Pharmaniaga’s performance was hampered by high financing costs

Pharmaniaga’s Indonesia segment remains the group’s top growth driver, thanks to its excellent performance, driven primarily by improved operational efficiency, digitization, continued inventory optimization, aggressive collection operations and an expanding product portfolio, noted the analysts. — Photo Bernama

KUCHING: Pharmaniaga Bhd (Pharmaniaga) net profits fell 83% year on year (yoy) while cumulatively for nine months, its profits fell 57.2% year on year to 37.1 million RM, largely due to higher borrowing costs on the back of more borrowing, analysts noted.

In a report, the research team of MIDF Amanah Investment Bank Bhd (MIDF Research) pointed out that the group’s revenue decreased by 56.6% year over year but increased by 21.5% quarter on quarter to 924, RM7 million.

For the cumulative nine months, revenue fell 35.5% year-on-year to RM2.65 billion.

“Lower sales from its concession segment due to the timing of orders from the Ministry of Health (MOH) contributed to lower revenue; offset by higher revenues from other segments, including non-concession business and Indonesia,” he said.

However, he stressed that the group’s Indonesian division posted revenue increases of 1.5% year-on-year and 15.9% qoq to RM260 million.

This division’s earnings rebounded more than 100% from a deficit of RM5.1 million in 2QFY22 and RM2.4 million in 3QFY21 to RM18.9 million.

“The improvement is due to its operational efficiency in optimizing inventory, aggressive picking effort and the digitization of its business processes,” he said.

Going forward, he highlighted that the Indonesia segment remains the group’s main development growth, thanks to its excellent performance, mainly driven by improved operational efficiency, digitalization, continuous inventory optimization, aggressive collection operations and a product portfolio in expansion.

Domestically, the group is emphasizing the use of its portfolio in the private sector, which has seen revenue growth of more than RM120 million.

“In addition, the group expects its concession business to continue to grow later this year, with growth expected to increase by 8%, as a result of the MoH adding more products to the Approved Products Purchase List (APPL),” MIDF Research said.

All in all, despite its weak performance, the research team maintained its “buy” bid on Pharmaniaga.

“We expect its marketing strategies and employee hiring to continue for another three to five years as earnings gradually return higher on the back of increased demand for its products regionally and locally.

“Under the reign of a new government, Pharmaniaga is expected to leverage the increased five per cent of GDP allocations to the healthcare sector, in addition to anticipated new demands for specialty medicines to treat mental illness and non-communicable diseases.

“We also reiterate our positive position that your bet on your long-term marketing plans would benefit the group in the long run.

“However, we believe Pharmaniaga will also face challenges, including the rising cost of raw materials for drug manufacturing and changes in government policies regarding the manufacturing and distribution of pharmaceuticals to local and regional customers,” he said.

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