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Financials

Second Quarter Financial Statement And Dividend Announcement 2018

Financials Archive

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UNAUDITED HALF YEAR FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2018

Profit and Loss

Income Statement 1Q2017

Consolidation statement of Comprehensive Income for the period

Comprehensive Income

Balance Sheet

Balance Sheet 1Q2017

Review of Performance

Overview

In 2Q2018 the Group posted net profit attributable to equity holders of RMB3.1 million and on revenue of RMB37.2 million.

Revenue

Group revenue increased 111% from RMB17.6 million in 2Q2017 to RMB37.2 million in 2Q2018 caused to higher sales of Antibiotics, Cardiovasular drugs and Cerebovascular drugs and other specialized drugs.

Revenue

Antibiotics sales increased 16% to RMB4.8 million in 2Q2018 due to higher demand for Sultamicillin Tosilate Tablets and Aztreonam for Injection which partially offset with the decrease of sales of Cefoxitin Sodium for Injection. Antibiotics accounted for 13% of Group revenue in 2Q2018 as the second largest revenue contributor to the Group.

Cardiovascular drugs and cerebrovascular drugs sales increased 83% to RMB1.6 million due to higher sales of Vinpocetine for Injection. Cardiovascular drugs and cerebrovascular drugs represented 4% of Group revenue in 2Q2018.

Other specialized drug increased 145% to RMB30.7 million in 2Q2018 mainly caused by higher sales of Potassium Sodium Dehydroandrographolide Succinate for Injection and Cobamamide for Injection together with a new product of Acetylcysteine Solution for Inhanlation which commenced sales in 2Q2018. Other specialized drugs were still the largest revenue contributor, accounting for 83% of Group revenue in 2Q2018.

Profitability

Gross profit increased 254% to RMB29.5 million in 2Q2018 mainly due to higher sales revenues.

Other operating income up to RMB1.0 million in 2Q2018 mainly caused by increase of rental income and a government subsidy received.

Selling and distribution expenses increased 23.5 times to RMB25.3 million in 2Q2018 mainly due to the selling and marketing expenses to those distributors that taken active roles to assist the Group to facilitate the sales to hospitals.

Administrative expenses increased 34% to RMB5.5 million in 2Q2018 caused by increase of staff costs and products assessment costs.

Other expenses raised 243% to RMB0.7 million in 2Q2018 mainly due to increase of research and development costs in this quarter.

Finance income declined from RMB0.02 million to RMB9 thousand due to less interest income received from available-for-sale financial assets.

Finance expenses changed from RMB1.3 million expense in 2Q2017 to RMB2.6 million income in 2Q2018 mainly due to the exchange gain from foreign currencies during the quarter.

As a result, the Group achieved net profit attributable to equity holders of RMB3.1 million in 2Q2018 compared with RMB1.3 million in 2Q2017.

Financial Position
(30 June 2018 vs. 31 December 2017)

Non-current assets increased from RMB79.3 million to RMB92.7 million. Property, plant and equipment decreased from RMB42.5 million to RMB39.8 million mainly due to depreciation charges. Intangibles assets increased from RMB5.8 million to RMB7.7 million caused by increase of deferred development cost of RMB1.9 million. Refundable deposits increased to RMB27.8 million due to new prepayments of RMB14.5 million to third party R&D vendors.

Current assets increased from RMB112.2 million to RMB161.5 million. Inventories level raised from RMB27.4 million to RMB66.2 million mainly due to increase the inventory of Acetylcysteine Solution for Inhanlation which are new products commenced sales in 2Q2018. Trade & bills receivables increased from RMB9.0 million to RMB9.6 million. Other receivables, prepayments and deposits increase from RMB5.5 million to RMB20.7 million mainly due to increase prepayment to factory equipments' vendors and raw material suppliers of RMB3.0 million and RMB10.2 million respectively. Cash and bank balances decreased from RMB69.0 million to RMB58.7 million mainly caused by purchase in available-for-sale financial assets of RMB 5.0 million and increased the refundable deposits of RMB14.5 million in 1H2018.

Current liabilities increased from RMB56.8 million to RMB109.5 million. Trade and other payables increased from RMB12.5 million to RMB45.4 million resulted from increase of raw material purchased for Acetylcysteine Solution for Inhanlation. Other payables increased from RMB44.3 million to RMB64.1 million was mainly caused by the amount due to distributors for selling and marketing costs under the "Two-invoice system".

Cash Flow Statement

The Group's net cash inflow from operating activities in 2Q2018 was RMB5.6 million. This was mainly due to the operating profit from Group's usual operating business for 2Q2018.

Net cash used in investing activities in 2Q2018 amounted to RMB6.6 million. This was mainly caused by the new prepayment to third party R&D vendors for new drugs development during 2Q2018.

No net cash movement in financing activities in 2Q2018.

Finally, the net cash outflow in 2Q2018 was RMB1.1 million.

Commentary

The Two-invoice system implemented by the China government targeting the pharmaceutical industry has speeded up consolidation of the medicine supply-sectors. The local authorities in different regions in China are embarking on new rounds of tender, control over medical insurance reimbursement and requiring hospitals to lower the medicine price. All these policies will increase the competition within the pharmaceutical industry in China.

In view of challenging conditions of the pharmaceutical industry, the Group will maintain high cautions attitude to deal with them and believe those challenges will be coped with by new medicines development and a better sales networking.


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