PETALING JAYA: Pharmaniaga Bhd confirmed today it has fallen under the Practice Note 17 (PN17) classification for financially distressed companies after posting its largest ever quarterly net loss of RM664.39 million in the fourth quarter ended Dec 31, 2022 (Q4 FY2022) from a net profit of RM85.47 million a year ago.
In a filing with Bursa Malaysia, the pharmaceutical group said it had taken a RM552.3 million impairment on unsold Covid-19 vaccines and also written down the goodwill of its Indonesian manufacturing cash-generating units of RM50.3 million.
Pharmaniaga, a subsidiary of Boustead Holdings, is one of Malaysia’s largest listed integrated pharmaceutical groups and has various lucrative contracts with the Malaysian government including the provision of Covid-19 vaccines.
It has supplied 20.4 million doses of Sinovac Covid-19 vaccine to the government and 2.5 million doses of Covid-19 vaccine to the private market, according to its website. It also has a contract to provide medicines and medical supplies to the health ministry.
In a statement today, Pharmaniaga acknowledged it had experienced a challenging FY2022 attributed mainly to the provision of the “slow-moving stocks of Covid-19 vaccines with shelf life in its inventory” which resulted in a loss after taxation of RM605 million.
Revenue tumbled 27.1% to RM3.51 billion from RM4.82 billion as there was lower demand from the government for the purchase of Covid-19 vaccines.
“Due to the accounting treatment in accordance with the Malaysia Financial Reporting Standards requirements and Pharmaniaga’s good governance practice, the group had to provide for an amount of RM552.3 million on the stock of vaccines.
“This provision inevitably triggered the criteria of Practice Note 17 for Pharmaniaga. The group is currently in talks with various parties, both local and overseas to purchase the vaccines,” it said, adding it is optimistic of favourable outcomes from the negotiations.
The group also assured all parties that it is committed to work on a regularisation plan, in accordance with Bursa Malaysia’s requirement within the stipulated timeframe.
The plan will focus on strengthening its financial standing, as well as assuring that core business activities remain viable with growth prospects, it added.
“The group also guarantees that its operational activities for both concession business with the health ministry and non-concession business with the private sector will not be disrupted and continue to be intact,” it stressed.
Pharmaniaga also said it is committed to “service all financial obligations to lenders and other financial institutions”, as well as formulating an optimal cash flow plan.
For Q4 FY2022, the group recorded a revenue of RM862.7 million, an increase of 21.2% from RM711.7 million in the previous year’s corresponding quarter.
It attributed this to healthy growth across the group’s concession, non-concession and Indonesian businesses resulting from strong demand subsequent to the resumption of business activities after the Covid-19 pandemic.
Turnaround of its Indonesian business
Pharmaniaga’s Indonesia operations continue to become the growth driver as it delivers an impressive performance by closing FY2022 with 10% growth in comparison to the previous year.
It managed to turn around the Indonesia business from a loss of RM1.4 million in 2021 to a profit of RM6.2 million in 2022.
“The group holds the view that Indonesia will be crucial for its future growth to elevate business further, thus will continue to focus on penetrating the Indonesian market,” it said.
On the local front, it noted the government had extended the date for negotiations of its concession agreement to June 2023. “The business continues to operate as usual while the group is in the final stages of negotiations,” it said.
“Moving forward, the group is optimistic it will be able to record a positive performance in 2023, despite the provision of slow-moving inventories on Covid-19 vaccines of RM552.3 million,” it added.
Pharmaniaga’s share price was unchanged today at 44 sen, giving it a market capitalisation of RM576.49 million. It has fallen 15% over the past week.