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Rhone-Poulenc S.A.: 1997 Results in Line with Previously Announced Objectives

PARIS, Jan. 29 /PRNewswire/ -- The following statement was released today by Rhone-Poulenc S.A. (NYSE: RP):
 % change
 over 1996
 Net income (in billions of FF) (4.991)
 (in millions of USD): ($832)
 Excluding non-recurring charges 3.417 +24.7%
 (in millions of USD) $570
 Net earnings per share (in FF) (14.87)
 USD :($2.48)
 Excluding non-recurring charges 10.18 +20.62%
 USD : $1.70


Excluding non-recurring charges and before
 amortization of goodwill 13.65 +18.3%
 USD : $2.28
 Consolidated net sales (in billions of FF) 89.955 +11.4% (A)
 (in billions of USD) $15
 Recommended gross dividend (in FF) 5.62
 USD :$0.94


The 1997 financial year was marked by a number of exceptional events designed to step up the pace of Rhone-Poulenc S.A.'s (NYSE: RP) transformation into a Life Sciences group, with a specialty chemicals subsidiary:

-- The increase of its ownership in Rhone-Poulenc Rorer to 100%;

-- The merger of the chemicals and fibers businesses (with the creation of

Rhodia on January 1, 1998) and strategic refocusing on specialty

chemicals;

-- Increase in capital of FF 7 billion ($1.16 billion).

As a result of these operations, a non-recurring charge of FF 9.7 billion(B) ($1.62 billion) (before tax) was carried in the fourth quarter, divided into FF 6.8 billion ($1.13 billion) related to the creation of Rhodia and FF 2.9 billion ($483 million) following the acquisition of the minority interests in Rhone-Poulenc Rorer.

Within the framework of this transformation and with a view to attaining the profitability targets announced for the coming years, the Group has launched re-engineering studies chiefly aimed at enhancing the earnings capacity of its pharmaceutical activities and at accelerating the pace of Rhodia's development. These studies will result in additional non-recurring charges for the 1998 financial year which, on the basis of initial estimates, may be in the region of FF 2 billion ($333 million).

(A) On a comparable basis of structure.

(B) The detail of this non-recurring charge is given in an annex to this
 press release.


The non-recurring charge recorded in 1997 explains the net loss of FF 4.991 billion ($832 million). If this non-recurring item is excluded, net income would have amounted to FF 3.417 billion ($570 million), representing an increase of 24.7% over 1996.

Net earnings per share, excluding non-recurring charges, amount to FF 10.18 ($1.70), an increase of 20.62%. This growth is in line with the objectives set at the beginning of 1997 (20% increase, excluding non-recurring charges).

Comments on Earnings from Operations

The following comments are based on the Group's 1997 earnings from operations excluding non-recurring charges and before amortization of goodwill(A).

Life Sciences (Pharma and Plant & Animal Health)

Consolidated net sales generated by the Life Sciences stood at FF 52.588 billion (up 11.7%(A)). Earnings from operations amounted to FF 8.386 billion, representing an increase of 0.95%(A).

In Pharmaceuticals (Rhone-Poulenc Rorer, Pasteur Merieux Connaught, Centeon):

Consolidated net sales were FF 33.308 billion, representing growth of 10.8%(A) (5.1% if the foreign currency translation effect is excluded).

Earnings from operations came to FF 5.265 billion, a fall of 7.9%(A) compared with 1996. This downturn in earnings is a direct result of the Centeon situation. The annual results have also suffered from the decline in sales of asthma products in the United States, weaker demand on the French pharmaceuticals market and increased selling expenses recorded during the second half of the year.

In contrast, however, strong growth was recorded in new product sales, particularly in the United States:

-- Clexane(R)/Lovenox(R), the world's leading product for the prevention

of deep vein thrombosis, generated sales of FF 2.7 billion, up by 15%.

Approval was granted for the treatment of new indications -- for

unstable angina, in particular -- thereby opening up new growth

potential for this product.

-- Taxotere(R), the anti-cancer agent commercially available in

55 different countries, recorded sales of FF 1.475 billion,

representing an increase of 184%.

-- Rilutek(R), the only available treatment for ALS (amyotrophic lateral

sclerosis or motor neurone disease) and Nasacort/AQ(R) for allergies,

also boosted their sales performance by 94% and 14%, respectively.

