Zeneca profits up 42% in first year after demerger: Volume and price growth, but conditions remain tough

ZENECA, the bioscience group, managed to achieve both volume and price growth in its first year as an independent company.

The former drugs and agrochemicals arm of ICI, demerged last June, saw 1993 pre-tax profits before exceptional items rise 42 per cent to pounds 627m on sales up 12 per cent at pounds 4.4bn.

Of the 21 per cent rise in trading profits to pounds 713m, 14 percentage points were contributed by volume growth and one point by price increases. Beneficial exchange rates accounted for the rest.

Pharmaceutical trading profits were up 21 per cent at pounds 589m, agrochemical profits rose 1 per cent to pounds 86m and speciality chemicals, which are highly sensitive to the economic cycle and have benefited from the end of the recession, surged 92 per cent to pounds 50m.

Sir Denys Henderson, Zeneca's chairman, said growth was clearly established in the US while the British recovery seemed solidly based, if patchy.

However, he warned that conditions would remain tough. Economic conditions in Europe and Japan were still fragile and the climate was uncertain, with government pressures on healthcare spending and European agricultural reforms, Sir Denys said. In pharmaceuticals underlying sales growth was 5 per cent. Sales of Tenormin, Zeneca's best-selling heart drug, fell 22 per cent in the face of generic competition.

However, there was strong growth in new products, which saw sales growth of 41 per cent with approvals for 10 new products in the US alone.

Most recently it received its first approval for Merrem, a new antibiotic, in Italy.

As foreshadowed at the time of the demerger, the second interim dividend will be 17p net, making a full year dividend of 27.5p.

The shares lost 3p to 763p.

View from City Road, page 32

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