Pharmaniaga remains confident of prospects despite posting first full-year loss

KUALA LUMPUR (Feb 21): Pharmaniaga Bhd — whose shares fell to a more-than-eight-year low of RM1.86 earlier today after reporting its first full-year loss since 1999 — remains confident of its prospects ahead on the back of newly extended concession contracts with the government.

In November 2019, the Ministry of Health (MoH) granted a five-year renewal for Pharmaniaga’s distribution and logistics concession, and a two-year extension for the renewal of a medicine supply concession.

Pharmaniaga's outgoing managing director Datuk Farshila Emran said at a media briefing today the two concession contracts will boost the group’s sales further, and it is expecting to post another year of double-digit growth in revenue.

This is also expected to translate to an improved bottomline, Farshila said, given that there will not be any more amortisation of its Pharmacy Information System (PhIS) or even a worldwide product recall, she explained.

Yesterday, the group said it swung into a net loss of RM178.6 million in the fourth quarter ended Dec 31, 2019 (4QFY19), from a net profit of RM4.44 million a year ago, due to recognition of the remaining RM247 million unamortised PhIS, a system invested by the company as part of the government concession agreement.

In addition, there was a provision for stock write-off on the voluntary Ranitidine product recall of RM9 million.

Pharmaniaga said in a statement yesterday that the RM247 million amount refers to expenses incurred for the provision and supply of certain hardware and software for the PhIS, a system developed and managed for the MoH. "Following the new contract arrangement with MoH, the remaining unamortised PhIS costs were fully recognised in the quarter under review," it added.

This dragged its full-year performance, resulting in a full-year net loss of RM149.22 million for the financial year ended Dec 31, 2019 (FY19) from a net profit of RM42.47 million in the previous year, even though revenue rose 18.3% to RM2.82 billion from RM2.38 billion in FY18.

“The amortisation is a one-off non-cash expense and moving forward this will not affect our earnings. Same goes for the re-call of the Ranitidine product, which occurred worldwide. Without both, our net profit is stable and moving forward I am confident we will do even better,” she told a media briefing earlier.

Going into FY20, Farshila said the group will be beefing up its international markets. “We plan to start exporting to Europe in the first quarter of this year and increase our existing markets in Southeast Asia,” she added.

The pharmaceutical company is also continuously working on lowering its dependency on its government concession business, which the company has been known for over the years.

“We are working on lowering the dependency. Now it’s about 50%-50% for concession and non-concession, that is a drop from 70% concession in about 2011. The government is still offering contracts to us and we are more than pleased with this.

“But we are looking to increase our logistics and distribution business in the private healthcare space and I’m happy to say that more private hospitals are taking interest,” she said.

At 2.51pm, shares of the company are trading 17 sen or 8.33% lower at RM1.87, valuing it at RM488.5 million.