KUALA LUMPUR (March 29): Government-linked pharmaceuticals manufacturer Pharmaniaga Holdings Bhd intends to further expand its business in Indonesia, to transform its operations there into an important manufacturing and export hub.

Pharmaniaga group managing director Datuk Farshila Emran said the company has allocated RM70 million for capital expenditure (capex) in 2016, of which RM40 million will be used to upgrade its manufacturing business, and RM10 million will be spent on improving its plant in Indonesia.

She said Pharmaniaga's presence in Indonesia is quite big, with its ownership of a distribution and logistics company, PT Millenium Pharmacon Tbk, and its manufacturing plant, Errita.

"We have increased our equity in PT Errita Pharma to 85% from 75%, as we recently announced. We have decided to really focus on Indonesia, because the market is bigger. We have temporarily decided to not pursue our Middle East projects," she said during a press briefing following the company's annual and extraordinary general meeting today.

Last May, Pharmaniaga announced that its 50:50 joint venture agreement with Saudi Arabia-based Modern Healthcare Solutions to build and operate a pharmaceutical manufacturing plant in Riyadh had lapsed.

It had told Bursa Malaysia then that "both parties have not determined the new extension date" on the deal, which was signed in May 2013.

"At the moment, we are doing a lot of upgrading in terms of expanding certain facilities at the Errita plant. Other future plans we have in mind is the business synergies with Malaysia. For your information, if we want to export Malaysian products into Indonesia, it's a must for us to own a plant in Indonesia.

"We can now export all our Malaysian-made products to Indonesia. Indonesia is going to be the target market for us to grow our export business at the moment. And for the rest of ASEAN, maybe Myanmar and Vietnam," she said, adding that there is an untapped market of 20,000 hospitals, pharmacies and drugstores in Indonesia.

The segment is expected to post profit this year, with top-line contribution from its Indonesian operations to increase by one to two percentage points, compared to the contribution of 23% of revenue for the financial year ended Dec 31 (FY15).

For FY15, Pharmaniaga's net profit slipped 10.4% to RM84 million from RM93.8 million in the previous year, though revenue gained 3.3% to RM2.19 billion from RM2.12 billion.