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.