Announced 2017 Annual Results 14.17% Steady Net Profit Growth Leading Position of Industry Consolidated
26 Mar 2018
(26 March 2018– Hong Kong) Sinopharm Group Co. Ltd. (“Sinopharm” or the “Company”, Stock Code: 1099.HK), the biggest wholesaler and retailer of pharmaceutical and healthcare products, as well as a leading supply chain service vendor in China, is pleased to announce the audited consolidated results of the Company and its subsidiaries (the “Group”) prepared under the Hong Kong Financial Reporting Standard for the year ended 31 December 2017 (the “Reporting Period”).
During the Reporting Period, the Group recorded a revenue of RMB277,717.02 million, representing an increase of RMB19,329.33 million or 7.48% as compared with the corresponding period of last year. The Group recorded a net profit of RMB7,868.18 million, representing an increase of RMB976.58 million or 14.17% as compared with the corresponding period of last year. Profit attributable to shareholders of the Company amounted to RMB5,283.09 million, representing an increase of RMB635.75 million or 13.68% as compared with the corresponding period of last year. Basic earnings per share of the Company amounted to RMB1.91, representing an increase of 13.69% as compared with the corresponding period of last year.
Faced with unfavorable industry situation through 2017, the Group took “new thought, new structure, new momentum, new target” as strategic guidance, further integrated platform resources and gave play to the scale effect. The revenue continued to grow stably, profit growth continued to significantly exceed sales growth, which further consolidated the leading position and edges of the Group.
Solid Leading Position in the Distribution Business
In the pharmaceutical distribution sector, the Group has built an integrated pharmaceutical supply chain, established an advanced supply chain management mode, achieved steady adjustments in product structures, continuously optimized customer structure, continuously expanded and integrated national distribution network. As at 31 December 2017, the distribution network covered 31 provinces, municipalities and autonomous regions across China. The Group’s direct customers included 15,032 hospitals (only referring to ranked hospitals, including 2,301 largest class-III hospitals with the highest rankings), 128,326 small end-customers (including primary health services institutions and others) and 87,246 retail pharmacies.
The Group continued its endeavors to promote integrated operation. Meanwhile, the Group continued to strengthen the construction of national integrated logistics platform, the plan for distribution network’s vertical layout was successfully accomplished: the national pharmaceutical distribution logistics network includes 4 logistic hubs, 42 logistic centers at provincial level, 236 logistics outlets at municipal level, 26 retail logistics outlets, with a total number of logistics outlets reaching 308.
Leading Position in the Retail Business
In respect of retail pharmacy, aiming to establish an integrated wholesale-retail pharmaceutical distribution model, the Group vigorously promoted the development of the retail business and strengthened its leading advantages. The Group has set up retail chain pharmacies that are either directly operated by the Group or through franchises in major cities throughout China. As at 31 December 2017, Sinopharm Holding Guoda Drug Store Co., Ltd., a subsidiary of the Group, has set up pharmacies covering 19 provinces, municipalities and autonomous regions across the country. The number of retail pharmacies was 3,834, among which 2,801 were directly operated by the Group and 1,033 were operated by franchisees. The sales amount grew rapidly on a year-on-year basis, and the scale continued to lead the industry.
The revenue of retail pharmacy also grew rapidly, the Group’s retail network continued to expand, covering 29 provinces and 167 prefectures. Direct sales to retail pharmacy grew fast and the coverage rate increased significantly.
Active Promotion of Innovative Businesses
The Group vigorously promoted medical device distribution business with sales growth exceeding 30%, leading to the increase in the Group’s revenue growth and gross profit margin. Based on alignment of pharmaceutical and medical device, the Group actively promoted hospital medical services such as cleaning, disinfecting and after-sale maintenance and its scale has grown rapidly. Financial services improved steadily, Sinopharm Holding (China) Financial Leasing Co., Ltd. successfully introduced strategic investors, its assets under management exceeded RMB10 billion and net profit grew significantly. Adapting to the “Internet +” trend, the Group grabbed the developing opportunities of pharmaceutical e-commerce and promoted the integration of traditional businesses and the Internet. Sinopharm Health Online Co., Ltd., completed series A financing, and its sales achieved substantial growth. Capitalizing on the policy opportunity to actively promote national integrated cold-chain logistics service system, implementation relating to information of integrated cold-chain was fully launched and third-party cold-chain logistics service capability was substantially improved.
Further Improvement in Management and Control
The Group strengthened its management and control of finance, human resources, diversified financing, operations management, informatization and procurement, etc., the gross profit margin was further increased, profitability was further improved, the operating efficiency was further optimized, the operating risks were further decreased, and the enterprise competitiveness was further enhanced.
In 2017, the Chinese government continued to release various healthcare policies, continued to push forward the healthcare reform, continued to increase 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’s sales growth dropped slightly on a year-on-year basis, but was still better than GDP growth, the rigid demand continued to be seen, the industry concentration ratio continued to increase, the whole industry still faced challenges from policies, payment collection and working capital, etc.
Looking forward, Mr. Li Zhiming, Chairman and Executive Director of Sinopharm Group Co. Ltd. said, “The healthcare industry will maintain a stable growth 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 healthcare reform being deepened continuously and various policies being released 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, Sinopharm will continue to conform to the ‘New Normal’ of the development of healthcare industry, seize the opportunities brought by supply-side structural reforms, further stimulate corporate vitality and creativity, and take ‘new thought, new structure, new momentum, new target’ as strategic guidance to achieve a new leap-forward development with more adamant faith, broader views and more actionable endeavors.”