Feb 10, 2010
Press Release

C&O’s 2QFY10 net profit jumps 18% to HK$30 million; Declares dividends of S$0.04

Financial Highlights

HK$’000	1HFY10	1HFY09	Change (%)	2QFY10	2QFY09	Change (%)
Revenue	295,816	243,414	+22%	169,873	144,312	+18%
Gross Profit	184,302	136,617	+35%	105,940	83,321	+27%
Gross Profit Margin	62%	56%	-	62%	58%	-
Operating Profit	66,755	44,764	+49%	39,286	27,970	+41%
Net Profit	55,360	42,126	+31%	29,579	25,168	+18%
Net Profit Margin	19%	17%	-	17%	17%	-

Mainboard-listed C & O Pharmaceutical Technology (Holdings) Limited (“C&O” or the “Company” and together with its subsidiary companies, the “Group”) announced today that its net profit for the period increased 18% to HK$30 million for the three months ended 31 December 2009 (“2QFY10”).

The Group’s revenue grew 18% to HK$170 million due to its increased marketing efforts in building its corporate brand name among PRC doctors and patients as well as increased sales in Exclusive and C&O Branded products. In 2QFY10, sales of Exclusive products improved 13% to HK$114 million while sales of C&O Branded products jumped 30% to HK$52 million year-on-year. The implementation of the Essential Drug List (“EDL”) and the expanded National Health Insurance Catalog have also contributed to the sales growth of these two product segments.

Although distribution and administrative expenses have increased in tandem with higher sales, the Group’s increased operational efficiency is evident from the substantial 41% increase in operating profit to HK$39 million in 2QFY10.

The Group’s income tax has increased by 216% to HK$9 million as a result of provision of withholding tax of approximately HK$6 million in connection with the declaration of special interim dividend. Not taking into account the provision of withholding tax, C&O’s 2QFY10 net profit would have jumped 42%.

The latest set of results lifted the Group’s 1HFY10 revenue and net profit to HK$296 million and HK$55 million, representing a growth of 22% and 31%.

The Group’s balance sheet remains strong, with total cash (including fixed deposits held at banks and cash and cash equivalents) increased from HK$193 million as at 30 June 2009 to HK$233 million as at 31 December 2009.

To optimise the use of our resources to maximise return to our investors and as a token of thanks to our shareholders for their continuous support to us, the Board has resolved to declare an interim dividend of S$0.005 and a special interim dividend of S$0.035 to our shareholders, totalling S$0.04. In aggregate, this represents a payout of S$0.04 and a dividend yield of 14% based on the closing share price of S$0.285 on 9 February 2010.

Outlook

The ongoing healthcare reform carried out by the PRC government will continue to shape the operating landscape of the pharmaceutical industry. Subsequent to the promulgation of “Essential Drug List”, the PRC government recently expanded the National Health Insurance Catalog. Two C&O Branded products have been included in the updated catalog, namely Amoxicillin Granules and Clarithromycin Dispersible Tablets. The Group believes the inclusion of these products will generate higher demand for its C&O Branded products.

In line with the Group’s strategy of building its corporate brand name, it will continue to strengthen its product portfolio and it intends to add another two new C&O Branded products, namely Levocarnitine Injection and Cefuroxime Axetil Capsule, in the coming quarter. Levocarnitine Injection is used for the supplementary treatment of carnitine deficiency diseases, while Cefuroxime Axetil Capsule is an oral complementary product to our existing C&O Branded product, Cefuroxime Sodium for Injection, a cephalosporin antibiotic. We shall have 24 C&O Branded products and 2 Exclusive products in the National Health Insurance Catalog.

With the growth of our business, we will also be looking at enhancing shareholders’ value and optimising return to our investors.