UPDATE 1-Zentiva sees better H2 after poor H1, shares gain

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By Marek Petrus

Generic drugmaker Zentiva reported a 6.8 percent drop in first-half net profit on Monday while forecasting an improvement for the second half, helping its share price regain some ground after a sharp fall.

The Czech-based company, 25 percent owned by France's Sanofi-Aventis , said net profit fell to 831.3 million crowns ($40.97 million), a tad above the firm's own forecast of around 800 million made 10 days ago.

Zentiva, one of the largest pharmaceutical firms in central Europe, said its profitability suffered from price erosion in its biggest Czech market, investments in its sales network and costs in its Romanian business .

Net sales fell 5.5 percent year-on-year to 6.797 billion crowns, in line with the company's guidance.

Zentiva forecast that expansion in Poland, Slovakia, Russia, and Ukraine will enable it to post higher organic sales and net profit in the second half, helping its shares to buck the lower trend on global equity markets.

The stock gained 2 percent to trade at 1,245 crowns by 1105 GMT, outperforming a 0.4 percent drop in the Prague bourse's blue-chip PX index.

The stock remains down 12.3 percent since the company on July 27 forecast weaker-than-expected first-half results.

"The room for a negative surprise has been very much limited after the profit warning. I think the market had absorbed the shock," said Erste Bank analyst Vladimira Urbankova, who is currently reviewing Zentiva's rating and target share price.

"The management struck a more cautious note on the outlook after predicting plus/minus 10 percent sales growth for this year. They also sound cautious on performance in Romania and the contribution of a recent acquisition in Turkey," she added.

In the second half, Zentiva said it expected to post organic sales growth of between 7 percent and 8 percent, and a net margin of around 15 percent.

It said consolidation of Eczacibasi Generic Pharmaceuticals, a Turkish producer acquired earlier this year, would contribute almost 3 billion crowns to its sales but expected a "slightly negative" impact on 2007 consolidated cash earnings per share.

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($1=20.29 Czech Crown)

Keywords: ZENTIVA RESULTS/

[PRAGUE/Reuters/Finance.cz]