Record Year for Bachem at all Levels in 2007

  • Sales grow to CHF198.3 million – up 17.0% in local currencies and 15.5% in CHF respectively
  • Operating profit up 29.9%, net income up 37%
  • Operating margin rises sharply to 36.5%, net income margin now at 32.3%
  • Prosposed increase in dividend by 50% to CHF3.00 per share
  • Positive trend in demand and systematic expansion of the portfolio and capacity promise continued growth in 2008

The Bachem Group (SWX: BANB) today announced results for the business year 2007. The company achieved a new sales record of CHF198.3 million in 2007. Compared with 2006, sales grew by
17.0% in local currencies or 15.5% in CHF. The weakening of the US dollar against the Swiss franc during 2007 outweighed the positive development of the Euro to the Swiss franc. As expected, sales in the second half of 2007 of CHF 95.3 million did not quite reach the level of the first half of CHF 103.0 million. After a first-half growth of 26.3% in local currencies or 25.4% in CHF, growth in the second half of 2007 amounted to 8.6% in local currencies or 6.4% in CHF.

The main driver of growth last year was again the active pharmaceutical ingredients (APIs) business, which grew by 21.0% in local currencies or 19.1% in CHF. Patent protected new chemical entities (NCEs), in particular, showed above-average growth
of 33.7% in local currencies or 29.2% in CHF. Generics grew by 14.0% in local currencies or 13.5% in CHF. It was very gratifying that, after two years of decline, the non-peptide generics also returned to high single digit growth. Research chemicals, however, only increased slightly by 2.0%. Declines in the catalog business were
offset by double-digit growth in custom synthesis.

Both Europe and North America posted double-digit sales growth in 2007. Sales in Europe increased by 11.4% in local currencies and 12.3% in CHF. This development is in line with the increasingly dynamic momentum in Europe, where more and more pharmaceutical and biotech companies are becoming active in the field of peptidebased
substances. The share of sales in this region thus amounts to 60.4%. Sales in North America showed strong growth of 25.6% in local currencies and 20.6% in CHF.

The additional capacity available since the previous year contributed substantially to the good performance in this region. But also the sales of products manufactured in Switzerland for the American market increased again. The US share of total sales
consequently increased to 39.6%.

Rolf Nyfeler, CEO of Bachem Holding AG, commented: “Once again we can look back on an extremely successful year with undiminished growth. In terms of both sales and profitability, the results achieved have even exceeded our optimistic forecast after the first half-year.”

In the past business year, Bachem increased its operating income by 29.9% or CHF 16.7 million compared to the previous year. The EBIT thus reached the record level of CHF 72.4 million compared to CHF 55.8 million in the previous year. The EBIT margin was again substantially increased and amounted to 36.5% in 2007.
Compared to the previous year’s figure of 32.5%, this represents an increase of four percentage points. A major part of the improvement in the operating margin results from the reduction in the cost of goods sold in relation to sales of around two percentage points. This improvement is partly due to shifts in the product mix, but in
particular was also achieved through economies of scale and process optimization. The gross margin thus improved by more than two percentage points from 53.1% to 55.4% compared to the previous year.

The general administrative costs not only fell in relation to sales from 11.7% to 10.1%, but also slightly in absolute terms from CHF 20.2 million to CHF 20.0 million. This optimization constitutes the second main component of the increase in the operating margin, with the general administrative costs contributing almost two
percentage points to the improvement in the margin in 2007. In relation to sales, selling costs slightly declined while research and development costs showed a modest increase.

In 2007, Bachem increased the number of employees by 42 to 651 full-time equivalents (FTEs). In Switzerland, 50 new jobs were created in Bubendorf, while the UK saw three new jobs created. By contrast, after strong expansion in the USA during the previous year, the number of FTEs here was reduced by 11 as part of a drive to
optimize the organization and increase production efficiency. The growth in personnel corresponds to a 6.9% increase in FTEs, which is an underproportionately low increase in relation to the sales growth.

The rise in net income, increasing by 17.3 million or 37.0% from CHF46.6 million to CHF63.9 million, results from the excellent operating performance, the gratifying financial result and the positive contribution from associated companies. The net
income margin thus likewise improved significantly from 27.2% to 32.2%. Earnings per share (EPS) consequently rose sharply from CHF 3.54 in the previous year to CHF 4.81 in 2007.

Investments in fixed and intangible assets were at CHF 35.3 million in 2007. After the main focus was on the USA in 2006, investments made during the year under review were predominantly in the expansion of capacity at the headquarters in Bubendorf.

The Board of Directors has decided to propose an increase in dividend from CHF2.00 to CHF3.00 for approval by the Annual General Meeting. This is in line with the dividend policy of granting shareholders a share of the funds that are not needed in operational terms.

Peter Grogg, Chairman of the Board, said: “In view of the excellent results, we propose that again a significant increase in the ordinary dividend by 50% to CHF3.00 per share be approved at the Annual General Meeting for 2007. In addition to having shareholders participate in the financial success of the company, we are also planning to further enhance the inner value of our company by significant investments to be funded entirely from the cash flow.”

Outlook

Thanks to the increasing interest in peptides and the excellent portfolio of products and services, perspectives for the future development of the business remain very favourable. Particularly the NCE business, for which the company made considerable progress in the expansion of its project portfolio especially in Europe, promises to further drive growth. For the generics business Bachem expects a continued increase in demand both for peptide as well as non-peptide active pharmaceutical ingredients. Open orders remain at a high level. Barring any unforeseen events, Bachem therefore anticipates to clearly increase sales and income again in 2008.

For the business year 2008, the company expects sales growth in the range of 8% to 12% in local currencies, which is in line with the long-term growth objectives. However, the EBIT-margin target is raised to 33% to 37%. In order to achieve these ambitious objectives, Bachem will continue to invest substantially in further
expanding its business over the coming years.

The Annual General Meeting of Bachem Holding AG for the business year 2007 takes place on April 23, 2008. The comprehensive Bachem Annual Report 2007 is available on the website.

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