JSC „Olainfarm” unaudited results for the 1st six months of 2006


JSC „Olainfarm” has combined results of activity in first six months of year 2006 and made an unaudited financial statement on activity of the company and the Concern in corresponding period. Unaudited consolidated statements are published with Riga stock exchange (www.rfb.lv) and JSC „Olainfarm” (www.olainfam.lv) Internet home pages.

Total sales of the concern in first six months of 2006 was 7.7 million Lats (11 million Euros), which is some 60% of total sales of the Concern in 12 months of 2005.  Sales of the Mother company during first half of 2006 make up some 45% of the annual sales target for 12 months of 2006 and have reached 7.24 million Lats (10.3 million Euros), which, taking into account the seasonality factor in sales of pharmaceutical products, corresponds to the sales target for 2006 of 16.1 million Lats.  This is also confirmed by the fact that sales in first half of 2006 exceed the sales in similar period of 2005 by 30%.  Net sales of the Daughter Company Baltfarm have also increased significantly to 1.1 million Lats (1.57 million Euros), which is 67% of the sales in 12 months of 2005.

This rather considerable sales increase has been achieved because of bigger share of promotable products in the total product range, more active promotion of products in traditional markets of “Olainfarm”, namely Baltic and CIS countries, and also because the share of sales in markets like Poland, France and the USA, is also increasing, although these can not be regarded as Company’s traditional markets at all.  Sales in these markets during the reporting period have exceeded 0.6 million Lats (0.85 million Euros) .

As the sales volumes are increasing, the Mother Company has increased the production volumes as well, which have in the reporting period reached the level of 9.4 million Lats  (13.37 million Euros) and are for 27% bigger than in similar period of 2005.

First half of 2006 has been particularly remarkable with commencement of a new investment program in the Mother Company and allocation of funding for it by JSC “SEB Unibanka”.  During the first six months of 2006 the implementation of the following investment programs has been started:

-                       introduction of Company’s resource planning system will allow to automate the data processing procedures in the Company and to obtain the data necessary for the management of the Company on a shorter notice;

-                       Establishment of Company’s Chromatography Center and reconstruction of Quality Control and Standardization Laboratories are commenced with an intention to finalize the creation of quality assurance system in accordance with the requirements of EU, USA, Japan, Russia and other countries;

-                       Reconstruction of the Company’s  Pilot Production Unit will allow the Company to comply with the requirements of GMP when preparing the Company’s future products for toxicological and clinical trials as well as will ensure the conditions and additional capacities for production of substances with high added value in smaller batches.

-                       Reconstruction of production units for production of nitrofurane related and other substances and reconstruction of warehouse for chemical substances is a continuation of Company’s modernization effort of production premises and facilities to fully comply with the requirements of GMP standards.

Total investments for implementation of these projects will comprise in 2006 at least 3.5 million Lats (4.98 million Euros) and will be partially financed through a long term financing arrangement with JSC „SEB Unibanka” and partially from additional resources raised through the new share issue. 

During the reporting period the Mother Company has also launched or continued other investment sub-programs directed at widening the Company’s product portfolio, increasing the production efficiency, compliance with quality assurance requirements and increase of production capacities.

Despite the rather significant increase in sales, the profit of the Concern during the first six months of 2006 was 238 247 Lats (338 995 Euros) or 38% of the Concern’s profit of entire year 2005.  This is manly related to the increase in costs of Mother Company, mainly through salary increase almost for 40%.  Turnover period of the recievables continues to shrink, as it has decreased from 169 days in 2005 to 137 days in six months of 2006.  Bank loans have increased by nearly 0.4 million Lats (0.57 million Euros) compared to January 1, 2006, but since the decision has been taken to increase the share capital of the Company and this share issue is fully paid for, we can assure that the mentioned increase in loans has not worsened Company’s solvency indicators in any degree. Profit per share coefficient (EPS) of Mother company during the reporting period constituted Ls 0,0232 (0,033 EUR) per one share. As increase of Share capital of Mother company was registered on August 18th, 2006, the EPS for new Share capital amount will be calculated starting with next reporting period.

During the first half of 2006 the Mother company has started a considerable investment program into organizing the consumption of energy resources in the company and saving them, through introducing more energy efficient technologies and more heat efficient insulation solutions.  Despite the increase in production volumes, the introduction of these measures will allow to reduce the amount of unrenewable energy resources consumed by the Company.

During the reporting period the Company has not opened new representative offices abroad, but number of medical representatives in Ukraine and Russia has been increased which will in the nearest future ensure the presence of company’s representatives in each of Russia’s cities with population exceeding 1 million people.

Decision of the Annual General Meeting held on July 29, 2005, to increase the share capital by issuing the personal registered shares worth 3 million Lats (4.3 million Euros).  Subscription for the shares was announced in May 11, 2006 with deadline being June 13.  All of the issued shares were subscribed for, but part of the subscribed shares were not paid for.  As a result of the share issue the share capital of the Company was increased by 2 956 690 Lats (4 206 991 Euros) and after the registration in the Commercial register reached 13 209 055 Lats (18 783 267 Euros).

During the second half of 2006 it is planned to finish the implementation of commenced investment programs. Taking into consideration the results of the first half of 2006 there are reasons to believe that the targets set for 2006 are realistic and will be achieved.


Olaine, August 31st, 2006.