Sinopharm Group Announces 2019 Interim Results Continuous Improvement in Market Share Maintaining Steady Business Growth
26 Aug 2019
(26 August 2019, 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 unaudited interim results of the Company and its subsidiaries (the “Group”) for the six months ended 30 June 2019 (the “Reporting Period”).
During the Reporting Period, the Group recorded revenue of RMB201,665.14 million, representing an increase of 23.36% as compared with the corresponding period of last year. The Group recorded a net profit of RMB4,968.22 million, representing an increase of 13.08% as compared with the corresponding period of last year; profit attributable to owners of the parent amounted to RMB2,975.18 million, representing an increase of 6.33% as compared with the corresponding period of last year. Basic earnings per share of the Company amounted to RMB1.00, representing an increase of 6.38% as compared with the corresponding period of last year.
With in-depth implementation of policies such as “two-invoice system”, “zero mark-up”, GPO policy in “4+7” pilot cities, the growth rate of the pharmaceutical distribution industry recorded a lower year-on-year growth but still continued to outperform the macroeconomic growth. The industry regulation has strengthened, the transformation and upgrade of the pharmaceutical distribution and retail industries have continued,2 the concentration ratio of the industry has further increased through merger and acquisition as well as integration undergone by enterprises, highlighting advantages in scale and branding. The environment of the pharmaceutical reform hastened the survival of the fittest in the distribution industry, the rise of leading enterprises such as Sinopharm would accelerate based on their own advantages in this round of transformation.
Solid leading position in the distribution business and significant increase in market share
In the pharmaceutical distribution segment, the Group seized the historic opportunity of medical insurance reform, continued to optimize business and customer structure, made adjustment to product structures, constantly improved the leading national distribution network. Leveraging on an integrated pharmaceutical supply chain and an advanced supply chain management model, the Group continued its endeavors to promote integrated operation, plan for logistics network resources, speed up establishment and optimization of the logistics system and improved efficiency of the internal supply chain. During the Reporting Period, the pharmaceutical distribution business of the Group achieved a revenue of RMB164,700.64 million, representing an increase of 22.22% on a year-on-year basis. The Group continued to optimize its business layout, select suitable targets for integration, carry out acquisitions in areas with relatively weak business network, and strengthen control over core areas. In the first half of 2019, the Group successfully acquired 100% equity interest in Anhui Pharmaceutical (Group) Co., Ltd. (安 徽 省 醫 藥 （ 集 團 ） 股 份 有 限 公 司), which effectively promoted the penetration of the business network to lower-tier market in Anhui province, and further improved the Group’s business share and service capability in this region.
Ongoing rapid growth of retail business and fast development in professional pharmacies
Under the guidance of the “synergetic whole-retail” pharmaceutical business mode, the Group vigorously developed the retail business. On the one hand, traditional pharmacies of the Group constantly improved their own abilities in operation and management, accelerated network coverage, advanced creation of retail brands, optimized commodity structure, and increased the service standard for end consumers. On the other hand, the Group grasped the development trends of separation of medical services and pharmaceutical sales, prescription outflows, diversification of pharmaceutical terminal sales, and also actively explored the development of professional pharmacies. During the Reporting Period, the Group’s retail business continued to achieve relatively rapid growth. Sales revenue reached RMB8,841.93 million, representing an increase of 24.51% over the corresponding period of last year. As at the end of the Reporting Period, Sinopharm Holding Guoda Drugstore Co., Ltd. (“Guoda Drugstore”), a subsidiary of the Company, has set up pharmacies covering 19 provinces, municipalities and autonomous regions across the country. The number of retail pharmacies was 4,593. The scale continued to lead the industry. The Group has 1,009 professional pharmacies as at 30 June 2019 with network covering 30 provinces, municipalities and autonomous regions across the country.
Rapid growth of medical device business
The Group proactively seized golden opportunities arising in rapid development of the3 medical device industry, and vigorously developed the medical device distribution business. In the first half of 2019, the medical device business of the Group achieved rapid growth, with sales revenue reached RMB29,024.79 million, representing an increase of 35.96% over the corresponding period of last year, hence bringing significant contribution to both revenue and profit of the Group. In the meantime, the Group reinforced the expansion of new products and the development of new businesses, including the device IVD business, the SPD project and other medical innovation services, speeded up horizontal expansion of business segments, enlarged its regional coverage, further underpinning the Group’s leading position in the medical device industry in the PRC.
Improving support capability of the headquarter, strict risk control and strengthened management and control
The Group established the global procurement and supply chain service centre as the national centralized business platform for integration of national resources, centralization and standardization of traditional service capabilities and standard as to build intelligent supply chain. Meanwhile, relied on its industry leadership and strong corporate brand, the Group enhanced the interaction between the domestic industry and the global pharmaceutical industry, utilized the state-of-the-art technology, explored innovative services and products, continued to promote a “full track & trace” vaccine tracking system, thereby further increasing business advantages of the Group. In addition, the Group comprehensively conducted risk investigation and identification, improved the Group’s creditability and accounts receivable management mechanism, controlled operational and compliance risks, reinforced management and business integration of acquirees and ensured high quality development through a series of measures.
Looking forward, the Group thinks that China’s pharmaceutical industry has dived into the key stage of reform, facing new challenges and development opportunities. The Group will embrace the industrial trend of expedited transformation and structural adjustment, further optimize the Group’s principal business, explore its core competitive advantages, diversify its business layout and explore new business mode, in order to consolidate the Group’s status in the industry and ensure high quality development of the business through onging stable endogenous growth and strategic external expansion. As the largest and most powerful pharmaceutical distributor and retailer in China, Sinopharm will continue to consolidate leading position in distribution business and continuously increase market share, promote rapid growth of retail business and implement wholesale-retail pharmaceutical business synergetic development strategy, vigorously develop medical devices business and promote integration of devices business, and optimize operation management capabilities and enhance management and control services so that to further strengthen the accounts receivable management and inventory management. Under the guidance of the new strategy, we will strive to ensure sustainable high-quality development of the enterprise and build the Group into a global distinguished medical and healthcare service provider.”