Roche proposes dividend increase of 36%

Roche on Wednesday committed itself to pushing up payments to shareholders after its cash pile surged by more than 40 per cent last year, confirming the group’s reputation as one of the world’s most profitable drugs companies.

The Swiss pharmaceuticals group, which also controls Genentech in the US and Chugai in Japan, said net cash soared by almost SFr5bn to SFr16.1bn last year.

The increase, driven by the group’s highly successful cancer drugs and its Tamiflu influenza treatment, prompted management to propose a 36 per cent dividend rise to SFr3.40 a share.

But Franz Humer, chairman and chief executive, said the higher payment was just the first step in a more generous payout policy in future.

“We will raise the payout ratio. What we’re doing today is a start for the future”, he said.

Mr Humer admitted the decision to boost dividends also reflected a lack of takeover opportunities and the fact that Roche’s shareholder structure – the group is still controlled by its founding families – reduced its options.

Mr Humer said he was “philosophically no friend” of share buybacks, as these were “a last resort when you can’t think of anything else.”

But he conceded Roche had avoided buybacks partly because of the implications for its controlling families, and suggested the company could consider raising its stakes in Genentech and Chugai as an alternative.

The comments came as Mr Humer promised further strong growth this year, with group sales predicted to rise in double digit percentage points in local currencies on the back of continuing strong demand.

“We have a young portfolio that has considerable potential for further growth …. So I assume we can gain further market share”, he said.

Group sales climbed by 17 per cent last year to SFr42bn, while net profits surged by 34 per cent to a record SFr9.17bn. Earnings were boosted by a more than doubling in the group’s financial income to SFr855m.

The booming sales and profits were driven by the core drugs division, which saw sales rise 22 per cent to SFr33.3bn. Sales of the Mabthera, Herceptin and Avastin cancer drugs continued to climb, as did Tamiflu, helping to push up the operating profit margin in pharmaceuticals by 4.1 percentage ponts to 31.7 per cent.

Diagnostics, Roche’s other core business, raised sales but suffered a sharp profits fall because of impairment charges on the group’s insuling injection products.

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