HANOI: The pharmaceutical industry’s growth momentum faded in the first quarter of the year, as companies grappled with fluctuating and rising prices of raw materials and intensifying competition.
The industry is an essential sector that is typically less impacted by economic slowdowns. However, weak demand has posed challenges for the fast-growing industry in Vietnam.
After record profits and strong growth in 2023, the industry’s momentum is facing limitations this year due to rising raw-material costs and increased market competition.
SSI Securities Corp forecasts pharmaceutical profit growth of 8.4% this year, lower than the 15.5% projected for the market’s benchmark VN-Index. It estimates an 8% increase in revenue and a 6% net profit growth for companies in the sector.
The lower projected net profit growth is due to the rising costs of active pharmaceutical ingredients, as well as the healthcare market having lower gross profit margins compared to retail.
While 2023 was a good year for the industry, SSI believes it will hardly achieve the same momentum this year.
In fact, the industry’s results have largely remained flat or seen only slight improvements compared with 2023.
In the first three months, top pharmaceutical firms like DHG Pharmaceutical (DHG) and Imexpharm Corp (IMP) experienced a paradoxical situation as their revenue increased while profit dipped.
Despite a slight rise of 2.4% in net revenue, DHG reported a 38.4% year-on-year decline in net profit to 222.2 billion dong.
This was largely attributed to a more than a 21% spike in the cost of materials, which sharply erased gross profit margins.
Similarly, IMP saw its net revenue grow nearly 2.5% over last year to 491.1 billion dong, but its net profit dropped 20.5% to 61.9 billion dong.
While many companies in the same industry have reported increasing revenues but declining profits, there are still some businesses that have seen both their revenues and profits decrease.
IMP’s leadership cited three main reasons for the mixed results, including higher input-material prices, intense market competition and a new factory coming online in the third quarter of 2023, which led to rising depreciation and operating costs.
Meanwhile, during the same period, Bidiphar saw a slight gain in net revenue to 383.8 billion dong, but the cost of inputs climbed at a faster pace than revenue, causing gross profits to drop more than two billion dong to 188.5 billion dong.
After deducting expenses, the company reported a net profit of 67.1 billion dong, which showed no change from the same period last year. Nevertheless, it achieved 25% of its full-year profit target of 320 billion dong in just the first three months. — Viet Nam News/ANN