Krka Reports on 2021 Unaudited Financial Statements

17. 3. 2022

The President of the Management Board and Chief Executive Jože Colarič explained: ‘As we reported in January, the Krka Group performed successfully and in accordance with our expectations in 2021. Set side by side with the 2021 preliminary unaudited performance estimate for the Krka Group, revenue remained the same, but operating profit exceeded our estimations by €1.8 million and net profit by €3.5 million. The last year’s business results indicate that we are flexible and well-prepared to adapt instantly to new opportunities and challenges in changing and demanding business situations thanks to our vertically integrated business model. The current situation in Ukraine and the Russian Federation has no impact on 2021 business operations. It, however, impacts current business operations of the Krka Group in the region. We have undertaken all actions in consideration of our social responsibility to keep our employees safe and ensure business continuity and uninterrupted supplies of our medicines, many of which are of vital importance for patients. The Krka Group sales estimate for the first quarter of 2022 is a few percent higher compared to the same period last year.’

Sales

All sales regions recorded sales growth, except Region West Europe. We increased sales of all product groups and services. We increased our sales volume by a good 2%, to more than 16 billion product units.

Region East Europe generated €547.8 million, accounting for 35.1% of Krka Group’s sales total, and was the largest region in terms of sales. Sales increased by 6% year on year. Region Central Europe, comprising the Visegrad Group and the Baltic states, followed with sales at €351.5 million, or 22.5% of total Krka Group sales. We recorded 3% growth compared to the year before. Region West Europe made €305.2 million, accounting for a 19.6% share, and was the third largest Krka Group region in terms of sales. The sales saw an 11% drop on the year before, primarily due to price pressure and fewer product launches. Product sales in Region South-East Europe amounted to €209.2 million, 5% higher than in 2020, and constituted 13.4% of total Krka Group sales. In Slovenia, sales reached €92.9 million, accounting for 6% of total Krka Group sales. Sales grew by 9%. Region Overseas Markets accounted for a 3.4% share of total Krka Group sales and yielded €53.7 million in product sales, an 18% year-on-year climb. 

The Krka Group sales of prescription pharmaceuticals totalled €1,305.3 million, up 4.7 million or 0.4% on 2020, accounting for 83.7% of total product and service sales. Sales of non-prescription products totalled €137.3 million, an increase of €13.6 million or 11% on 2020, accounting for 8.8% of total sales. Sales of animal health products grew by €5.3 million or 7% to €81.3 million, accounting for 5.2% of total sales. Health resorts and tourist services yielded €36.5 million, up €6.7 million or 23% on 2020, accounting for 2.3% of total sales.

Research and Development

We were granted marketing authorisations for 16 new products, of that 14 prescription pharmaceuticals, and two animal health products. We completed more than 200 registration procedures, obtaining more than 1,000 marketing authorisations for various products.

Investments

Investments made in 2021 by the Krka Group amounted to €66.4 million, of that €49.5 million in the controlling company.

Employees

At the end of 2021, the Krka Group employed 11,511 persons of whom 46% or 5,273 worked outside Slovenia. The proportion of Krka Group employees with at least university-level qualifications was 51%, of that 207 employees held doctoral degrees. Together with agency workers, the Krka Group employed 12,459 personnel.

Situation in Ukraine and the Russian Federation: Impact on Krka Group Operations

We go to great lengths to protect health and safety of our employees in Ukraine. In the beginning of March, we have supplied medicines in total of €100,000 to Ukraine as a donation for humanitarian purposes. We supply pharmaceutical products according to expectations and circumstances. We recorded €40 million of trade receivables due from Ukrainian customers. Our trade receivables have insurance coverage for commercial credit risk. In Ukraine, we are not directly exposed to currency risk, since we conduct business transactions in the euro. Our products kept in stock at distributors and pharmacies are expected to last a few months. We estimate Ukrainian sales in the first quarter of 2022 at €25.9 million compared to €22 million generated in product sales in the same period last year.

In the Russian Federation, business activities have been fairly unhindered. This applies to product registrations, production, marketing and promotion, sales, distribution, and payments. Transport takes longer, so we have engaged extra vehicles. Our products face decent demand. We have established additional controls over trade payables, constantly monitor liquidity of our business partners, and intend to adapt our activities immediately in case of any inexplicable payment delays. The production at our subsidiary Krka-Rus runs uninterruptedly. Contingency stocks of raw and key materials in the Russian Federation should accommodate production for a few months; however, we are increasing them further. We estimate sales in the first quarter of 2022 at €79.9 million compared to €79.4 million generated in product sales in the same period last year.

Key short-term risks include the current situation in Ukraine, economic restrictions, volatility and depreciation of the Russian rouble, and credit risk. Medicines are not included in the embargo. This applies to sanctions against the Russian Federation as well as for the Russian sanctions on the import of goods. In our opinion, other markets and sales regions will not sustain direct harm on the account of the present situation. The indirect impact on all other markets of Region East Europe will depend on duration of situation in Ukraine and the Russian Federation

Krka has been present on the markets of Region East Europe for over 50 years. We have encountered several challenges that affected our business operations through devaluation of national currencies and decreases in demand. In the long term, however, we managed to strengthen our market position after each such situation. Our robust operations are based on the system of vertical integration, which ensures resilience against external shocks and responsiveness to rapidly changing market situation.

Krka has a strong capital structure, generates a strong cash flow from operations and has no financial debt, so its successful business performance in the long run is not jeopardised. Our Management Board closely monitor events and implement all necessary activities to ensure business continuity in the two countries. They also take measures to manage operational risks and reduce the eventual negative impact on business results. 

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