Pharmaniaga’s earnings hit by lower demand from govt hospitals

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KUALA LUMPUR: Lower demand from government hospitals reduced the third-quarter (Q3) earnings of the country’s largest listed pharmaceutical firm, Pharmaniaga Bhd, by 35% year-on-year (y-o-y).

The company, whose concession business with the Health Ministry accounted for over half of its revenue last year, said revenue in Q3 ended Sept 30 fell to RM515.22mil from RM524.41mil a year earlier due to the drop in the concession business, which in turn pulled down its earnings to RM13.06mil.

Pharmaniaga holds the exclusive concession to distribute medical products to government-owned hospitals and clinics for 10 years expiring on Nov 30, 2019.

Pharmaniaga said that during the quarter under review, in view of the ongoing negotiations to finalise the terms and conditions for the extension of its concession, the group had revised the remaining estimated useful life of the expenses incurred for the rights to supply under the concession agreement from four years to 14 years.

As a result, the amortisation charge for Q3 was reduced by RM21.5mil, it added.

The latest quarter marked Pharmaniaga’s fourth consecutive quarter of recording lower y-o-y earnings. The reasons given differed from quarter to quarter.

For the nine-month financial period, earnings fell 32% to RM46.44mil while revenue rose 6% to RM1.61bil.

The manufacturing division registered a lower profit before tax (PBT) of RM68.9mil for the period versus RM79.2mil in the previous corresponding period. This was mainly due to lower offtake for in-house products under the concession business.

The logistics and distribution division swung to a loss of RM1mil from a PBT of RM9.8mil previously.

In a press statement, Pharmaniaga chairman Tan Sri Lodin Wok Kamaruddin said there were opportunities that the group would be able to tap going forward in relation to the measures announced by the Government in Budget 2017 for health programmes.

Part of the sum of RM25bil allocated will be for building and upgrading hospitals and clinics.

For the third quarter, Pharmaniaga directors have declared a third interim dividend of 4 sen (2015: 9 sen) per share to be paid on Dec 15. This will bring the total dividend this year to 9 sen (2015: 23 sen).