-- Vaccine sales enjoyed strong growth, helping to consolidate Pasteur

Merieux Connaught's worldwide positions notably in the United States

where sales increased by 41%, thanks in particular to Tripedia(R)

(pertussis, diphtheria, tetanus) and IpoI(R), an injectable polio

vaccine.

In Plant and Animal Health (Rhone-Poulenc Agro, Rhone-Poulenc Animal Nutrition, Rhone-Poulenc Jardin, Merial):

Consolidated sales were FF 19.546 billion, an increase of 12.8%(A) (7.5% if the foreign currency translation effect is excluded).

Results from operations amounted to FF 3.121 billion, an increase of 20.5%(A). This growth was fueled by a generally buoyant market, the rapid increase in new product sales and the earnings posted by Merial.

Regent(R), the brand name of the new Fipronil-based insecticide already registered in some 50 countries for use on 42 different crops, doubled its 1996 sales performance to reach FF 500 million. It was also registered for use on corn in the United States at the end of 1997.

In animal nutrition, methionine and vitamins continued to improve their sales performance generating a total of FF 4.154 billion (up by 10%).

Merial, a 50/50 joint venture between Rhone-Poulenc and Merck, was created in July 1997 and now ranks as the world's leading specialist in animal health and poultry genetics. Frontline(R), an antiparasitic agent for animals, recorded sales of FF 1.1 billion (up 150%) in its first full year on the international market.

Chemicals / Fibers and Polymers

Consolidated net sales of Chemicals amounted to FF 26.114 billion, an increase of 11.6%(A), (volumes: +6.2%, prices: -1.2%, translation effect: +6.6%).

Sales of Fibres and Polymers stood at FF 11.945 billion, an increase of 8.9%(A), (volumes: +8.3%, prices : -3.3%, translation effect: +3.9%).

Earnings from operations were FF 1.505 billion for Chemicals (+32.8%(A)) and FF 563 million for Fibres and Polymers (against FF 42 million in 1996). This increase is mainly due to enhanced sales in most businesses, such as:

-- Polyamide (+16%) with the development of Meryl(R);

-- Rare Earths (+14%) with the launch of new products : Neolor(R) colored

pigments and Actalys(R) additives for catalytic converters;

-- Silicones (+14%) with the success of products designed for the

anti-adhesive paper market and the coating of fabrics used in airbags;

-- Silicas (+13%) with the growth in sales of high dispersion silicas used

in car tires;

-- Specialties for food ingredients, detergents and surfactants also

enjoyed significant growth (12 to 13%) thanks to business developments

with leading customers.

The refocusing process toward specialty chemicals is now well underway. Divestitures continued in 1997 with, in Europe, the sale of the titanium dioxide business, Donau Chemie, 50% of the chlorine/soda activity and, in Brazil, the disposal of the acrylic, nonwovens and packaging film businesses.

(A) On a comparable basis of structure

CONSOLIDATED SALES (Group)

The Group's consolidated net sales amounted to FF 89.995 billion ($15 billion), representing an increase of 4.8% on an historical basis and 11.4% on a comparable basis of structure. Volumes were up by 6.4%, prices fell by 0.7%, and the impact of the foreign currency translation effect was +5.7%.

Operating income (before non-recurring charges) stood at FF 7.988 billion ($1.33 billion) (up 15.9%, or 21.6% on a comparable basis of structure) and equity in net earnings of affiliated companies amounted to FF 617 million ($102.8 million) (down 25.6%, or 42.7% on a comparable basis of structure).

Earnings from operations, before non-recurring charges and amortization of goodwill, amounted to FF 9.769 billion ($1.63 billion) (up 11.9%, or 12.1% on a comparable basis of structure).

Net income was negative with a loss of FF 4.991 billion (-$832 million) due to the recording of a non-recurring charge of FF 9.738 billion ($1.62 billion), before tax. If these non-recurring charges are excluded, net income rose to FF 3.417 billion ($570 million) (up 24.7%).

The net debt-to-equity ratio rose to 0.88 against 0.61 at the end of 1996.

A gross dividend per ordinary share "A" of FF 5.62 ($.94) (FF 5.25 ($.88) in 1996) will be recommended by the Board of Directors at the Annual General Meeting of shareholders.

