Wed, 10 Sep 2003

Indofarma to stay in the red this year

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned pharmaceutical company PT Indofarma said on Tuesday that it will remain in the red this year as it strives to restructure its business and sales strategy, which are considered uncompetitive.

"We are trying to revise our business and sales strategy this year. The sales policy applied by the previous management has simply caused our products to be uncompetitive," Indofarma newly- elected president Dani Partomo said on the sidelines of a hearing with House of Representatives Commission V for industry and trade.

Dani said that the production cost of Indofarma's drugs was still high compared with similar types of drugs produced by other companies.

The publicly listed company forecast that this year it would book a loss of Rp 12 billion (US$1.4 million), down from a loss of Rp 59.8 billion the previous year.

For the first semester of this year the company managed to reduce its losses to Rp 37.4 billion.

In order to overcome its cash flow problems, the company plans to issue three-year medium term notes worth Rp 150 billion for refinancing most of its debts, worth Rp 215 billion.

The company said that with the new debt issue, it expected to save around Rp 8 billion per year in interest payments?

Dani said that the note issuance was scheduled to take place later in the fourth quarter of this year.

Indofarma, led by its previous management, was under scrutiny by the Jakarta Stock Exchange earlier this year for financial report irregularities.

The company reported to the bourse a net loss for financial year 2002, whereas previously it had reported a net profit of Rp 88.6 billion in the first three quarters of 2002.

The company said that mistakes in inventory during the first three quarters, and costly programs, such as giving massive discounts to pharmacies in the fourth quarter, had contributed to more than Rp 108.6 billion in discrepancies.

However, many analysts raised questions over the discrepancies, saying that mistakes were caused by sloppiness.

Due to the mistakes, the government took tough action by replacing the company's management.

Indofarma is about 19 percent owned by the public and 81 percent by the government.

The company is among several state-owned firms scheduled to be sold to strategic investors.