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ZENECA GROUP REPORTS RESULTS

    LONDON, July 29 /PRNewswire/ -- ZENECA Group PLC, the international bioscience group, announced today its first half year results (unaudited) for the six months ended 30 June 1993.
    Financial Highlights
    -- Sales for the first six months were 2,316 million pounds sterling ($3,497 million), (1992: 2,058 million pounds) ($3,108 million)), a 13 percent increase over the same period last year.  Return on sales has increased to 17.8 percent from 15.8 percent.
    --  Pre-tax profit for the period increased 41 percent to 367 million pounds ($554 million), (1992: 261 million pounds ($394 million))
    -- Earnings per Ordinary Share before exceptional items of 30.9 pence ($1.40 per ADS) (1992: 24.2 pence ($1.09 per ADS)) an increase of 28 percent.
    -- Earnings per ordinary share of 33.3 pence ($1.51 per ADS), (1992: 24.6 pence ($1.11 per ADS)), represents an increase of 35 percent.
    First Interim Dividend
    -- 10.5 pence (net of tax credit) per 25p Ordinary Share.
    -- 59.5 cents (including tax credit) per American Depositary Share (ADS) (using conversion rate of 1 pound equals $1.51).
    Sir Denys Henderson, chairman of Zeneca, said, "These good results reflect a determined performance by the businesses in their major markets many of which continue to be affected by uncertainties.  We have made a firm start to the year and will continue to strengthen those businesses which have a strong market position and leading edge technology."
    This Interim Statement will be mailed to shareholders on July 29, 1993 and copies will be available to the public at the company's registered office.
    Chief Executive Officer's Review of Operations
    David Barnes, chief executive officer of Zeneca issued the following:
    In presenting this first account to shareholders of Zeneca's results, I am pleased to report that by comparison with the first half of 1992 sales increased by 13 percent, pre-tax profit by 41 percent and earnings per share have risen by 35 percent to 33.3 pence.  The company declared a first interim dividend of 10.5 pence (net of tax credit) per 25 pence Ordinary Share.
    In all of the markets in which Zeneca operates, there has been increased competitiveness and ongoing political and economic uncertainty.  Of the overall 26 percent increase in trading profit 7 percent resulted from volume growth and 3 percent from increased prices.  The balance arose from ongoing pressure to reduce costs and, most importantly, our ability to take full advantage of more realistic exchange rates.  In terms of individual businesses, the growth of the newer Pharmaceutical products, Zestril, Zoladex,  Diprivan and Nolvadex, has continued apace and more than offset the decline in Tenormin, which is now slowing.  In Agrochemicals, despite a 4 percent increase in dollar sales in North America, and gains in CIS countries, lower volumes resulted overall.  The principal decline focussed on the West European markets resulting from Common Agricultural Policy (CAP) reform.  The Specialties businesses, which are those most exposed to the economic cycle, have continued to encounter very difficult trading conditions.
    The early action taken to reduce costs has enabled us to mitigate to some extent these adverse market conditions.
    Pharmaceuticals
    ZENECA Pharmaceuticals' sales increased by 22 percent overall and trading profit was up 34 percent.  This was despite the divestment of certain products between the first half of 1992 and the current period that accounted for over 2 percent of the 1992 trading profit.
    The following business sector comments exclude estimated benefits arising from major exchange rate movements.  It is felt that this  will enable a clearer understanding  of underlying business  performance.
     Healthcare reform is a common feature of the world's six largest pharmaceutical markets (U.S.A., Japan, Germany, France, Italy and the U.K.).  Against this background sales in local currencies were up by 6 percent when compared to the first half of 1992.  In Germany where the "Seehofer" reforms have reduced total market sales of pharmaceuticals by 21 percent, sales of Zeneca products are down somewhat less at 18 percent.  In Italy, the 'De Lorenzo' reforms have limited total market growth to 3.4 percent in the year to April 1993.  However, ZENECA Pharmaceuticals' sales in Italy have grown by 13 percent, well above the market average.  In France, Zeneca sales have grown by 12 percent, in Japan by 3 percent and in the USA by 11 percent. Sales in the U.K., after allowing for the divestment of Monit and Corsodyl, were up 6 percent and in Spain were up by 25 percent.
    The new products continue to grow strongly.  Growth in Zestril sales has been 44 percent.  In the USA market the FDA recently gave approval for the use of the product in congestive heart failure (CHF), a further significant extension of the product's use, and the regulatory submission for CHF use in Japan was filed, as planned, at the end of May.
