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9 <title>Welcome to PLIVA d.d. Zagreb Croatia</title>
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131 <td width="100%"><font FACE="Arial" size="3"><b><a name="PLIVA’S SHARES VALUE MUST RETURN TO 600 KUNA">PLIVA’S SHARES VALUE MUST RETURN
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133 TO 600 KUNA</a></b><p></font><font FACE="Arial" size="2">Vecernji list, Wednesday,
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135 09/09/1998 </p>
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137 <p>Our share price has drastically decreased, but not due to incompetent business
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139 activities, but because of the global market crisis. *Because of the Russian crisis,
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141 almost all foreign investors have withdrawn from Croatia, and the Zagreb Stock Exchange is
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143 practically out of business. *Almost all expert analysts estimate that the PLIVA’S share
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145 price must increase from its present 350 kuna to some 600 kuna. *We shall continue
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147 supplying hospitals, but large scale drug-dealers will be cut off until they pay their
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149 debts, totalling some 400 million kuna. </p>
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151 <p>&nbsp;</p>
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153 <p>Reporter: Diana Glavina, Vecernji list</p>
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155 <p>The President of the Croatian multinational company PLIVA, Zeljko Covic, M.Sc., is
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157 extremely pleased. The reasons are, above all, the excellent six-month results, high rates
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159 of increase, which are the best proof of PLIVA’s steady growth. In comparison to the
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161 same period last year, the PLIVA’s total income increased by as much as 31.1%, amounting
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163 to 1.8 billion kuna. EBIT increased almost 30% (615.4 million kuna, representing 80% of
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165 1997 totals). Net profit increased 7.7% to 407.7 million kuna. </p>
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167 <b><p>How do you explain these extremely high sales growth rates?</b></p>
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169 <p>- PLIVA’s goal – the internationalisation of business activities – has from the
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171 very beginning been marked with our endeavours towards an increase of our profit from the
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173 international market. And today, for the first time, the international market profit
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175 share, which amounts to 57.6%, is for the first time larger than the profit share from the
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177 domestic market. Our short-term goal is 60%, in order to ensure the additional stability
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179 of the company. Furthermore, PLIVA has an optimal export structure in certain regions, so
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181 that immediately after Croatia and its 42% share of total income are the countries of
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183 Central and Eastern Europe with a 25% share, and this amounts to an 147% sales increase in
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185 comparison with the first six months of last year. This is partially a result of our
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187 acquisition of Polfa Krakow, but even without that, our profits in the region have been
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189 constantly increasing. I would like to point out that only three years ago, our profit
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191 from the above mentioned countries amounted to three or four percent. Then followed
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193 Western Europe with eight percent of income, which means that sales increased by 69%
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195 there. America accounts for 18 percent of PLIVA’s income, and Russia four percent.</p>
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197 <p>Income in Croatia has grown around 8.9 percent, which only proves our thesis that the
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199 possibilities for a more meaningful growth in Croatia are limited by the size of the
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201 market. </p>
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203 <b><p>Despite the outstanding financial results, PLIVA’s share price has decreased
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205 considerably. What is your explanation of such a contradictory situation?</b></p>
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207 <p>- It is a fact that the price of shares has dropped considerably. But this is merely
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209 the result of international market trends, the result of the crises which have shaken up
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211 the global economy and finances. At the moment, Russia is at the centre of all the crises,
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213 but let us not forget that the complete effects of the Asian crisis are not yet known. And
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215 it is a well-known fact that in such moments of crisis, investors react with panic and
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217 make irrational decisions. These may be non-selective decisions whose repercussions may be
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219 felt throughout the whole region, not differentiating between the companies and countries
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221 which are and which are not in crisis. </p>
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223 <p>And this is why at the moment Croatia is being connected with the Russian crisis. </p>
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225 <p><b>What is your position as a successful company in such circumstances – are you
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227 powerless or are you going to be able to make certain moves?</b></p>
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229 <b><p>- </b>We have just published our financial results, and as usual, we are going on
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231 the “road show” with an aim of explaining to the shareholders and foreign investors
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233 the difference between the Croatian market and PLIVA and all the latest events in Russia. </p>
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235 <p>Due to the Russian crisis, all foreign investors have withdrawn from Croatia. The
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237 Zagreb Stock Exchange is practically out of business, and the situation in the countries
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239 of Central and Eastern Europe, including Russia of course, is very much alike. As I said,
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241 our income from Russia is four percent, so even if we calculate all the possible risks
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243 which PLIVA might take due to the devaluation of the Ruble and the crisis on the whole,
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245 our losses would be practically non-existent. On the other hand, we hold as our advantage
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247 the fact that PLIVA’s income from the stable parts of the world drastically decreases
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249 the risk of investments in PLIVA. </p>
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251 <b><p>Have you got expert estimations regarding the PLIVA’s share price in the future?</b></p>
252
253 <p>- All the serious analysts are predicting a speedy recovery of PLIVA’s shares, and
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255 according to their estimations the share price should increase to around 600 kuna. The
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257 Russian tornado has passed over our country too, but I repeat, we are going to use firm
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259 arguments to ensure the investors that the risk of investing in PLIVA truly is minimal.
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261 For example, sales of Azithromycin alone represent 30 percent of our income and is
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263 virtually risk-free. This allows us to give a strong argument to investors and
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265 shareholders and ask them not to put us in the same basket with Russian companies, which
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267 rely exclusively on their domestic market and which are over-burdened with massive debts. </p>
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269 <b><p>Still, according to some analysts, investment banks are saturated with PLIVA’s
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271 shares and this is why they are selling them now.</b></p>
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273 <p>- This is only partially true, or insufficiently explained: when investors are
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275 withdrawing from a certain market, they sell whole packages of shares, and among them
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277 could be a Russian company, a Latin-American company and PLIVA. This is the so-called
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279 cleaning of the portfolio for the purpose of fast withdrawal from so-called emerging
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281 markets, in order to invest elsewhere. Besides, many funds have orders not to invest in
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283 emerging markets. Therefore, it is very important for us too to see the end of the Russian
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285 crisis and the beginning of a period of political tranquillity. </p>
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287 <b><p>Have you got any receivables from Russia?</b></p>
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289 <p>- Our relatively conservative policy towards Russia has proven itself a very reasonable
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291 one today, even though at the time there had been some foreign investors who held our
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293 policy against us. However, luckily we know the Russian market and we know that
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295 investments in Russia involve a lot of risk. Our receivables from Russia amount only to
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297 around 50 million kuna, and we received around USD 9 million over the period of the last
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299 eight months. Receivables are dispersed among more than 40 clients, so even if the worst
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301 case of their bankruptcy came true – we would not be affected very much. </p>
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303 <b><p>Are you planning any new acquisitions after those in Poland and Slovakia? </b></p>
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305 <p>- Today PLIVA is already the absolute leader in the pharmaceutical industry in this
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307 part of Europe. We intend to increase our market share in this region, and are therefore
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309 analysing all the possibilities of growth, development and, of course, further investment
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311 in the countries of Central and Eastern Europe, and we shall even invest in Russia.</font></p>
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