Commenting on the year-end earnings, Jean-Rene Fourtou, Chairman and Chief Executive Officer of Rhone-Poulenc, said: "1997 was a very important year for Rhone-Poulenc. We consolidated our activities in the Life Sciences and paved the way for the creation of Rhodia with its business portfolio sharply focused on specialty chemicals. Our asset disposal program and the preparation of Rhodia's stock market flotation in 1998 are both progressing well and should enable us to generate the FF 13 billion in cash announced in September 1997.

"Enhancing the value of the Group remains our priority. It means boosting the earnings potential of our business activities to achieve a return on equity of 13% by the year 2000. In order to reach this objective, the Group is counting, first of all, on continued strong growth of our new products in the Life Sciences, as well as on Rhodia's future development. This is why new operations will be launched in 1998 to meet the challenges presented by our pharmaceutical environment and to speed up the improved earnings potential of our chemical specialty businesses.

"For 1998, we are maintaining our target of 20% growth in net earnings per share, excluding non-recurring charges. It is an ambitious objective; attaining it will also depend on a favorable economic and monetary environment."

Rhone-Poulenc S.A. is a leading life sciences company, growing through innovations in human, plant and animal health and through its specialty chemicals subsidiary, Rhodia. With sales in 1997 of FF 90 billion (US$15 billion), the company employs 68,400 people in 160 countries worldwide.

This press release contains key figures converted from French francs to U.S. dollars at the exchange rate of $1 = 6FF.
 LIFE SCIENCES
 KEY PRODUCTS


In millions of FF
 PHARMACEUTICALS 1996 1997Change (In %)(A)
 Azmacort(R) 1352 1341 (13.2)
 Clexane/Lovenox(R) 2045 2699 (22.3)
 Granocyte(R) 342 420 20
 Intal/Aarane(R) 1515 1347 (17.7)
 Nasacort(R)/AQ 536 694 14
 Rilutek(R) 143 321 104.5
 Taxotere(R) 454 1475 197.7
 A cellular pert. and/or HIB Comb. 1525 1849 14
 Flu Vaccine 717 856 10
 Hepatitis B Vaccine 1218 1173 (4)
 Injectable Polio Vaccine 68 243 240
 PLANT AND ANIMAL HEALTH 1996 1997Change (In %)(A)
 Fosetyl 511 545 6
 HBN 777 899 8.1
 Iprodione 752 794 (3.2)
 Isoxaflutole (IFT) 5 37 >600
 Regent(R) 257 500 89
 Temik(R) 987 1116 4.3
 Avermectine 3458 3807 0.1
 Frontline(R) 436 1095 144


(A) Excluding currency impact.
 SUMMARY CONSOLIDATED INCOME STATEMENTS
 Results 1997
 (Millions of FF)
 RESULTS ON A COMPARABLE BASIS(A)
 1997 1997 before 1996Change(B)
 one time (in %)
 charges
 Net Sales 89,955 89,955 80,731 11.4
 USD $14,993 $14,993 $13,455


Earnings from operating

activities before
 goodwill amortization 4,689 9,769 8,711 12.1


Of which :
 Goodwill amortization 4,909 1,164 1,065 9.3
 Operating Income (719) 7,988 6,570 21.6


Equity in net

earnings of
 affiliated companies 499 617 1,076 (42.7)
 RESULTS ON HISTORICAL BASIS
 (Millions of FF)
 1997(A) 1997 before 1996 (A)Change(B)
 one time (in %)
 charges
 Net Sales 89,955 89,955 85,818 4.8
 USD $14,993 $14,993 $14,303


Earnings from operating

activities before
 goodwill amortization 4,689 9,769 8,727 11.9


Of which :
 Goodwill amortization 4,909 1,164 1,006
 Operating Income (719) 7,988 6,892 15.9


Equity in net earnings
 of affiliated companies 499 617 829 (25.6)


Operating Income + Equity
 in net earnings (220) 8,605 7,721 11,4
 USD ($37) $1,434 $1,287
 Interest expenses - net (2,360) (2,360) (2,151) (9.7)


Other income (expenses)
 - net (212) 701 616 13.8
 Income before taxes (2,792) (6,946) 6,186 12.3
 Taxes (931) (2,141) (1,597) (34.1)
 Minority interests (171) (291) (718) 59.5
 Preferred remunerations (1,097) (1,097) (1,131) 3.0
 Net income (4,991) 3,417 2,740 24.7
 USD ($832) $570 $457
 Earnings per share (14.87) 10.18 8.44 20.62
 USD ($2.48) $1.70 $1.41


