Feb 10, 2011
Press Release
C&O achieves net profit of HK$29 million in 2QFY11
- Gross profit margin improves from 62% to 63%
- Application for production of Edaravone Injection approved by SFDA
Financial Highlights
| HK$’000 | 1HFY11 | 1HFY10 | Change (%) | 2QFY11 | 2QFY10 | Change (%) |
|---|---|---|---|---|---|---|
| Revenue | 282,432 | 295,816 | -5% | 153,616 | 169,873 | -10% |
| Gross Profit | 178,856 | 184,302 | -3% | 96,280 | 105,940 | -9% |
| Gross Profit Margin | 63% | 62% | - | 63% | 62% | - |
| Operating Profit | 64,272 | 66,755 | -4% | 31,265 | 39,286 | -20% |
| Net Profit | 57,126 | 55,360 | +3% | 28,770 | 29,579 | -3% |
| Net Profit Margin | 20% | 19% | - | 19% | 17% | - |
Mainboard-listed C & O Pharmaceutical Technology (Holdings) Limited (“C&O” or the “Company” and together with its subsidiary companies, the “Group”) reported a 3% drop in net profit to HK$29 million on revenue of HK$154 million for the three months ended 31 December 2010 (“2QFY11”).
Group revenue decreased 10% year-on-year to HK$154 million, largely due to a 9% decline in sales of both Exclusive products and C&O Branded products. This was attributable to the uncertainty in the government’s healthcare reform policies, which resulted in many of its customers adopting a wait-and-see stance and maintaining a lower inventory in anticipation of the potential price adjustment of drugs by the PRC government.
In tandem with lower revenue, gross profit declined by 9% from HK106 million in 2QFY10 to HK$96 million in 2QFY11. However, gross profit margin in the latest quarter improved marginally to 63% as compared to 2QFY10’s 62%. Over the past seven quarters, the Group has been maintaining a high gross profit margin of at least 60%.
Over the same period, distribution expenses decreased by 10%, in proportion to lower sales recorded in 2QFY11. Administrative expenses rose 15% mainly due to the higher staff cost. Income tax expenses decreased by 85% due to the provision of withholding tax of approximately HK$6 million recorded in relation to the declaration of special interim dividend in 2QFY10.
1HFY11 Performance
For the six months ended 31 December 2010 (“1HFY11”), revenue dipped 5% to HK$282 million largely due to the decline in sales of Exclusive products, while a 3% year-on-year increase in net profit was recorded for 1HFY11.
Commenting on the Group’s performance, Mr Gao Bin, Deputy Chairman of C&O said, “The uncertainty in the government’s pricing policy continues to affect our sales in the second quarter as customers maintained low inventory levels in anticipation of a drop in pricing. However, we see this as a temporary situation, as strong market fundamentals, coupled with increase in government spending on medical care, will ultimately stimulate market demand in the long-run.”
The Group’s balance sheet remained healthy, with total cash (including fixed deposits held at banks and cash and cash equivalents) of HK$99 million as at 31 December 2010, down from HK$286 million recorded as at 30 June 2010. This was attributable to the payout of dividends (declared during its last financial year) in 1HFY11.
C&O’s basic earnings per ordinary share declined from HK cents 4.5 in 2QFY10 to HK cents 4.36 in 2QFY11, based on 663,360,000 ordinary shares. Net asset value per ordinary share was at HK$1.023 as at 31 December 2010 (As at 30 June 2010: HK$0.998).
Outlook
China’s pharmaceutical industry remains buoyant on the back of the favourable macro environment and increase in government spending on medical care. China is also expected to become the world’s third largest pharmaceutical market by 2011, from its number five ranking in 2009 (Source: State Food and Drug Administration “SFDA” Southern Medicine Economic Research Institute).
Said Mr Gao, “Leveraging on Sumitomo’s expertise in C&O corporate management, global network and experience in developing international markets, C&O is in a strong position to take on the growing China healthcare market as well as explore export markets in Southeast Asia. We have exciting plans on the drawing board and will update investors via announcements in due course.”
“Having approved by the SFDA for the production permit of Edaravone Injection, we are a step closer to launching this new prescriptive drug. Edaravone Injection is a neuroprotective agent administered to protect the brain from injury induced by stroke.”
