Impact of Covid-19 Pandemic on Overall Market
- 1Q20 market performance if compared to 1Q19, is weaker, given a strong base effect in 1Q19.
- During March, awareness increased and demand on vitamins, immunity boosters and sanitizers increased.
- Demand for chronic disease medications increased, since consumption has been a little bit higher than average in fear of the lockdown and any future shortages.
- The increase in consumption will not continue during April and May, since it is an overstock from the end-user and will revert to normalcy. The market should then normalize after May-July.
- Total market (including retail and non-retail) growth was around 14% in 1Q20, in line with guidance. Retail growth was around 5% and non-retail growth was around 33%, but given that retail constitution is 70%, hence the 14% overall growth.
Updates on operations
- ISPH’s cooperation with the prime minister office exempted ISPH vehicles, drivers and workers of the warehouses from curfew and movement restrictions.
- Pharmacies sales during nighttime courses were negatively affected.
- Sales to private hospitals dropped, especially in April, however private hospitals represent only 3% of the business.
- Factories have around 6 months of APIs inventory, wholesalers and distributors like Ibnsina cooperate with factories to ensure that the flow of supply is adequate even for the highly consumed medications.
- Tender business was strongly growing during 1Q20 (around 50% YoY), with no changes in prices nor margins.
- No decline witnessed from imported SKU volumes, with imported medications representing around 5% of business in 1Q20; almost flat YoY.
Updates on Working Capital
- Slightly higher Inventory DoH (2-3 days above average) in 1Q20.
- Higher payables DoH, given a witnessed increased in tender business.
- Receivables DoH are as well 1-2 days longer than average, but are offset by longer payables DoH.
- Overall, there are no significant changes in working capital.
Updates on Capex
No intention to slow down capex plans or investments, however current circumstances and movement restrictions might slightly slow down plans..
- ISPH is expecting more than 1% increase in market share.
- 1Q20 margins is in line with management guidance and budget; where GPM for 2020 should be around 8.5%.
- Slight enhancement on EBITDA and EAT margins, mainly on economies of scale.
- Debt/Equity of around 0.87x, similar to 1Q19.