Net income before goodwill
 amortization (in MF) : (82) 4,581 3,746 22.3%


Earnings per share before
 goodwill amortization (FF)(0.25) 13.65 11.54 18.3%


Average number

of shares
 outstanding 335,652,783 335,652,783 324,613,899 3.4
 - A shares 334,725,963 334,725,963 323,687,079 3.4
 - B shares 926,820 926,820 926,820 0.0


(A) Audited accounts (B) Comparison between "1997 before one time charges" and 1996
 RESULTS BY SECTOR ON A COMPARABLE BASIS
 1997
 SALES
 (Millions of FF)
 Sector 1997 1996(A) Change In %
 PHARMACEUTICALS 33,308 30,054 10.8%
 P&A HEALTH(B) 19,546 17,325 12.8%
 CHEMICALS 26,114 23,408 11.6%
 FIBERS & POLYMERS 11,945 10,965 8.9%
 OTHERS 654 570
 ELIMINATIONS (1,612) (1,591)
 TOTAL 89,955 80,731 11.4%


EARNINGS FROM OPERATING ACTIVITIES (excluding one time charges)
 (Millions of FF)


Operating Income Equity in net Operating Income + earnings Equity in net earnings
 Sector 1997 1996(A) 1997 1996(A) 1997 Change
 97/96(A)
 in %
 PHARMACEUTICALS 4,166 3,888 187 1,003 4,353 (11.0%)
 P&A HEALTH(B) 2557 2272 487 250 3044 20.7%
 CHEMICALS 1288 904 43 59 1331 38.2%
 FIBERS & POLYMERS 663 274 (101) (234) 562 NS
 OTHERS (686) (768) 1 (2) (685)
 TOTAL 7988 6570 617 1076 8605 12.5%


EARNINGS FROM OPERATING ACTIVITIES (excluding one time charges)
 BEFORE GOODWILL AMORTIZATION
 (Millions of FF)
 Operating Income Equity Goodwill Earnings from
 in net amortization Operating
 earnings Activities
 before
 Goodwill
 amortization
 Sector 1997 1996(A) 1997 1996(A) 1997 1996(A) 1997 Change
 97/96(A)
 in %
 PHARMACEUTICALS 4166 3888 187 1003 912 824 5265 (7.9%)
 P & A HEALTH(B) 2557 2272 487 250 77 69 3121 20.5%
 CHEMICALS 1288 904 43 59 174 170 1505 32.8%


FIBERS
 & POLYMERS 663 274 (101) (234) 1 2 563 NS
 OTHERS (686) (768) 1 (2) 0 0 (685)
 TOTAL 7988 6570 617 1076 1164 1065 9769 12.1% (A) At comparable structure, on the basis of 1997


(B) MERIAL : the joint venture created in July 1997
 SUMMARY CONSOLIDATED INCOME STATEMENTS
 Fourth Quarter
 RESULTS ON A COMPARABLE BASIS (A)
 (Millions of FF)
 1997 1997 before 1996 Change(B)
 one time (in %)
 charges
 4th quarter 4th quarter
 Net Sales 22,992 22,992 20,094 14.4
 USD $3,832 $3,832 $3,349


Earnings from

operating activities

before goodwill
 amortization (2,798) 2,282 1,766 29.2


Of which :
 Goodwill amortization 4,102 357 308 15.9
 Operating Income (7,125) 1,582 1,246 27.0


Equity in net

earnings of
 affiliated companies 225 343 212 61.8
 RESULTS ON HISTORICAL BASIS
 (Millions of FF)
 1997(A) 1997 before 1996 (A) Change(B)
 one time (in %)
 charges
 4th quarter 4th quarter
 Net Sales 22,992 22,992 22,069 4.2
 USD $3,832 $3,322 $3,678


Earnings from

operating activities

before goodwill
 amortization (2,798) 2,282 1,518 50.3


Of which :
 Goodwill amortization 4,102 357 229
 Operating Income (7,125) 1,582 1,204 31.4


Equity in net earnings
 of affiliated companies 225 343 85 303.5


Operating Income + Equity
 in net earnings (6,900) 1,925 1,289 49.3
 USD ($1,150) $321 $215
 Interest expenses - net (743) (743) (461) (61.2)


