Sinopharm Group Announces 2020 Annual Results Continues to Consolidate Industry Position The Profitability is Strong
22 Mar 2021
(22 March 2021, 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 consolidated results of the Company and its subsidiaries (the “Group”) prepared under the Hong Kong Financial Reporting Standards (“HKFRSs”) for the year ended 31 December 2020 (the “Reporting Period”).
During the Reporting Period, the Group recorded a revenue of RMB456,414.61 million, representing an increase of RMB31,141.89 million or 7.32% as compared with the corresponding period of last year. Net profit for the year amounted to RMB12,097.29 million, representing a year-on-year increase of 13.91% and net profit attributable to owners of the parent reached RMB7,187.28 million, representing a year-on-year increase of 14.95%. Basic earnings per share of the Group amounted to RMB2.31, representing an increase of 9.48% as compared with the corresponding period of last year. Relevant resolution was passed at a meeting of the Board held on 19 March 2021 to propose to distribute a final dividend of RMB0.69 per share (tax inclusive) for the year ended 31 December 2020, totalling approximately RMB2,153,253,000.
At the beginning of 2020, influenced by various strict prevention and control measures during the outbreak, the daily treatment and surgery services of hospitals were reduced, and the sales of non-epidemic prevention-related drugs and devices were significantly impacted, which had a huge impact on the entire pharmaceutical distribution industry. With the implementation of a series of policies, such as “Volume-based Procurement of Drugs and High-value Consumables”, “Negotiation for Medical Insurance Catalog” and “Diagnosis Related Groups (DRGs)”, the competitive advantages of the top companies have further emerged. This has promoted the continuous increase of market concentration, and at the same time, strongly promoted the channel reconstruction and service transformation of the distribution industry. The iterative upgrading of business models and the growing demand for innovative services have also brought new opportunities and challenges for the industry’s sustainable development. At the same time, with the rapid development of innovative technologies and service capabilities, including “Internet+” and “Artificial Intelligence”, the entire healthcare industry has been further transformed and upgraded. As the industry gradually develops towards a new diversified development trend, the Group will continue to adhere to the strategic guidance, fully stimulate the vitality of the enterprise, and maintain its leading position in the industry.
Leading position in distribution solidified, and advantages in network emerged at a faster pace
In 2020, reform measures such as “volume-based procurement of drugs” and “Negotiation for Medical Insurance Catalog” implemented by the National Healthcare Security Administration and provincial healthcare security bureaus continued to expand the implementation scope. The Group proactively followed the industry trend, continued to explore the scale advantages of the distribution network covering all levels of medical institutions, enhanced its intensive operation capabilities, and actively undertook the market share of volume-based procurement related products. During the Reporting Period, the pharmaceutical distribution business achieved revenue of RMB348,294.38 million, representing a year-on-year increase of 3.25%. With the continuous expansion of lower-tier market business, the terminal networks at provincial, municipal, and autonomous regional levels covered over 500,000 terminals. As of the end of 2020, the Group’s pharmaceutical distribution business has continuously strengthened its leading advantages, and its regional competitiveness has emerged at a faster pace. In 2020, the Group has continued to develop marketing projects for innovative drugs including “Vemlidy” in the broad lower-tier market, and successfully achieved horizontal derivation of the business model and service capabilities in addition to traditional pharmaceutical distribution services, injecting new propelling force into the long-term and stable development of the pharmaceutical distribution business. The Group also focuses on the adjustment and optimization of business structure and product proportions, furthered enrich and optimized the product structure while continuously capitalizing on the competitive advantages of a leading enterprise.
Medical devices business grew steadily, and service advantages gradually emerged
In 2020, the strict prevention and control measures adopted by hospitals restricted daily medical operations and hospitalization services, which had a phased impact on the sales and product structure of the medical devices business. During the Reporting Period, the Group actively overcame the challenges posed by the outbreak of the pandemic and continued to promote the construction of the medical devices distribution network and the innovation of the business model. During the Reporting Period, the medical device segment of the Group recorded a revenue of RMB89,402.25 million, representing a year-on-year increase of 29.02%, the growth potential of the segment emerging at a faster pace. In 2020, the Group continued to improve its medical devices distribution network, and further enhanced its coverage of the broad market through endogenous growth and external expansion and coverage over prefecture-level cities further increased to 76%, and the scale advantage of the network significantly improved. Besides, the Group also focused on promoting the innovation and upgrading of business models and supply chain service capabilities. Making full use of the competitive advantages of “drug-device synergic development”, promoted business synergy and technological empowerment, continuously driving the rapid development of value-added services such as centralized delivery, in-hospital logistics management, and smart logistics. As of the end of 2020, the Company has carried out a total of 1,735 centralized delivery projects and SPD (supply, processing and distribution) projects, an increase of 790 from the previous year. During the Reporting Period, the Group acquired preliminary production and manufacturing capabilities for more than one hundred standard varieties in the medical consumables category, with products sales quickly covering 31 major cities across the country, laying a solid foundation for the upstream extension of the Group’s medical device segment.
