales and gross margin increased in the first nine months of 2013. In Italy, sales of non-prescription medicines showed a similarly pleasant improvement in the reporting period, which offset the decline in sales of prescription medicines. Earnings came in much higher than in the prior-year period, benefitting from cost cuts. In Norway, Celesio saw positive sales growth, particularly in the non-prescription business. Salary increases and higher pension burdens, however, resulted in higher personnel expenses, which were not fully offset by the positive sales performance in the period. In the Pharmacy Solutions division, the wholesale business, sales dropped by 4.6 per cent relative to the prior-year period to 13,476.5 million euro. Germany, on the other hand, posted positive sales growth. The French market saw a decline, which was mainly due to the substitution of patent-protected medicines with generic products. Moreover, the performance in the period was impaired by the deconsolidation of the Czech activities in November 2012 and of the Irish wholesale business in May 2013 as well as currency effects. Adjusted for currency and deconsolidation effects, sales were up by 0.1 per cent. Adjusted EBIT amounted to 235 million euro, 5.4 per cent below the prior-year period (unadjusted: +9.3 per cent). Additionally adjusted for negative currency effects, adjusted EBIT was down 2.0 per cent. The on-going intensive discount competition in Germany had a massive negative impact on earnings in spite of solid market growth. This brings about huge challenges for the entire industry. In the UK, considerable cost reductions were achieved at pharmaceutical wholesaler AAH. In addition, the margin benefited from a favourable product mix. AAH was therefore able to post encouraging growth in earnings. Earnings forecast For Celesio, the 2013 financial year is all about the strategic realignment, which we will continue to consistently pursue. Especially the close integration of the pharmacy and the wholesale businesses and positive earnings effects from improved procurement activities as well as the OEP will have further positive impact. Progress with countermeasures already initiated, particularly cost cuts in terms of both personnel expenses and other operating expenses, shows first effects. However, the negative market environment and the on-going discount competition in Germany in particular were only partly offset. Moreover, we still do not expect that this situation will show any improvements before the end of the year. The National Health Service's annual budget cuts in the UK announced in September for the coming two quarters were lower than anticipated and thus slightly eased the regulatory situation in 2013. Overall, the management is confirming its forecast, which had been revised after the first six months, and expects adjusted EBIT of between 405 and 425 million euro. Key figures of the Celesio Group 1st to 3rd 1st to 3rd quarter quarter 2012 2013 Continuing operations Revenue EUR m 16,696.8 15,991.1 EBITDA EUR m 395.1 399.3 adjusted 1) 2) EUR m 434.7 406.9 EBIT EUR m 282.2 303.3 adjusted 1) 2) EUR m 334.0 312.0 Profit before tax EUR m 157.4 197.6 adjusted 1) 2) 3) EUR m 235.9 206.4 Retail pharmacies 4) 2,232 2,176 Wholesale branches 4) 141 131 Discontinued operations Net profit/loss EUR m -262.7 -5.4 Continuing and discontinued operations Employees 4) 41,015 38,886 Net profit/loss EUR m -182.5 120.8 Change on a euro basis % Revenue EUR m -4.2 EBITDA EUR m 1.1 adjusted 1) 2 EUR m -6.4 EBIT EUR m 7.5 adjusted 1) 2) EUR m -6.6 Profit before tax EUR m 25.6 adjusted 1) 2) 3) EUR m -12.5 Discontinued operations Net profit/loss EUR m 98.0 Continuing and discontinued operations Net profit/loss EUR m --- 1) Adjusted for non-recurring expenses and income from the Operational Excellence Program (including tax). 2) Adjusted in 2012 for special effects from revaluations pursuant to IFRS 5 as well as deconsolidation effects in 2013 (including tax). 3) The figures reported for 2012 are adjusted to eliminate special effects in the financial result (including tax). 4) Closing figures at the end of the reporting period. Press contact Marc Binder, Celesio AG, +49 (0)711.5001-380 [email protected] Rainer Berghausen, Celesio AG, +49 (0)711.5001-549 [email protected] About Celesio Group Celesio is a leading international wholesale and retail company and provider of logistics and services to the pharmaceutical and healthcare sectors. The proactive and preventive approach ensures that patients receive the products and support that they require for optimum care. With 39,000 employees, Celesio operates in 14 countries around the world. Every day, the group serves over 2 million customers - at 2,200 pharmacies of its own and 4,100 participants in brand partnership schemes. With around 130 wholesale branches, Celesio supplies 65,000 pharmacies and hospitals every day with up to 130,000 pharmaceutical products. The services benefit a patient pool of about 15 million per day. End of Corporate News --------------------------------------------------------------------- 13.11.2013 Dissemination of a Corporate News, transmitted by DGAP - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: Celesio AG Neckartalstr. 155 70376 Stuttgart Germany Phone: +49 (0)711 5001-735 Fax: +49 (0)711 5001-740 E-mail: [email protected] Internet: www.celesio.com ISIN: DE000CLS1001 WKN: CLS100 Indices: MDAX Listed: Regulierter Markt in Berlin, Düsseldorf, Frankfurt (Prime Standard), München, Stuttgart; Freiverkehr in Hamburg, Hannover; Terminbörse EUREX End of News DGAP News-Service --------------------------------------------------------------------- 239506 13.11.2013