Saturday 02 Dec 2023
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KUALA LUMPUR (Feb 28): Boustead Holdings Bhd's 52%-owned subsidiary Pharmaniaga Bhd, once its major income contributor, has dragged the conglomerate into a quarterly net loss of RM402.3 million in the fourth quarter ended Dec 31, 2022 (4QFY2022).

The whopping net loss was due mainly to the RM552.3 million impairment provision for Pharmaniaga's unsold Covid-19 vaccine sitting in the warehouse.

Consequently, Boustead incurred a loss per share of 19.85 sen, in contrast to earnings per share of 3.88 sen, or RM78.6 million, in 4QFY2021. This was despite a 25% growth in quarterly revenue to RM3.69 billion from RM2.96 billion, Boustead's Bursa Malaysia filing showed.

Group chief executive officer Izaddeen Daud, who took over the post in December last year, said the writedown was “indeed deeply concerning”.

“Nevertheless, we are confident that Pharmaniaga remains a going concern and is well poised to tap on the strong prospects of the pharmaceutical sector, domestically and regionally.

“We are supporting the management team to ensure a robust regularisation plan is in place to strengthen the company’s balance sheet and progressively work towards the upliftment of the PN17 (Practice Note 17) status,” he added.

Analysts commented that there is likelihood that Pharmaniaga will need a cash call to recapitalise and regularise its financial conditions. Being the controlling shareholder, Boustead will need to have financial resources on standby in order to uplift the generic drug maker out of PN17 status.

“This could entail a rights issue, private placement, special issue, or privatisation by key shareholders LTAT (Armed Forces Fund Board) and/or Boustead (which is also 59.4%-owned by LTAT)," said CGS-CIMB analyst Sherman Lam Hsien Jin in his research note on Pharmaniaga.

Lam noted that Pharmaniaga also disclosed that it breached certain financial covenants for its term loan and revolving credit facilities, with a total carrying value of RM94 million, which were thus classified as current liabilities.

“While it is in negotiations with creditors on the matter, we believe there is risk of the company defaulting on these debt instruments (unless major shareholders Boustead and/or LTAT intervene), aside from potentially breaching covenants of other debt instruments in the coming months, especially after the release of its audited financial statements (likely in April 2023),” the analyst commented.

This may explain why Boustead's chieftain Izaddeen, an accountant by training, voiced his deep concern.

Apart from Pharmaniaga, Boustead also owns a 64.99% stake in Boustead Heavy Industrial Corp Bhd, 57.42% in Boustead Plantation Bhd and 20.93% stake in Affin Bank Bhd. It also holds a 68.85% stake in Boustead Naval Shipyard Sdn Bhd — the company that has been tasked to build six littoral combat ships but it has yet to deliver.

Boustead’s cash balances rose to RM764.3 million as at end-2022, from RM463.5 million as at end-2021.

Short-term borrowings climbed to RM4.04 billion, from RM3.93 billion at end-2021, while long-term borrowings fell to RM2.75 billion from RM3.06 billion.

For the full financial year ended Dec 31, 2022 (FY2022), Boustead's net profit shed 64% to RM62 million, from RM170.1 million in FY2021. Earnings per share shrank to 3.06 sen from 8.39 sen.

Annual revenue, however, expanded 34% to RM15.11 billion from RM11.31 billion.

Going forward, Boustead said Pharmaniaga will continue its effort to negotiate with various parties including overseas markets for the sale of the remaining Covid-19 vaccine inventories.

“Despite the challenges to our pharmaceutical division, we are encouraged by the fact that most of our other divisions recorded positive results for the financial year under review.

“This was driven by our dedicated focus [on] our reinventing Boustead strategy, and we will continue to build on this to leverage opportunities to drive the sustainable growth of our core businesses, alongside unlocking value creation for the future,” said Izaddeen in a statement.

Boustead's share price already felt the heat, it fell as much as 12% on Tuesday (Feb 28) following Pharmaniaga’s financial results announcement. It closed at 62.5 sen, down 5.5 sen or 8.1% from Monday. At this price, the group's market capitalisation stands at RM1.27 billion.  

Edited ByS Kanagaraju & Kathy Fong
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