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How does STADA assess its business prospects?

In STADA's Interim Report on the First Nine Months of 2011, the Executive Board gives the following assessment of the situation in its prognosis for further business development:

"The Executive Board confirms the fundamental outlook and risk report published for the Group in STADA’s Annual Report 2010. Together with the supplements and updates, especially with reference to the current financial year, listed in this interim report, it gives, in the view of the Executive Board, an up-to-date overall picture of the opportunities and risks for the STADA Group.

STADA’s business model is accordingly geared towards markets with long-term growth potential in the health care and pharmaceutical markets. Linked to this, however, are also inseparable risks and challenges resulting in particular from changed or additional state regulation and intensive competition. In view of this, in the Executive Board’s assessment, far-reaching regulatory interventions, a high level of competition, default risks and significant margin pressure can continue to occur in individual national markets in the future. The latter applies primarily to the increasing volume of business activities in the Generics core segment characterized by tenders.

In addition, STADA will continue to be confronted with non-operational influence factors. The most important currency relations for the Group, in particular of the Serbian dinar and the Russian ruble to the euro, will therefore also affect the Group’s future development in financial years 2011 and 2012.

Furthermore, STADA will still have to deal with the effects of the global economic and financial crisis. In view of this, the Group continues to prepare itself, within the realm of possibility, for specific potential risks in this regard, such as a significantly increased default risk of business partners, subsidies to crisis-prone competitors that distort competition or continued strong volatility in interest rate levels and currency relations that are relevant for the Group. However, in view of the extraordinary dimension of the global financial and economic crisis, burdens which result from this such as one-time special effects from payment defaults or non-operational burdens on earnings from currency influences can, as before, not be ruled out.

The sales and earnings development of the STADA Group will indeed be characterized in 2011 and 2012 and in the future by differing and partially contradictory factors in the various national markets.

In the overall assessment of influence factors, the Executive Board, however, continues to expect an increase in Group sales for financial year 2011, as well as in 2012, from today’s perspective.

In view of the factors mentioned in this overview that influence the Group’s earnings development, the Executive Board expects – despite the negative net income reported after the first nine months of 2011 due to the high burdening one-time special effects – from today’s perspective, nevertheless, a significantly positive reported net income in the double-digit million euro area for the full year 2011. For 2012, the Executive Board once again expects a significantly higher reported net income.

At the same time the Group expects positive effects on earnings as a result of the implementation of the “STADA – build the future” project for EBITDA adjusted for one-time special effects and the correspondingly adjusted net income in the coming years. By 2013, from today’s perspective, project-related investments of a total of approx. EUR 20 million as well as project-related expenditures for special write-offs, personnel expenses and consultancy services of a total of approx. EUR 50 million are expected (in each case including the past financial year 2010). The Group will recognize each of these project-related costs as one-time special effects according to progression of the project. In the case of the sale of production facilities in Ireland and Russia, currently evaluated in the context of “STADA – build the future”, a significant expense in the low net double-digit million euro area would be expected for financial year 2012 from today’s perspective.

The STADA Executive Board continues to expect growth in the key earnings figures adjusted for one-time special effects in the Group for both 2011 and 2012. For 2011, the Executive Board continues to see, from today’s perspective, the opportunity for an increase in the high single-digit percent area in EBITDA adjusted for one-time special effects.

Furthermore, the Executive Board continues to hold to the long-term prognosis envisaged for 2014¹⁾, according to which Group sales of approx. EUR 2.15 billion, at an adjusted level, EBITDA of approx. EUR 430 million and net income of approx. EUR 215 million – on the basis of a largely organic business – should be reached.“

1)	See the Company’s ad hoc release of June 7, 2010.