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Vitamin price hike propels Northeast Pharmaceutical

By Zheng Lifei (China Daily)
Updated: 2009-04-02 08:07

Drug maker Northeast Pharmaceutical Group Co said yesterday that it expects net profit in the first quarter to more than triple from a year earlier on escalating vitamin supplement prices, the mainstay of its business.

The forecast comes close on the heels of its six-fold jump in net income for 2008.

Net profit in the first quarter is expected to surge by 300 percent to 350 percent from a year earlier to 120 million yuan, or 0.36 yuan per share, on booming sales and improved profitability, the Shenzhen-listed firm said.

The country's biggest Vitamin C supplement exporter made a net profit of 29 million yuan in the first quarter of last year.

"The strong performance in the first quarter is in line with our expectations as Vitamin C supplement prices witnessed a 15 percent to 20 percent year-on-year growth during the period," TX Investment Consulting Co said in a research note.

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Northeast Pharmaceutical, which produces antibiotics, vitamins and cardiovascular medicines, said the sales revenue and gross profit margin of Vitamin C products are expected to witness a significant growth in the first quarter.

"While the raw medicine segment is likely to maintain a sound growth, its injections business is also expected to benefit from the country's medical reforms," TX Investment said.

The company will also benefit after its new injections plants and Vitamin C processing projects are completed, said TX Investment, which has an 'overweight' rating on Northeast Pharmaceutical.

The company's shares rose 3.57 percent to close at 20.3 yuan in Shenzhen trading yesterday.

The drug maker said in February that it would issue bonds worth 600 million yuan to repay bank loans and increase its working capital.

Northeast Pharmaceutical, which also makes anti-AIDS medicines, late last month reported a 653 percent surge in 2008 net profit as the prices of Vitamin C supplements soared last year and profit margins jumped.

Its net income rose to 358 million yuan, or 1.16 yuan per share, while its sales grew 24 percent from a year earlier to 4.61 billion yuan.

The sales revenue from Vitamin C supplements touched 1 billion yuan last year, accounting for half of the company's raw medicine ingredients business, while the profit margin hit 47 percent, up a whopping 196 percent from a year earlier.

The rising Vitamin supplements prices last year has also seen another domestic drug and food additive maker Zhejiang NHU Co's net profit skyrocket 16-fold in 2008.