UPDATE 2-Zentiva profit gain beats forecast, shares flat

(Releads with market reaction, adds analyst quote)

By Marek Petrus

PRAGUE, Oct 30 (Reuters) - Soaring export sales helped Zentiva <ZNTVsp.PR> post a 4 percent rise in nine-month net profits on Monday, but its shares held flat as the Czech drug maker merely reiterated its full-year earnings outlook.

Net profit rose to 1.55 billion crowns ($69.5 million), beating the average forecast in a Reuters poll of analysts for an unchanged result from the 1.49 billion in January-September 2005. Diluted earnings per share rose to $1.78 from $1.65 a year ago.

"Profits were good, but the full-year outlook was left unchanged ... The market may have expected to also see the outlook rise," said Tomas Gatek, an equity analyst at Patria Finance in Prague.

The company confirmed its net profit forecast for the whole of this year at 2.2 billion crowns, up from 1.88 billion last year.

Zentiva, one of central Europe's biggest pharmaceutical firms, halted a profit slide it suffered earlier this year thanks to a sales recovery in its domestic market and robust growth in Romania, Poland, Russia and other export markets.

Revenue jumped 19 percent to 9.87 billion crowns, reflecting in part a boost from last year's acquisition of Romanian drugmaker Sicomed <SCDB.BX> but falling short of the 9.93 billion forecast.

However, costs related to debt, raised to fund the Sicomed takeover, and an ongoing marketing campaign ate into revenue and hampered a sharper improvement in profitability.

PRICED IN

Zentiva shares traded at 1,234 crowns by 1200 GMT, barely changed from their level before the news but 1.2 percent lower on the day. Their fall still outperformed a 1.7 percent drop in the Prague bourse's blue-chip PX index <.PX>.

Analysts have said the market has already built into Zentiva's share price expectations of a recovery in the Czech market and further growth in export sales.

The stock has traded at nearly 22 times forecast 2006 profits, above the near 16 times on companies included in the DJ Stoxx health sector index <.SXDE>.

Operating profit, or earnings before tax and interest (EBIT), rose 12.5 percent to 2.29 billion crowns, for an EBIT margin of 23.2 percent. That included 89 million crown in gains from the sale of a parcel of land in Romanian capital Bucharest.

"The results ... show that the geographical expansion that we have pushed ahead with over the last two to three years has been crucial to our success," Zentiva Chairman and Chief Executive Jiri Michal said in an earnings statement.

"I am confident that 2006 will turn out to be a record year for Zentiva both in terms of sales and earnings," he added.

France's Sanofi-Aventis <SASY.PA> has been Zentiva's largest shareholder with a 24.9 percent stake. (Additional reporting by Jan Korselt)

((Reporting by Marek Petrus

Editing by Jane Baird

Reuters messaging

rm://marek.petrus.reuters.com@reuters.net

Email prague.newsroom@reuters.com

marek.petrus@reuters.com

Telephone +420 224 190 477)) ($1=22.30 Czech Crown)

Keywords: HEALTH CZECH ZENTIVA