Chairman's Statement

Chairman's Statement

DEAR SHAREHOLDERS,

I would like to express my heartfelt gratitude to the shareholders and the community for your great support and encouragement to Sinopharm over time. Sinopharm made significant progress in various aspects such as quality improvement and efficiency enhancement, being better and being stronger, and diversified development in 2016. The Board, the management and all the staff attribute to the shareholders with sustained and stable growth in results again for their support and caring for the growth of the Company.

Sustained and Stable Growth in the Results

During the Reporting Period, the Group recorded a revenue of RMB258,387.69 million, representing an increase of RMB29,714.76 million or 12.99% as compared with the corresponding period of last year.

During the Reporting Period, the Group recorded a net profit of RMB6,891.60 million, representing an increase of RMB1,150.69 million or 20.04% as compared with the corresponding period of last year. Profit attributable to shareholders of the Company amounted to RMB4,647.34 million, representing an increase of RMB875.12 million or 23.20% as compared with the corresponding period of last year.

During the Reporting Period, basic earnings per share of the Company amounted to RMB1.68, representing an increase of 23.53% as compared with the corresponding period of last year.

Compared to 2015, total assets of the Group increased from RMB139,429.70 million to RMB157,711.59 million, net assets increased from RMB40,878.68 million to RMB44,532.44 million, and gearing ratio increased from 70.68% to 71.76%.

For the year of 2016, total capital expenditure of the Group amounted to RMB1,464.49 million, which was primarily used for the expansion and development of distribution channels, upgrading the logistic delivery system and improving the level of informatisation, so as to increase the Group’s market share and improve delivery efficiency.

Obtained Various Awards and Received High Recognition from the Market

In 2016, the Company remained as the largest healthcare listed company in the Hong Kong market in terms of market value and obtained various awards in the capital market. The Company was chosen as “The Best Investment Return Company” by “Fortune” magazine (Chinese version) and ranked 23rd in the “Fortune” China’s 500 list. The Company was also awarded “2016 Excellent Board of China’s Strategic Listed Company” from “21st Century Business Herald” and “The Best Listed Company Award” from “China Financial Market”, those awards demonstrated the market’s high recognition for the Company.

Economy was Stable in General and Industry Continued to Grow Stably

In 2016, the Chinese economy remained stable during a slow-down and was poised for better prospect while being stable, reform and open further advanced, economic structure adjustment accelerated, new growth momentum continued to increase, and people’s livelihood continued to improve. It is expected that Chinese economy would still be able to sustain medium to high-speed growth during “13th Five-Year” period and continue to be an important driver to the growth of the world economy.

The Chinese government specifically released various healthcare policies, continued to push forward the healthcare reform, continued to step up investments in the healthcare industry and continued to enhance healthcare quality, aiming to establish a “Healthy China” that can satisfy the basic healthcare needs of the masses. The pharmaceutical distribution industry saw a sustained rigid demand and recorded a stable growth in sales and profit, the industry concentration ratio continued to increase. However, the whole industry was still facing challenges from policies, payment collection and working capital, etc.

Prospects

The healthcare industry will maintain a stable growth rate which is attributable to growth drivers such as the country’s aging population, urbanisation, increase in chronic diseases, increase in healthcare investments as well as the continuous deepening of healthcare reform. The business opportunities brought by various innovative business models will also drive the future growth in the industry. The healthcare industry is still one of the industries with the highest growth potential. As the healthcare reform continues to deepen, various polies will continue to be released. Although short-term pains are likely to persist, we believe those polies will eventually contribute to the survival of the fittest in the industry and result in further compliance and consolidation. The industry’s prospect will become better and better.

The Company adopted the restricted share incentive scheme and successfully completed the initial grant of the restricted share in 2016, which will help further improve the mechanism of benefit of and risk sharing among employees and fully arouse the proactiveness of the senior management and key employees. Looking forward, the Company will continue to capitalise on the opportunity of mixed ownership reform to further push forward reforms in various aspects such as nomination, remuneration, incentive and corporate governance and stimulate corporate vitality, so as to lay solid foundation for sustainable development.

As the largest and most powerful pharmaceutical distributor in China, Sinopharm will continue to move forward by keeping up with the “New Normal” development of the pharmaceutical and healthcare industry, capitalize on the opportunities brought by structural reforms of the supply side to further stimulate corporate vitality and creativity, and continue to provide full-channel supply chain services for clients, so as to become a true first-class global pharmaceutical service provider through actively building global healthcare service platform with a new strategy of unification of distribution and retail.

Finally, I would like to express heartfelt gratitude to all the shareholders, directors, strategic partners, members of management of the Company and all my fellow colleagues. Let us continue to make great efforts hand in hand to advance the transformation of Sinopharm from distinction to excellence as well as from a traditional pharmaceutical distribution company to an innovative healthcare service provider.

Li Zhiming Chairman
Shanghai, the People’s Republic of China 24 March 2017
EN
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