The directors of Pharmaceutical manufacturer, CiplaQCIL, have not recommended payment of a dividend for the financial year ended 31 March 2020 after the company announced a loss of Shs 36bn.
“The Company recorded a loss of UShs 36 billion in FY 2019-20 compared to a profit of UShs 7 billion in FY 2018-19 mainly due to the additional impairment allowance, drop in gross margins and increase in interest on overdraft,” said CiplaQCIL in a statement this week.
“The cessation of orders supplied to Government of Zambia (GOZ) combined with the impairment allowance for the delayed payments are the principal factors which have resulted in the Company recording a loss for the FY 2019-20.”
The deal to supply the Zambian government with medicine was inked during President Edgar Lungu’s visit to Uganda in 2015.
CiplaQCIL was to supply Anti-retrovirals (ARVs), Anti-malarials (ACTs) and Hepatitis medicines manufactured in Uganda to the Ministry of Health Zambia for a period of 20 years with reviews every 5 years.
ChimpReports now understands the CiplaQCIL Board, with the help of the Government of Uganda, has engaged Zambia to expedite the settlement of the outstanding balance.
Zambia has confirmed its intent to settle these receivables as soon as possible.
However, CiplaQCIL said it also was exploring other avenues to recover these funds and minimise the reduction in Zambia related revenue by increasing donor funded sales of malaria products.
In September 2018, CiplaQCIL became the first publicly listed pharmaceutical company in East Africa following successful Initial Public Offering on the Uganda Stock Exchange.
The company recently issued a profit warning, informing shareholders and people who intend to buy its shares that it recorded a loss in the first quarter of 2020.
CiplaQCIL also said its revenues were not affected by the COVID-19 pandemic as is the case with many businesses in the country.
The Company focuses primarily on the production of quality WHO pre-qualified first-line treatments for HIV/AIDS and Malaria.
It also manufactures the two first-line WHO- recommended therapies for Hepatitis B.
Local sales increased by 18% in FY 2019-20 due to increased orders from international health organisations for delivery in Uganda.
Reduction in export sales by 53% resulted mainly from suspension of sales to Zambia due to delayed payments for previous deliveries.
Officials said the benefit of the increase in local sales reduced the impact of ceasing sales to the GOZ. This resulted in sales closing at UShs 193 billion (2019: UShs 195 billion).
“Gross profit reduced from 27% in FY 2018-19 to 19% in FY 2019-20 mainly due to change in product mix in the new orders received after suspension of sales to GOZ and increase in orders from international health organizations,” said CiplaQCIL.
“The margins were further affected by increased competition in some of the product ranges, which in turn, put pressure on pricing to remain competitive.”
Impairment allowance on financial assets increased by UShs 29 billion from UShs 3 billion (FY 2018-19) to UShs 32 billion (FY 2019-20) due to the continued delay in receiving payments from Zambia.
General and administrative expenses reduced by UShs 4 billion or 11% mainly due to the one-off share listing expenses, reduction in legal expenses and reduction in rental costs resulting from commissioning of Company owned warehouse.
Finance costs increased due to additional utilisation of the short-term borrowing facility to cover the working capital gap created by long outstanding amounts from Zambia.
The company said cash flows from operations increased to UShs 23 billion from a deficit of UShs 49 billion in FY 2018-19 partly due to improved collections from customers.
Payments to suppliers increased due to increased purchases of stock in the previous year to manage risks associated with dependence on imports from China.
The UShs 15 billion used in investing activities was mainly to facilitate the completion of the CiplaQCIL Quality Control laboratory. The overall increase in cash and cash equivalents in FY 2019-20 was UShs 8 billion.
In the second half of this year, CiplaQCIL completed its UShs 8 billion quality control laboratory at its Luzira site.
This new laboratory incorporating analytical machinery will provide sufficient quality testing capacity to enable the Company meet its ambitious growth targets. The space vacated by the old laboratory will be utilised to enhance manufacturing capacity.
The Global Fund sales increased significantly to USD 16.4 million from USD 2.6 million in the prior year.
The first ever sales were made to the President’s Malaria Initiative (PMI), the first time the Company has supplied United States Aid funded orders.
PMI funded business is anticipated to be a contributor to sales growth in the financial year 2020-21.
However, whilst donor funded business increased substantially it could not fully make up for the decline in Zambia business.