First Half Profit Growth At Roche

After having announced an increase in total group sales of 20%(Marketletter July 21), Swiss pharmaceutical group Roche has reported a 10% rise in net income to 2.43 billion Swiss francs ($1.58 billion), which as a percentage of sales decreased slightly by 2.4% to 26.1% for the first half of 1997.

For the same period, gross profit rose from 5.39 billion francs to 6.27 billion francs, up 16%. The company states that despite additional manufacturing cost savings, gross profit margin was adversely affected by heavy price pressures, particularly in the vitamin C market, where prices plunged due to overproduction by Chinese competitors. Unfavorable sales mix developments, due to patent expiry, also led to the decrease in gross profit margin of 2% to 67.4%.

Marketing and distribution expenses were higher compared to the corresponding period last year as a result of currency exchange rate movements, expansion into new markets and sales force build-up. Similarly, higher exchange rates, coupled with accelerated product development programs, led to a significant increase in R&D costs for the first half of 1997, up nearly 300 million francs to 1.4 billion francs. As a consequence, operating costs also rose to 4.2 billion francs, up 22.6%.