Retail network continues to improve, and coordinated development was achieved through resource integration
Supported by the accelerated development of innovative technologies such as the mobile Internet and big data, the Group’s retail segment has comprehensively promoted the integrated development of online and offline businesses. Through continuous improvement of the convenient community service model, the Group expanded the service radius, enhanced service adhesion for consumer members, and further strengthened the competitiveness of the Group’s retail business. As of the end of 2020, the total number of retail stores has reached 8,977, representing an increase of 2,773 from the end of the previous year. Specifically, Sinopharm Holding Guoda Drugstore Co., Ltd., a subsidiary of the Group, had 7,660 retail pharmacies, representing an increase of 2,639 from the end of the previous year; and 1,317 professinal pharmacies, representing an increase of 134 from the end of the previous year. During the Reporting Period, the Group also successfully completed the merger and integration of retail businesses such as Chengda Fangyuan, thereby continuously optimizing its network coverage and strengthening its regional competitive advantage. During the Reporting Period, the Group’s retail pharmacy business recorded a total revenue of RMB24,164.34 million, representing a year-on-year increase of 22.02%.
Continued to improve headquarters’ support capabilities and further promote integrated construction
During the Reporting Period, the Group focused on planning for the transformation to “nation-wide integration”, vigorously improved the business governance and coordination at the parent company level, integrated superior resources of the distribution and retail segments, and promoted the balanced development of core businesses, thereby continuously optimizing the business structure in a coordinated manner. As of the end of 2020, the Group has completed the construction of a cross-field multi-dimensional pharmaceutical industry service platform and formed a comprehensive supply chain service system including specialty drug service platforms, marketing services, retail e-commerce, and clinical research and development materials auxiliary services. The Group also actively strengthened various expenses supervision measures, promoted the sharing of the financial system, refined capital budget management, and control to continuously promote cost optimization. As of the end of 2010, the overall expense ratio of the Group was 5.29%, representing a year-on-year decrease of 0.03 percentage point; the annual financial expense ratio was 0.65%, decreased by 0.09 percentage point from the end of the previous year.
Actively fulfilled the corporate mission and effectively enhanced the industry influence
In 2020, the various anti-epidemic results achieved by the Group were extremely difficult and extraordinary. Pharmaceutical distribution companies at all levels within the Sinopharm system responded quickly and successfully completed the procurement, storage, and allocation of protective materials, treatment equipment, and anti-epidemic drugs, demonstrating the capability of the “national team” and “main force” of central enterprises, exemplifying Sinopharm’s corporate philosophy of “All for Health, Health for All”, and fully reflecting the Group’s efficient network operation and collaboration capabilities. These performances have been highly recognized by relevant state ministries and commissions and Sinopharm Group, and have also received commendations from the Medical Materials Safeguard Team of the State Council’s Novel Coronavirus Pneumonia Epidemic Joint Prevention and Control Mechanism, and the State-owned Assets Supervision and Administration Commission. This not only enhanced the Group’s corporate image and industry influence but also established the Group’s irreplaceable and important position in China’s medical and health emergency protection system in the future.
Looking ahead to 2021, after the pandemic prevention and control enters the normalization stage, the momentum of China’s domestic economic cycle will further emerge, and the annual economic growth rate is expected to rebound at a faster pace from last year’s low. As an important part of the national economy, the pharmaceutical industry will benefit from the economic recovery, policy support, and the improvement of residents’ quality of life, and maintain a good development trend.
The Group will seize the opportunity of the transformation and development of the pharmaceutical industry. On the basis of consolidating the advantages of the commercial distribution network, it will fully explore the synergy of distribution and retail as well as drugs and medical devices, actively explore development opportunities in innovative business areas, promote the vertical extension of business segments, build a supply chain service system befitting the new competitive landscape under the background of industry transformation, and make a good start for the achievement of the Group’s “14th Five-Year” development plan.