Estimates that the rupiah exchange rate will be more stable and stronger this year are certainly good news for pharmaceutical producers. PT Kimia Farma Tbk (KAEF) is no exception, with most of the raw materials obtained from imports.
Ganti Winarno, Corporate Secretary of KAEF, said that the company is quite optimistic this year will be better than last year. "Regarding the exchange rate, of course, all pharmaceutical industry players will have a positive impact considering that most of the pharmaceutical raw materials are still imported," he explained to Kontan.co.id, Thursday (1/17).
In addition, the company has also signed a raw material contract for 2 years starting from 2018 yesterday and 2019 now to reduce the cost of raw materials. Management explained that KAEF's cost of goods sold did not reach 90%, but maintained around 60% to 65% of revenue.
The company will implement several centralized procurment strategies, large purchases in the future. This is a form of hedging that can be done to anticipate an unpredictable increase in foreign exchange.
In addition, KAEF's production needs are also calculated to procure raw materials needed at the outset by entering into contracts with suppliers. As an illustration, until the third quarter of 2018, the cost of goods sold in terms of manufacturing production reached Rp 871 billion, where the cost of using raw materials contributed a considerable amount of Rp 593 billion.
Regarding this year's target, Ganti can't share it now. What is clear is KAEF is still focused on developing its business both existing and new.
"In 2019 we will continue to expand our business to sustain business growth," said Ganti. Just so you know, in 2018 the company allocated a large capital expenditure or capital expenditure / capex of around Rp 3.5 trillion.
The budget is mostly used to fund the company's inorganic expansion in the form of mergers and acquisitions. The details are capex of Rp. 2.3 trillion for mergers and acquisitions, the remaining Rp. 1.2 trillion for organic business
Management said that the absorption was highly dependent on negotiation-related mergers and acquisitions. The company hopes that after the successful merger and acquisition process in 2018, the minimum capex will be absorbed by up to 60%.
One of the expansions that has been done by KAEF is to acquire a 60% stake in the pharmaceutical retail network in Saudi Arabia, DaWaa Medical Limited Company, one of the subsidiaries of Marei Bin Mahfouz (MBM) Group which is engaged in health at the beginning of last year with a value of Rp 130 billion . KAEF also plans to develop hemodialysis clinics in other major cities, which until now there is only one in Bandung.
From the company's last published financial report, KAEF recorded a gross sales of Rp 5.44 trillion in the last nine months of 2018, which grew 23.92% compared to the previous year which was recorded at Rp 4.39 trillion.
The State-Owned Enterprise recorded net sales after, deducting sales deductions, from Rp. 5.31 trillion, up 23.49% compared to the same period of the previous year of Rp. 4.30 trillion. Based on KAEF's financial report, KAEF's largest portion of revenue comes from the retail segment of Rp 2.99 trillion, followed by distribution income of Rp 2.03 trillion, and manufacturing income of Rp 200.80 billion.