    In the anti-cancer market our two leading products, Zoladex and Nolvadex, both grew by 27 percent.  The greatest increases in sales were recorded in the USA (up 50 percent) and in Japan where Zoladex sales grew by 60 percent.  The intravenous anaesthetic Diprivan, grew strongly across a wide range of markets and registered a 24 percent increase in sales.  The approval by the FDA of the use of Diprivan in intensive care units for sedating adult patients provides enhanced market potential. Tenormin sales declined by 22 percent overall with the greatest reduction arising from the impact of generic competition in the United States, although the rate of decline is gradually slowing.
    In early 1993, Zeneca entered into an arrangement with Amersham International whereby we would co-promote the radiopharmaceutical treatment, Metastron, in most territories of the world.  This fits well with our current activity in promoting anti-cancer products to oncologists and urologists.  Profits arising from the sale of the Monit products business in the U.K. and the Hibitane lozenge business in Spain amounting to 17 million pounds have been included in profits on sale of operations.
    In respect of our development products, we have sanctioned the construction of new dehydration and micronising facilities for the production of Accolate (capital cost 8 million pounds) and also facilities for the production of bulk drug intermediates for Seroquel (capital sanction 8.5 million pounds).  The latter cost has been significantly reduced by the imaginative and efficient adaptation of existing plant.  Development of these compounds, and others in the new product pipeline, continue in accordance with plan.
    Agrochemicals
    ZENECA Agrochemicals' sales increased by 10 percent overall, but trading profit was down 11 percent.
    The following business sector comments exclude estimated benefits arising from major exchange rate movements.
    World agrochemical markets continue to be extremely competitive. CAP reform in Europe has impacted particularly adversely on sales of all manufacturers' products in France and Germany.  The sales increase of 4 percent in North America has partially offset this effect.
    In the Herbicides sector sales increased by 2 percent overall due mainly to increased sales of Gramoxone and Fusilade.  In this market sector the wet weather conditions in the mid-west of the U.S.A. have helped to increase US  sales of Gramoxone by 42 percent and in Latin America sales of the product also increased.  Sales of Fusilade increased 14 percent with strong volume growth in Latin America and Southern Continental Europe.  Sales of insecticides improved by 1 percent.  Substantial progress with Karate in Continental Europe, particularly in CIS countries, was offset by lower sales of Pirimor in France and Germany.  Sales of fungicides were down 9 percent overall.
    In June we received final planning permission for the construction of a new paraquat (Gramoxone) plant to be built at Huddersfield in the U.K. at an estimated cost of 40 million pounds.  This new plant, when it is complete, will ensure that the business's low cost base is further enhanced thus reinforcing the leadership position held in this very competitive sector.  The market introduction of our new herbicide Touchdown continues with new registration approvals for the product being obtained in Ireland, Italy, Holland and Vietnam during the first half of 1993.  European manufacture of Touchdown will be based at Seneffe in Belgium where existing plant is being adapted, thus providing at minimal cost a manufacturing facility which will be commissioned in the Spring of 1994.
    The seasonal pattern of sales of agrochemical products is changing, with southern hemisphere markets beginning to account for a slightly higher proportion of total sales.  While this changing pattern should provide the opportunity for profits in the second half of the year, markets are expected to remain extremely competitive with ongoing pressure on margins.
    Sales of Seeds were down 6 percent mainly due to lower volumes in Europe, reduced planting in the mid-west of the U.S.A. due to the very wet weather, partially offset by increased sales to Eastern Europe and the CIS.
    Specialties
    ZENECA Specialties' sales increased by 8 percent overall and trading profit was up 30 percent.
    The following business sector comments exclude estimated benefits arising from major exchange rate movements.
    The Specialties Businesses are those that are most exposed to the economic cycle, the impact being particularly strong in Europe.  Overall sales in local currencies were up 2 percent on last year, but the effects of disposals reduced sales by 8 percent giving rise to an overall 6 percent fall.  The recessionary impact has been most marked in Colors and Fine Chemicals, particularly in textile dyes in Europe.  The ZENECA Coatings businesses increased their sales by 4 percent against this unpromising background although overall sales were down 3 percent due to the effect of disposals.  Stahl products reported an 8 percent increase.  These improved performances were underpinned by a gradual recovery in the USA.
