Sigma shareholders need good lie down
Sigma, which had the worst performing share price of any of the ASX’s top 100 companies, last year, had forecast 10 to 15 per cent growth on last financial year’s USD 101 million net profit.
But in a statement yesterday Sigma wiped out the forecast growth, indicating that the coming year’s profit would remain at about USD 101 million.
It attributed the profit downgrade to diluted access to a government funding scheme and heightened competition in the generic pharmaceutical market.
Sigma managing director Elmo de Alwis said Sigma’s competitor, global freight company DHL, should not be able to access the Federal Government’s community service obligation fund, which is worth USD 12 million a month.
The CSO funds pharmacy distributors to ensure all pharmacies across the nation are adequately stocked. Mr de Alwis said he had received legal advice that DHL should not be allowed access to the scheme because it only distributed for the generic drug manufacturer Alphapharm.
If DHL was taken off the scheme it would boost the USD 4 million monthly payment Sigma received from the pool. But analysts said Mr de Alwis had been overly optimistic in including a revision to the CSO scheme in Sigma’s original profit forecast.
Increased discounting by generic drugs companies and the expiry of Sigma’s sole licence to produce some generic products would also hurt the company’s future earnings, Sigma said.
Sigma announced an on-market share buyback of up to 9.9 per cent of the group’s ordinary shares, which is due to start in about two weeks. The company has money to spare after having bids spurned for competitors Australian Pharmaceutical Industries and Symbion Health.
