KUALA LUMPUR (Feb 29): Pharmaniaga Bhd, which posted its second loss-making year in a row on Thursday, said it has appointed Zulkifli Jafar as its executive director to turn the company around, after submitting its plan to exit its Practice Note 17 status to Bursa Malaysia.

The group said Zulkifli will take over the role and functions of its executive committee in running the group's operations, while the committee will be disbanded.

"A trained corporate lawyer, Zulkifli joined Pharmaniaga in August 2020 as a board member before [being] appointed as executive director in March 2022, and subsequently as deputy chief executive officer in February 2023. Zulkifli has vast experience in corporate restructuring and turning around companies during his stint as a lawyer over 25 years," Pharmaniaga said in a statement.

The group also named three new independent non-executive directors to its board.

They are: Datuk Dr Faridah Aryani Md Yusof, a pharmacist and formerly the senior director of pharmaceutical services programme with the Ministry of Health; Datuk Mohd Zahir Zahur Hussain, a chartered accountant and chairman of Pusat Perubatan Universiti Malaya; and Dr Imam Fathorrahman, a pharmacist who has held senior positions in Indonesian firm PT Kimia Farma Tbk for over 11 years.

All the appointments took effect on Friday, March 1.

Pharmaniaga chairman Izaddeen Daud said the consolidated leadership team, supported by the expertise brought by the new board members, is poised to steer the group through its transformative phase and foster sustainable growth in both Malaysia and Indonesia.

Separately, the group announced a net loss of RM32.72 million for the final quarter of 2023, as revenue fell on lower sales from its concession business.

Revenue for the quarter ended Dec 31, 2023 (4QFY2023) fell 8.45% to RM789.81 million from RM862.72 million in 4QFY2022, its bourse filing showed.

Its 4QFY2023 revenue was barely enough to cover cost of sales, even though that had fallen to RM783.39 million from RM1.34 billion previously — leaving it with a gross profit of RM6.42 million. The massive cost of sales in 4QFY2022 included a huge provision for slow-moving inventories on Covid-19 vaccines of RM552.31 million.

The losses in 4QFY2023 "was driven by a 19.6% decrease in sales within the concession business as there was a special budget allocation at the end of 2022 for the purchase of Covid-19 related items by government hospitals," the group said.

"Nevertheless, the impact was moderated by the improved performance recorded by the Indonesia segment," it said.

The group reported an annual net loss of RM77.45 million for its full FY2023, its second consecutive year in the red after the group booked a net loss of RM629.92 million in FY2022.

Revenue fell to RM3.4 billion from RM3.48 billion due to lower concession topline because of the government's lower budget for Covid-19 related items, as mentioned earlier.

Besides lower revenue, the group also recorded a one-off provision for stock obsolescence of RM64.8 million in its third quarter, due to slow demand for pandemic-related consumables inventory such as personal protective equipment and needles, and a write-off of new product development costs of RM12.8 million due to the non-commercial viability of the products.

"Additionally, the cessation of non-core and non-performing businesses also resulted in a write-down of machinery equipment (RM12.9 million). Consequently, the group closed the year with a LBT [loss before tax] of RM62.8 million, compared with RM610.6 million in the previous year," it said.

For FY2024, Pharmaniaga said its margins are expected to face pressure due to various factors, including fluctuations in the US dollar, elevated finance costs, a rise in electricity tariffs and increased labour expenses resulting from amendments to the Employment Act.

Nonetheless, Pharmaniaga said the encouraging market situation in Indonesia bodes well with the group's expansion strategy as its publicly listed logistics subsidiary, PT Millennium Pharmacon International Tbk (MPI) has opened two new branches. “This move will not only reinforce Pharmaniaga's market presence but also secure a sustainable path for business growth in the region”.

“We are [also] in the midst of finalising the acquisition of a vaccine development grant from the Ministry of Science, Technology, and Innovation (Mosti). This grant not only underscores the government's support for our endeavours but will also position the group at the forefront of healthcare innovation, particularly in the critical area of vaccine development,” it said.

Pharmaniaga shares closed at 36.5 sen on Thursday, down half a sen or 1.33%, valuing the Practice Note 17 group at RM526.24 million.