Vietnam pharma majors report lower after-tax profits in H1

Two leading Vietnamese pharmaceutical firms have reported lower after-tax profits in the first half of 2024, citing rising costs among other factors.

Hau Giang Pharmaceutical Co. Ltd., posted revenues and after-tax profits of VND2,364 billion ($93.32 million) and VND415 billion ($16.38 million) in H1/2024, down 1% and 34% year-on-year, respectively.

Corresponding figures for Q2 were VND1,106 billion ($43.66 million) and VND192 billion ($.58 million), down 4% and 27%, according to the company’s financial statements.

Listed on the Ho Chi Minh Stock Exchange (HoSE) as DHG, the company completed 45% and 43% of its year revenue and after-tax profit targets of VND5,200 billion and VND965 billion, respectively.

The company’s directors attributed the lower profits to reduced purchasing power and people tightening spending due to the difficult economic situation.

The sharp drop in deposit interest rates saw the company’s financial revenue drop sharply, by as much as 40% year-on-year, or VND23 billion ($908,000).

Meanwhile, the operation of its new Betalactam factory from May 2024 increased costs. The cost of the company's products rose because it actively regulated production output to bring inventory to a reasonable level. At the same time, the revenue proportion of other goods with low profit margins grew over the same period, leading to a sharp increase in the prices of products sold in Q2 and H1.

Higher revenues, lower profts

Another leading pharma firm, Imexpharm, listed on the HoSE as IMP, recorded Q2/2024 revenues of VND517 billion ($20.4 million), a year-on-year increase of 17.5%. However, a strong increase in the cost of goods pushed prices up by 4%, while sales and administrative expenses expanded 18% and 21%, respectively.

As a result, the company’s after-tax profits fell 17.3% year-on-year to VND65.9 billion ($2.6 million), marking the third consecutive quarter of decline.

For H1/2024, the company’s revenues rose nearly 10% year-on-year to VND1,008 billion ($39.48 million), but its after-tax profits went down 19% to VND128 billion ($5.05 million).

The company said that its H1 revenue increased thanks to the ETC (ethical drugs) channel, which expanded 33%, outperforming the overall market increase. In contrast, the over-the-counter (OTC) channel decreased by 4% although it promoted cooperation with pharmacy chains.

The main factor in declining profit was a 27% increase in the cost of goods.

Imexpharm has targeted revenues of VND2,364 billion ($93.32 million) and pre-tax profits of VND423 billion ($16.7 million) this year, up 19% and 12% year-on-year, respectively. Thus, at the half-way mark, it has achieved 43% and 38% of the annual revenue and net profit targets, respectively.

Some of its H1 highlights included the opening of 10 new stock-keeping units (SKUs) and implementation of 93 R&D projects. It also signed a strategic cooperation agreement with Genuone Sciences Inc. on the transfer of advanced drug production technology from South Korea.

This is expected to help the firm enhance its research and development capacity for complex drugs beyond antibiotics, including those for diabetes and cardiovascular disease treatment.

On July 5, the board of directors issued a resolution on collecting shareholder opinions for a 100% bonus shares plan. The company also intends to issue more than 77 million shares from equity to increase its charter capital to VND1.54 trillion ($60.6 million).

It said that the capital hike plan will support its growth and expansion plan in the next 3-5 years. After the issuance, the company is expected to become Vietnam's largest listed pharmaceutical company in terms of charter capital, consolidating its leading position in the market.

Imexpharm is the first pharmaceutical company under Vietnam Pharmaceutical Corporation (Vinapharm) to equitize and list shares on the HCMC bourse. IMP share prices have increased steadily but its liquidity has been poor with just several tens of thousands of shares changing hands per session.

Its shareholder structure is quite concentrated with South Korea’s SK Vina III Pte Ltd holding a 47.67% stake, Vinapharm 22.03%, Sunrise Kim Investment Joint Stock Company 9.75%, and KBA Investment Joint Stock Company 7.37%. Sunrise Kim and KBA Investment are linked to SK Vina III.

According to Mirae Asset Securities, the Vietnamese pharmaceutical market recorded revenues of $7.24 billion last year, including $1.8 billion from the OTC channel and $5.45 from the ETC channel.