The UAE’s Gulf Pharmaceutical Industries, otherwise known as Julphar with a market capitalization of Dh1.79 billion, reported vastly improved numbers as first quarter earnings, stating that profitability isn't far away. Revenues for the quarter came in at Dh166.8 million, a massive improvement of 60 per cent from last year, fuelled by reopening shipments to Saudi Arabia, Oman, and Kuwait, as well as higher sales in North Africa.
The company is making significant efforts to reduce losses, and reported a 56 percent drop in the first quarter compared to the prior year. Gulf nations had imposed a temporary suspension on their medicines that substantially hurt marketshare during the late 2018 to first quarter 2020 period. Now that the ban is lifted, improved sales could go a long way in the revival.
Significant gross margin improvement and cost reduction strategies implemented by the pharma major helped with a positive EBITDA of Dh3.3 million for the first time in the last three years. Amid the pandemic, a significant breakthrough for the company was an agreement with G42 Medication Trading to produce ‘Hayat Vax’, which is essentially the Chinese Sinopharm vaccine being manufactured in the UAE.
As the nation aspires to inoculate most of the population by the start of the much-awaited Expo 2020, inking a deal right in time could help the company improve its top-line. As Julphar is edging towards a turnaround, the company has secured a syndicated loan facility worth Dh1.01 billion with a consortium of local banks to refinance existing debt and support its investment and expansion plans. Recently, Julphar announced sale of a 51 percent stake in Saudi's Alpha Pharma. Indeed, the management expects assets to reduce marginally by 10-12 per cent, but the proceeds can be used to bring down its debt and strengthen its balance-sheet.
Now that the suspension to export medicines to Saudi Arabia is lifted, Julphar may no longer need a controlling stake in the Kingdom's pharma company to increase its market presence. The group has made significant progress with its transformation programme and strengthened the management with several new recruitments, including a CEO. This strategic reorganization will help restore Julphar's position as a leading pharmaceutical company.
The company should start eyeing a return to profitability by regaining market-leading positions in the Gulf, and through new alliances to branch out into new products related to core therapeutic areas.