Hovid’s results hit hard by production downtime

fnhovid 12 - The Hovid office and factory in Jalan Tunku Abdul Rahman (formerly Jalan Kuala Kangsar.).

KUALA LUMPUR: Hovid Bhd’s bottom line appears to be hit much harder than the company had anticipated in January following the disruption in its manufacturing operations.

The pharmaceutical and herbal product maker, whose manufacturing licences were revoked by the Health Ministry on Jan 9 due to non-compliance with the Current Good Manufacturing Practice, reported on Wednesday its first quarterly loss in about six years in the January-March 2017 quarter.

In January, Hovid had estimated about a RM2.7mil drop in earnings (-0.33 sen per share) if manufacturing activities resumed only after March.

However, according to its latest unaudited financial report, Hovid swung to a net loss of RM4.14mil from earnings of RM1.48mil in the same period of 2016.

That represented a RM5.62mil reduction in earnings, and there may be more impact in April as production activities only fully resumed on May 8.

Hovid’s earnings per share (EPS) for the quarter fell by 0.68 sen to -0.5 sen year-on-year, twice the 0.33 sen drop per share that the company had estimated in its statement to the exchange in January.

The January-March quarter was the third financial quarter in Hovid’s financial year ended June 30, 2017 (FY17). For the first nine months of the year, its EPS was 0.59 sen, down 0.88 sen from FY16’s corresponding period.

Meanwhile, Hovid’s revenue remained resilient at RM40.88mil during the quarter under review against RM40.89mil achieved a year earlier.

The company had forecast a RM37.95mil drop in turnover (-4.63 sen per share) in January.

Among Hovid’s assumptions in January were that the manufacturing licences for its plants in Chemor and Ipoh, Perak, would be reissued by end-March and production would resume by April 1.

On March 6, Hovid regained the manufacturing licence for its Chemor plant, which CIMB Research said contributed 70% of Hovid’s total capacity. However, the Ipoh plant’s licence was reinstated only on May 5.

On its prospects, Hovid said the group’s outlook was expected to be satisfactory given that it was expanding its tablet and capsule production facility and was actively securing new overseas markets and registering new products.

“However, the fluctuation of the ringgit against the US dollar and the resulting unrealised forex exchange gains/loss may cause some fluctuations to our ringgit-denominated financial results,” it said.

Hovid shares closed unchanged at 34.5 sen on Wednesday. The price fell after the manufacturing licences were revoked on Jan 9, but it has fully recovered compared with the closing price at the end of 2016 (34 sen).