Strong kroner knocks Swedish drug giant profits knocked by kroner

Astra, Sweden's biggest company, warned yesterday that currency effects would knock profits this year, but calmed fears that trading would be hit by a US sexual harassment scandal.

The drugs group announced that the strength of the Swedish kroner had sliced around SKr600m (pounds 58m) from interim profits and said the currency effect would be somewhat greater in the second half, increasing "by at least a further 50 per cent", according to a company representative.

The firmness of the kroner, up by around 18 per cent against the German mark in the past 18 months, held Astra's pre-tax profits to SKr6.76bn (pounds 656m) in the six months to June, a 7 per cent rise on the same period of last year. Net earnings per share rose to Skr7.83 from Skr7.40.

The size of the currency hit wrongfooted analysts, who were looking for interim profits of around SKr6.97bn, and shares in Astra, which represents 12 per cent of the Swedish stock market, fell sharply in early trading in Stockholm.

However, analysts welcomed signs that sexual harassment allegations involving the head of Astra's US operations had not affected business there. In April, the group suspended its US chief executive, Lars Bildman, pending an internal investigation into alleged sexual harassment and financial improprieties. He was sacked in June.

Sales in North America rose 18 per cent to SKr4.79bn in the half year, outperforming other parts of the group. In Europe, Astra's biggest market, turnover was up a mere 2 per cent to SKr10.9bn and total sales for the group were 6 per cent ahead at SKr19.1bn. At constant exchange rates, North American sales were 28 per cent up, against 12 per cent in Europe.

James McKean, pharmaceuticals analyst at Morgan Stanley, said he was relieved that the harassment issue had not affected North American operations: "There don't seem to have been any operational difficulties at all and this was something that had concerned everyone."

He added: ''All growth rates in local currencies are looking good ... and the underlying growth and operating margins are fine. Any shortfall was due to the currency."

Sales of Astra's biggest selling drug, the ulcer treatment Losec, rose to SKr8.55bn in the first half, a 22 per cent increase at constant exchange rates. Its second-biggest seller, the anti-asthma agent Pulmicort, climbed from SKr2.21bn to SKr2.29bn after correcting for currency.

Astra ascribed strong growth in sales of Seloken, a beta-blocker and its largest cardiovascular product, to favourable trends in the US. At constant exchange rates, it was 14 per cent ahead at SKr1.24bn in the first half.