Indofarma continues to suffer losses

Indofarma continues to suffer losses

Sari P. Setiogi, The Jakarta Post, Jakarta

Publicly listed pharmaceutical company PT Indofarma said on
Wednesday it suffered more losses in the third quarter of this
year despite higher sales as the company had to cover huge
borrowing expenses.

Company president M. Dani Pratomo said that the net loss in
the third quarter increased to Rp 40 billion (US$4.45 million)
from Rp 34 billion in the second quarter. (During the third
quarter of last year, the company reported a net profit of Rp
88.6 billion).

The losses came despite a jump in sales to Rp 323 billion
during the third quarter from Rp 162 billion in the second
quarter and Rp 240 billion in the third quarter of last year.

Speaking at a hearing with the House of Representatives
Commission VIII on health issues, Dani explained that a huge part
of the company's working capital came from bank loans which
carried an average interest rate of 16.5 percent.

But he said that the state-owned company had now obtained
cheaper bank loans carrying interest rate of 13.5 percent to
refinance the expensive loans.

"We expect to save about 3 percent annually, which is
equivalent to about Rp 8 billion for a Rp 250 billion loan," Dani
said.

He said that the jump in the third quarter sales was
attributed to the reintroduction of a discount program, which was
dropped during previous quarters following criticism from the
government that the program was costing the company as evidenced
by the Rp 59.82 billion net loss booked in the full-year 2002
account.

"We increased sales by offering discounts on generic
medicine," said Dani, while adding that Indofarma gave discounts
of between 5 percent to 50 percent.

Dane went on to say that the company had no other choice than
to offer such discounts amid tighter competition.

"I expect demand for generic medicine to increase," he said.

About 85 percent of Indofarma's sales still rely on generic
medicine.

For the coming year, Dani forecast that the company could
reach a net profit of Rp 17 billion.

Commenting on the company's plan to sell subsidiaries to new
investors, Dani said that the divestment program was expected to
be completed next year.

Indofarma plans to sell subsidiary PT Indofarma Global Medika
(IGM), a distributor of pharmaceutical products, food and
beverages. This is part of efforts to allow the company to
concentrate on its core business of manufacturing generic
medicine.

"We are now looking for strategic investors," he said.

At the moment, PT Tiga Raksa Satria is the only investor which
has openly expressed interest to purchase IGM. But Dani said
that there were few other investors with the same interest, but
he declined to reveal any names.