KARACHI, Nov 30: The directors’ annual report 2002 conveys to the shareholders, all that essentially must fall as pieces of good news: that the pharmaceutical market exhibited increased growth rate of 11 per cent; that the industry benefited greatly from the stability of the Rupee and that the company improved sales, profit and payouts.

Earlier this year, the market price of the Ferozsons stock topped Rs75, which was perhaps its historic best; the share is currently trading at Rs60.60 ex-the 2002 dividend and bonus. At the shareholders’ meeting held on October 28 at the company’s registered office in Rawalpindi, the record 90 per cent payout (cash at 65 per cent tied to stock bonus at 25 per cent) was declared; last year, shareholders had been paid 70 per cent in cash dividend. The company had resumed dividend payment in 1994 after two blank years (1992 and 1993) and there has not been an omission since.

But the share in Ferozsons Laboratories is about as illiquid as the stock of most multi-national pharmaceutical firms. No more than 88,500 shares changed hands at the KSE in the first 10 months of the current calendar year, which comes to three per cent of the total 3.53 million outstanding shares in the company. Associated private company, KFW Factors (Pvt) Limited held 27.2 per cent shares in Ferozsons, while National Bank of Pakistan commanded 11.6 per cent of the equity at the end of last financial year.

After tax profit for the year ended June 30, 2002 grew 30 per cent to Rs52.2 million, from a year ago taxed profit at Rs40.0 million. Net sales increased 15.2 per cent to Rs404.6 million, from Rs351.1 million the earlier year.

Directors said that the trend of industry growth was marred to some extent by the sudden imposition (and subsequent withdrawal) of GST at 15 per cent on retail prices on pharmaceutical products, which led to confusion and stuck-up inventory at the distributor, wholesale and retail levels during the last quarter of the year ended June 30, 2002, as well as the first quarter of the current year. But the board said it appreciated prompt withdrawal of GST. “The mechanism employed for GST withdrawal and refund to manufacturers was also well thought-out and effective in its implementation”, company chairperson & CEO Mrs. Akhter Khalid Waheed stated.

During the year under review, the newly launched products, particularly in the company’s cardiology and dermatology franchises, were claimed to have received encouraging response. One recalls that a couple of years ago, the company had put on hold its long-cherished plans of setting up manufacturing plant for injectable antibiotics at Nowshera. The conditions then were said to be inconducive for such an investment. Nothing has since been heard about the injectable antibiotics manufacturing, which could mean that the plan has finally been shelved. In terms of future plans, the company said that in addition to new launches in the areas of cardiology and dermatology, the company had entered into strategic partnership with two major foreign principals — Curatis Pharma GmbH, Germany and the Bago Group SA, Argentina — for import, repackaging and marketing of a range of sophisticated biotechnology-based products in the areas of gastroenterology and Oncology.

With paid-up capital of Rs35.3 million and shareholders’ equity at Rs134.7 million, break-up value of the 10-rupee share worked out at Rs38.12, not including the surplus of Rs76.2 million on revaluation of fixed assets.

There was no major long term indebtedness, while borrowings for current needs were also low. As the cash flow improved and interest rates declined, financial charges dropped by 34.4 per cent to Rs1.6 million, from Rs2.4 million at the end of last year.

Apart from the mainstay-pharmaceutical products, the forty-six year old Ferozsons Laboratories also has the capacity to produce soap products. But the soap plant with sanctioned capacity of 18,500 tons remained idle all through the year with nil production. The major reason for non-operation of the plant was stated to be the competition from smaller units and uncertain market conditions for raw materials.