Other income
 (expenses) - net (560) 353 329 7.3
 Income before taxes (8,203) 1,535 1,157 32.7
 Taxes 635 (575) (47) (1123.4)
 Minority interests 186 66 (259) 125.5
 Preferred remunerations (266) (266) (277) 4.0
 Net income (7,648) 760 574 32.4
 USD ($1,275) $127 $96
 Earnings per share (FF) (21.81) 2.16 1.75 24.00


Net income before goodwill
 amortization (in MF) : (3,546) 1,117 802 39.3%


Earnings per share

before goodwill
 amortization (FF) (10.12) 3.18 2.44 30.3%


Average number

of shares
 outstanding 350,699,451 350,699,451 328,247,684 6.8
 - A shares 349,772,631 349,772,631 327,320,864 6.9
 - B shares 926,820 926,820 926,820 0.0


(A) Audited accounts. (B) Comparison between "1997 before one time charges" and 1996.
 RESULTS BY SECTOR ON A COMPARABLE BASIS
 Fourth Quarter 1997
 (Millions of FF)
 SALES
 Sector 1997 1996(A) D
 in %
 PHARMACEUTICALS 9,349 8,327 12.3%
 P & A HEALTH(B) 4,251 3,681 15.5%
 CHEMICALS 6,457 5,633 14.6%
 FIBERS & POLYMERS 3,186 2,616 21.8%
 OTHERS 148 119
 ELIMINATIONS (399) (282)
 TOTAL 22,992 20,094 14.4%


EARNINGS FROM OPERATING ACTIVITIES (excluding one time charges)
 (Millions of FF)
 Operating Income Equity in net Operating Income +
 earnings Equity in net
 earnings
 Sector 1997 1996(A) 1997 1996(A) 1997 Change
 97/96(A)
 in %
 PHARMACEUTICALS 939 1158 25 134 964 (25.4%)
 P & A HEALTH(B) 346 291 333 123 679 64.0%
 CHEMICALS 231 44 12 24 243 257.4%
 FIBERS & POLYMERS 225 (38) (27) (67) 198 NS
 OTHERS (159) (209) 0 (2) (159)
 TOTAL 1582 1246 343 212 1925 32.0%


EARNINGS FROM OPERATING ACTIVITIES (excluding one time charges)
 BEFORE GOODWILL AMORTIZATION
 (Millions of FF)
 Operating Income Equity in Goodwill Earnings from
 net amortization
 earnings Operating Activities
 before
 Goodwill
 amortization
 Sector 1997 1996(A) 1997 1996(A) 1997 1996(A) 1997 D
 97/96(A)
 in %
 PHARMACEUTICALS 939 1158 25 134 331 271 1295 (17.1%)
 P & A HEALTH(B) 346 291 333 123 11 11 690 62.4%
 CHEMICALS 231 44 12 24 19 25 262 181.7%


FIBERS
 & POLYMERS 225 (38) (27) (67) (4) 1 194 NS
 OTHERS (159) (209) 0 (2) 0 0 (159)
 TOTAL 1582 1246 343 212 357 308 2282 29.2%


(A) At comparable structure, on the basis of 1997.

(B) MERIAL : the joint venture created in July 1997.
 ONE-TIME CHARGES RESULTING FROM
 THE GROUP TRANSFORMATION
 In billions of FF Chemicals/Fibers Life Sciences Total
 Accelerated amortization of goodwill 3.8 1.9 5.7


Assets depreciation

(divestment or discontinuation
 of activities) 1.8 0.4 2.2


Provision for :
 - restructuring and environment 1.2 0.6 1.8


(divestment, discontinuation of

activities, reorganization)
 TOTAL 6.8 2.9 9.7


SOURCE Rhone-Poulenc S.A.
 -0- 01/29/98


/NOTE TO EDITORS: This release was issued earlier today in France by Rhone-Poulenc S.A. This press release contains key figures converted from French francs to U.S. dollars at the exchange rate of 1 US dollar = 6FF./

/CONTACT: Beverley Miles, 011-33-1-47-68-09-79, or Anne-Laurence de Verdun, 011-33-1-47-68-22-35, both of Rhone-Poulenc, Paris; or John Abrams, U.S. Media, 610-454-5452, or Dwight Grimestad, U.S. Investor Relations, 732-821-3487, all for Rhone-Poulenc/

/Company News On-Call: http://www.prnewswire.com or fax, 800-758-5804, ext. 752087/

/Web site: http://www.rp-rorer.com/

(RP)

CO: Rhone-Poulenc S.A. ST: Pennsylvania IN: CHM MTC SU: ERN

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