    In April, as part of the restructuring of its portfolio, ZENECA Specialties completed the sale of its Tribol industrial lubricants business to Burmah Castrol PLC for $48 million.  The profit of 1 million pounds arising from this disposal has been credited to profits on sale of operations.  Market interest in the Quorn business continues to develop satisfactorily.  The number of supermarket outlets in the U.K., Germany and Holland selling products based upon Quorn has continued to increase.  In order to supply this wider market interest, a further investment of 26.5 million pounds in a new production facility has been sanctioned.  This will bring the total investment in new facilities to 64 million pounds.  As a result of this program, production will increase from 1,200 tons presently to 7,000 tons by the end of this year and to 14,000 tons by 1995.
    Biopol has been chosen by the department store division of Dayton Hudson Corporation of Minneapolis as the packaging of choice for their `Goodnest' personal care range of products.  This represents a further commercial usage of Biopol in the important USA market.
    Future Prospects
    I do not presently see the removal of major market uncertainties during the second half of the year.  We still do not know the extent and nature of any healthcare reforms to be introduced in the USA, nor is it yet possible to predict the long-term consequences of the extraordinarily wet weather in the mid-west and how that may affect future demand for agrochemicals and seeds.  Continental European economies seem unlikely to improve in the short term and it seems realistic to expect little, if any, economic improvement during the second half of the year.
    I am confident, however, that we have the resources, skills and determination to make further progress despite these challenging circumstances.
    Interest
    The financial statements for the half year include actual interest on the indebtedness between the ICI Group and Zeneca assumed on Jan. 1, 1993.  Amounts due to the ICI Group were reduced by approximately 1,300 million pounds in June 1993 from the proceeds of the Zeneca Rights Issue.
    Taxation
    The effective tax rate for the first half of 1993 was 29.7 percent, which compares with 27.2 percent for the first half of 1992.
    Dividends
    ZENECA Limited declared and paid a dividend to ICI of 70 million pounds (net of tax credit) on May 27, 1993, prior to the demerger.
    ZENECA Group PLC today declared a first interim dividend for 1993 of 10.5 pence (net of tax credit) per 25 pence Ordinary Share (59.5 cents (including tax credit) per ADS).  Payment will be on Nov. 8, 1993 (Nov. 16, 1993 in the U.S. through Morgan Guaranty Trust Company) to all shareholders on the register on Sept. 30, 1993.
                            ZENECA GROUP PLC
                  Consolidated Profit and Loss Account
                             (In millions)
    First Half                            1993   1992   1993   1992
                                            (pounds)       (US$)
    Sales(C)(D)                          2,316  2,058  3,497  3,108
    Cost of sales                         (991)  (877)(1,497)(1,324)
    Distribution costs                     (79)   (70)   119   (106)
    Research and development              (242)  (214)  (365)  (323)
    Administrative and other expenses     (628)  (581)  (948)  (877)
    Other income                            36     25     54      37
    Exceptional items charged to
      Trading Profit(D)                     --    (15)    --    (23)
    Trading Profit(D)                      412    326    622     492
    Share of profits less losses of
      associated undertakings                2      3      3       4
    Profits less losses on sale or
      closure of operations                 18     13     27      20
    Net interest payable                   (65)   (81)   (98)  (122)
    Profit on ordinary activities
      before taxation                      367    261    554     394
    Taxation(E)                           (109)   (71)  (164)  (107)
    Profit on ordinary activities
      after taxation                       258    190    390    287
    Attributable to minorities              (7)    (7)   (11)   (11)
    Net profit for the period              251    183    379    276
    Pre-demerger dividend to ICI           (70)    --   (106)    --
    Dividends to Shareholders              (99)    --   (149)    --
    Profit retained for the period          82     --    124     --
    Earnings per 25p Ordinary Share
     before exceptional items (F)         30.9p  24.2p
    Earnings per 25p Ordinary Share (F)   33.3p  24.6p
    Earnings per ADS(AA)
     before exceptional items(F)                       $1.40   $1.09
    Earnings per ADS(AA)(F)                            $1.51   $1.11
    (AA) -- Three ZENECA Ordinary Shares are represented by each American Depositary Share
                       Consolidated Balance Sheet
                             (In millions)
      First Half                           1993   1992   1993  1992
                                            (pounds)      (US$)
      Fixed assets:
    Tangible assets                       1,600  1,380  2,416  2,084
    Investments                              28     36     42     54
    Total                                 1,628  1,416  2,458  2,138
    Current assets:
    Stocks                                  787    718  1,188  1,084
    Debtors                               1,451  1,075  2,191  1,623
    Cash and short-term investments         554    372    837    562
    Total                                 2,792  2,165  4,216  3,269
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