Industry Trend Analysis - Exchange Rate Stability Will Be Essential To Improve Krka's East Europe Sales - MAY 2017


BMI View: Issues such as foreign currency exchange rates have continued to take their toll on Krka's results, but the firm will take some comfort in its total revenues remaining relatively stable in recent years despite the economic uncertainties recently seen in key markets such as Russia. Revitalising East Europe sales and reversing a fall in its Western Europe region will be essential for Krka if the firm is to see significant improvements in its revenues. Exchange rate stability will be essential for the firm to achieve this .

For FY16, ended December 31 2016, Krka Group has reported revenues worth EUR1,174.4mn (USD1,299.8mn). This was flat against FY15, rising by just 0.8% from the EUR1,164.6mn reported a year earlier. Volume of sales rose by 11%; Krka noted that over the past five years, the average annual sales value and sales volume growth rates have been 1.8% and 6.8%, respectively. Net profit fell by 31.4%, from EUR158.2mn to EUR108.5mn (USD120.0mn). Krka reported that the decrease was the result of major price erosions in most markets and the depreciation of certain Eastern and Central European currencies.

Krka's revenues in the last five years have been relatively stable, fluctuating between a low of EUR1,143.3mn in FY12 to a high of EUR1,200.8mn in FY13. In recent years, however, net profit has been falling; this reached a recent high point of EUR172.8mn in FY13 and has fallen each year since. The EUR108.5mn reported for FY16 represents a considerable drop. Krka had anticipated sales for FY16 would be worth around EUR1.2bn; the firm fell short of this target. However, it had also anticipated that net profit would be down by around one-third compared to FY15, an expectation that was met. For FY17, Krka again expects sales will be worth EUR1,220mn, but this time anticipates that net profit will exceed that reported for FY16.

Revenues Are Stable But Net Profit Is falling
Krka's Group Revenues And Net Profit (EUR000s)
Source: Krka, BMI

This article is part of our Emerging Europe coverage. To access this article subscribe now or sign up for free trial