Incorporated in 1967 as Hoechst Pakistan Limited, Sanofi-Aventis Pakistan is a distinguished company in the pharmaceutical industry of Pakistan. The company started the manufacturing of pharmaceuticals and chemicals in 1973. Sanofi is also listed on Karachi Stock Exchange since 1977 and has a market capitalisation of Rs 7.3 billion.
PRODUCT PORTFOLIO: Being a pharmaceutical manufacturer, Sanofi holds a diversified portfolio. It has its presence in areas including diabetics and pain management, epilepsy and cardiology and other medical solutions. In terms of segments, the company is involved in vaccines and consumer health care business. Its product portfolio is line with company's broad strategy to become "a diversified healthcare company with patient centric approach."
During 2013, the company launched a total 16 new products; 9 in the pharmaceutical range and in consumer healthcare product range. Also, Sanofi has acquired Chattem product, Selsum Blue shampoo and plans on expanding this range.
1HCY14: REVIEW OF FINANCIAL PERFORMANCE During first half ended June 2014, net sales grew by a decent 12 percent year-on-year. Increase in revenues is more likely to be linked to the launch of new products in the pharmaceutical and consumer healthcare portfolio of the company. However, fluctuations in currency movements and soaring prices of raw materials and other input costs kept cost of sales on the higher side, thus eroding gross margin during the period under review.
Moreover, selling, marketing and distribution costs shot by 26 percent year-on-year on account of expenses linked to the launch of new products and associated costs related to advertisement and promotional activities which have also helped the firm achieved higher sales growth. Considering that higher expenses are incurred in the early periods of product launches, profitability can be expected to level out in coming years.
According to company's director report, net sales of pharmaceutical business grew by 11.64 percent over the corresponding period last year, while launches that drove sales growth include Lantus, Daonil, Flagyl range and NoSpa. Also, the newly launched Thymoglobulin lent a hand in reinforcing topline growth.
The performance of vaccines business remained poor, posting a substantial drop of 52.36 percent during the period under review. Shrinking vaccines sales is the outcome of drop in consumption of polio vaccines.
Consumer healthcare business boasted a rise of 22.04 percent. According to the company, stronger emphasis on distribution coverage and advertisement initiatives backed by television commercials has helped the firm achieve brand awareness besides wider availability of products throughout the country. During the period, new launches in consumer healthcare segment included Thymoglobuline, Siprozee, and some extensions in existing lines of tablets and injections.
Exports to Afghanistan have continued to remain under pressure. This is due to the ongoing political tension in Afghanistan following elections and continuing violence has hampered the supply and delivery of supplies. However, during the period under review, the company was able to achieve a growth of 5.22 percent during the period under review, while during the quarter ended June 2014, exports to Afghanistan actually witnessed a decline of 1.82 percent owing to the reasons highlighted above.
To add to the woes, terrorist attacks on Karachi airport during June 2014 damage company's consignments and the company had to book losses. However, the settlement of insurance claims will be reflected in the financials of next period.
CY13: REVIEW OF FINANCIAL PERFOMANCE After a period of overwhelming profitability growth in 2012, bottomline of the firm dipped by 36 percent year-on-year in 2013 on account of burgeoning expenses and finance costs. Topline remained flat rising by a skimpy 2 percent.
According to company's director report of 2013, the pharmaceutical segment underwent a decline of 2.14 percent. This pales when compared to a growth rate of 18 percent achieved by the company in 2012. Moreover, in order to look for new business opportunities, the company continued to penetrate in the pharmaceutical market of Afghanistan. This led the export sales to Afghanistan to grow substantially by nearly 46 percent during the year.
Other income registered a significant dip on account of high base effect on account of one-off event of gain on sale of Wah Site last year.
INDUSTRY OUTLOOK: Barring unfriendly regulatory environment and stringent pricing policies imposed on pharmaceutical manufacturers, focusing on boosting the consumer healthcare business and boosting exports could serve as a silver lining for pharmaceutical manufacturers.
Besides, the government's recent initiative to work on building a pricing policy is crucial. However, much depends on the seriousness of the government to speed up the process. Not to disregard the fact that such attempts have been made multiple times by successive governments but no clear outcome has materialised as yet. One hopes that the new government is diligent on resolving the crisis of pharmaceutical sector.
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SANOFI-AVENTIS (FINANCIAL HIGHLIGHTS)
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Rs (mn) CY12 CY13 1HCY14
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Net sales 8,628 8,791 4,951
Cost of sales (5,999) (6,114) (3,726)
Gross profit 2,629 2,677 1,225
Distribution and marketing costs (1,567) (1,458) (933)
Administrative expenses (221) (237) (124)
Other operating expenses (229) (249) (21)
Other income 257 40 80
Operating profit 869 773 227
Finance costs (159) (233) (138)
Profit before taxation 710 540 89
Taxation (223) (230) (60)
Profit after taxation 487 310 29
Earnings per share (Rs) 50.52 32.12 3.06
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Source: Company accounts
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