KARACHI, April 25: The company has summoned 20th Annual General Meeting (AGM) at its registered office in Lahore on Monday (April 28). Election of seven directors for a three-year term beginning September 3; increase in authorized capital from Rs100 to Rs150 million and approval of cash dividend at 15 per cent tied to a bonus issue at 10 per cent (one-for-ten) are the important items on the agenda.

Directors have recommended a lower cash dividend for the year 2002 at 15 per cent, from 20 per cent paid last year. But the bonus would probably make up for more than the shortfall in cash payout for the share in Highnoon is currently trading at its five-year high price of Rs23 ex-dividend/ex-bonus. There is substantial liquidity as nearly two million shares changed hands during the first three months of the current calendar year. One reason could be a large 40.4 per cent shareholding in the hands of 2,946 private shareholders.

Highnoon Laboratories is one of the few locally-owned pharmaceutical companies that are competing with a good measure of success, with not just the powerful multinationals who enjoy benefits of immense parent resources, R&D and the assured supply of raw materials but also with scores of local drug companies, most of whom, do not always put ethics before business.

For the year ended December 31, 2002, the company achieved net sales of Rs776.5 million, which represented growth of 12.97 per cent over sales valued at Rs687.4 million the previous year.

Pre-tax profit for the year increased 39.8 per cent to Rs45.7 million, from a year ago pretax profit at Rs32.7 million. Profit after taxation rose 63.8 per cent to Rs34.9 million, from Rs21.3 million the earlier year. This produced earning per share (eps) at Rs3.78, which places the stock on price-to-earnings multiple of 6x.

Chairman Jawaid Tariq Khan stated in his review that the company had been able to achieve improved results in spite of the fact that reimbursement of selling and promotional expenses from foreign principals for the marketing services rendered reduced considerably as compared to the preceding year. The chairman observed that the year 2002 had turned out to be one of the most turbulent period for the pharmaceutical industry, not only due to post 9/11 uncertainties, but also as a result of “irrational and inconsistent government policies”.

One of such quick policy twists that has been mentioned by several pharmaceutical companies in their yearly reviews was regarding the imposition and subsequent withdrawal of GST on all drugs and medicines. GST was imposed in March 2002, which the Highnoon chairman stated had plunged the industry into a crisis. “This was worsened due to partial withdrawal, on some of the products, subsequently”, said the chairman, adding that uncertainties created due to those decisions led to the trade shrinking their inventories, which obviously adversely affected sales. “It was only after the complete withdrawal of GST in August that the market sentiment became positive and sales returned to their normal pace”, the company said. For all that, the chairman stated that Highnoon was able to maintain market share of 1.6 per cent, through aggressive and innovative marketing policies. During the year, the company launched 13 new products to its portfolio of 84 products. Also throughout the year, the company was said to have undertaken preparatory work to introduce the phytotherapeutic range of products, licensed-in from Pierre Fabre of France. That business segment was expected to go on line during the first half of 2003 and the company pinned hopes on it becoming a major revenue generator.

Total shareholders’ equity at December 31, 2002 amounted to Rs199.8 million, which produced the break-up value of Rs21.67 for the share. Current ratio worked out at 1.23:1 and the total assets of the company stood at Rs726.5 million.

Chairman observed that prospects for the company would continue to depend on the policies of the government, as pharmaceutical remained one of the most regulated sectors in the economy. Highnoon, nonetheless, was aiming to become a Rs1 billion company.