Chairman's Statement

Chairman's Statement

I would like to express my heartfelt gratitude to the shareholders and the community for your great support and encouragement to Sinopharm. 2018 was a year full of challenge for the Group, but the Board, the management and all the staff took new strategy as guidance and “high-quality development” as the goal, closely focused on our development strategies such as wholesale-retail integration, drug-device linkage, technology guidance and service transformation, achieved innovation and breakthrough, fought hard, and attributed to the shareholders with sustained and stable growth in operation again for their support and caring for the growth of the Group.

Stable performance in economy while securing progress and stable growth in the industry

In 2018, China generally achieved a stable economic performance while at the same time securing progress, maintained continuous and healthy development. It is expected that the Chinese economy would still be able to maintain high-quality growth during the “13th Five-Year” period and continue to be an important driver to the growth of the world economy.

In 2018, the Chinese government continued to release various healthcare policies, push forward the healthcare reform, increase investments in the healthcare industry and enhance healthcare quality, aiming to establish a “Healthy China” that can satisfy the basic healthcare needs of the masses. As for the pharmaceutical distribution industry, the competition pressure further increased, the industry’s sales growth dropped slightly on a year-on-year basis, but was still better than GDP growth. The whole industry faced challenges such as various healthcare policies and increase of accounts receivable turnover days, but the rigid demand continued to be seen, and the industry concentration ratio continued to increase.

Sustained and Stable Growth in the Results

During the Reporting Period, the Group recorded a revenue of RMB344,525.82 million, representing an increase of RMB36,172.24 million or 11.73% as compared with the corresponding period of last year.

During the Reporting Period, the Group recorded a net profit of RMB9,404.48 million, representing an increase of RMB739.50 million or 8.53% as compared with the corresponding period of last year. Profit attributable to owners of the parent amounted to RMB5,835.84 million, representing an increase of RMB260.26 million or 4.67% as compared with the corresponding period of last year.

During the Reporting Period, basic earnings per share of the Company amounted to RMB1.97, representing an increase of 4.79% as compared with the corresponding period of last year.

Compared to 2017, total assets of the Group increased from RMB190,693.40 million to RMB235,771.08 million, net assets increased from RMB57,947.19 million to RMB68,275.77 million, and gearing ratio increased from 69.61% to 71.04%.

For the year of 2018, total capital expenditure of the Group amounted to RMB3,865.87 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.

Formation of new strategy

In 2018, the Group responded to the changes in the market and formed a new strategy under the Board’s guidance, namely, vigorously developing pharmaceutical distribution business, retail business and medical devices trading and service business. The new strategy will become the Group’s future growth driver and lay a solid foundation for the Group’s future high-quality development.

Further improvement of corporate governance

The functions of the Board were further enhanced and enriched, the normative operation of the Board was further strengthened, the work of Board committees was further specialized, the corporate governance of the subsidiaries was further optimized, and the overall corporate governance system was further improved.

Awards-winning and highly recognized in the market

In 2018, the Group ranked 42nd in the list of Chinese listed companies by brand value, ranked 1st among pharmaceutical companies on the list, and the brand value reached RMB65.6 billion. The Group ranked 25th in the 2018 “Fortune” China’s 500 list, and was listed on the 2018 Forbes World's Best Employers List. These awards demonstrated the market’s high recognition for the Group’s brand and strength.

Prospects

Looking to the future, the healthcare industry will maintain a stable growth rate which is attributable to factors such as the aging population, urbanization, increase in chronic diseases, increase in healthcare investments as well as the continuous deepening of healthcare reform, etc. 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. We believe that the continuous deepening of healthcare reform and the continued launch of various policies will accelerate the survival of the fittest in the industry and bring about further compliance and consolidation. The prospect of the industry will become better and better.

As the largest and most powerful pharmaceutical distributor and retailer in China, Sinopharm will continue to conform to the “new normal” of the development of the pharmaceutical healthcare industry, seize the opportunities brought by supply-side structural reforms, further stimulate corporate vitality and creativity, and continue to promote the high-quality development of the Group under the guidance of the new strategy.

Finally, I would like to express my heartfelt gratitude once again to all the shareholders, directors, strategic partners, members of management of the Group 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 a smart healthcare service ecosystem.

Li Zhiming Chairman
Shanghai, the People’s Republic of China 22 March 2019
EN
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