Roche reported solid results for 2014: Group sales reached 47.5 billion Swiss francs in 2014. Growth in Pharmaceuticals was driven by medicines for HER2-positive breast cancer (+20%), as well as Avastin (+6%).
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Core operating profit increased by 3%. This includes a double charge of 202 million Swiss francs of the US Branded Prescription Drug fee, following final regulations issued by the Internal Revenue Service, which advanced the timing of recording the liability. Excluding this double charge, core operating profit was 5% higher.
Operating free cash flow was 15.8 billion Swiss francs. The strong cash generation of the underlying operations was offset by higher capital investments in manufacturing facilities and other site development projects, resulting in a 2% decrease at constant exchange rates. Free cash flow was 5.3 billion Swiss francs, 1% higher at constant exchange rates.
IFRS net income was negatively impacted by debt restructuring, impairments and restructuring costs in 2014. The Group restructured part of its debt in 2014 to take advantage of the low interest environment. Net of tax, this measure resulted in a one-time loss of 279 million Swiss francs, but will lead to interest savings over the longer term.
Intangible impairments increased by 1.1 billion Swiss francs, in particular in Tissue Diagnostics, following the reassessment of a product in late-stage development and cuts in US laboratory test reimbursement. Costs for restructuring increased by 252 million Swiss francs due to a non-recurring, one-time income effect in the 2013 IFRS results.
In total, these costs and impairments resulted, after taxes, in a 10% lower net income on an IFRS basis in 2014 (down 16% in Swiss francs). Core net income, which excludes these items, was 6% higher than 2013 (stable in Swiss francs).
The performance of the underlying business remained strong, with core earnings per share 5% higher at constant exchange rates, and stable in Swiss francs. Excluding the one-time double charge of the US Branded Prescription Drug fee, core earnings per share were 7% higher.
Based on the strong business results, the board has recommended the 28th consecutive dividend increase, 3% to 8 Swiss francs per share. ■