Fitch lifts Farmaceutyczna view to stable

Fitch Ratings said it changed the outlook of Polska Grupa Farmaceutyczna SA's national long-term rating to stable from negative. The national ratings are affirmed at long-term BB+(pol) and short-term B(pol).

The outlook change reflects the company's improved profitability and cash flow generation, as well as interest coverage ratio. The company's EBITDA margin strengthened to 2.4% in the first nine months of 2006 from 2.1% in the same period of 2005, while EBITDA-to-interest ratio improved to 5.4x from 3.4x.

The rating takes into account Polska Grupa Farmaceutyczna's aggressive financial policy as evidenced by its high financial leverage and considerable dividend payments, Fitch said. This is mitigated by the company's leading position in the growing Polish pharmaceuticals distribution market, modern nationwide distribution network and expanding retail operations.

The ratings also reflect the company's strategy, which is based on organic growth and further development of its chain of pharmacies, including those owned by Polska Grupa Farmaceutyczna (PGF) and private pharmacies cooperating with PGF under the loyalty program. Fitch said it understands that PGF is interested in selected acquisitions in Poland, but is not willing to increase leverage.

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