CCM: Healthy groth for pharmaceuticals

KUALA LUMPUR: Chemical Company of Malaysia (CCM), which yesterday received shareholders' approval for the sale of six pharmaceutical units to its 73.78%-owned CCM Duopharma Biotech Bhd, expects revenue for pharmaceuticals business to grow 25% in three years' time.
"The combined (pharmaceutical) revenue for the two companies is approximately RM300 million, so come 2018, with insulin and erythropoietin (EPO) hitting our books (after getting registered), we're looking at almost 25% increase in revenue compared with the last (few) years," CCM group managing director Leonard Ariff Abdul Shatar told reporters after the company's EGM here yesterday.
He said CCM will focus on the biotherapy business, whereby insulin and EPO are expected to bring in revenue of between RM110 million and RM120 million.
Apart from that, Leonard Ariff said the group is looking to grow oncology products as well as increase the utilisation rate of its Bangi asset.
At the EGM yesterday, the RM133.26 million disposal will see CCM Pharmaceuticals Sdn Bhd, CCM Pharma Sdn Bhd, Innovax Sdn Bhd, Upha Pharmaceutical Manufacturing (M) Sdn Bhd, CCM International (Philippines) Inc and CCM Pharmaceuticals (S) Pte Ltd parked under CCM Duopharma.
CCM Duopharma will undertake a renounceable rights issue exercise to raise as much as RM195.27 million to fund the acquisition, while the remaining will be channeled towards capital expansion.
Leonard Ariff believes there will be improved efficiency in its post the corporate exercise, significantly trimming down production time to six months from 18 to 24 months in the past.
He said pharmaceuticals, chemicals and fertilizers will remain the core businesses for the group, and and its main earnings contributors.
Pharmaceuticals, chemicals and fertilizers contributed 30%, 25% and 45% each to the group's revenue in 2014.
Leonard Ariff expects the chemicals business, which tends to be less predictable in earnings, to perform better this year, underpinned by improved caustic prices.
"We try to get financial numbers more resilient and less reliant on items that are not within our control," he said.
For the fertilizers segment, he noted it depends on the market dynamics, whereby softened palm oil prices have led to the lower usage of fertilizers.
"A lot of our focus is on the dealer market because it feeds the smallholders of plantation, they usually won't cut the fertilizers usage," he added.
Last year, CCM incurred a net loss of RM43.85 million following an impairment loss of RM36.8 million made on its Medan fertilizers plant assets, which was closed down in last October. This compares with a net profit of RM647,000 it made in 2013.
On another note, Leonard Ariff said CCM has no plan to neither privatise nor pare down its stake in CCM Duopharma, saying that the group is comfortable with maintaining the current equity structure.