0 Kalbe expands with cash flow as treasury stocks scrapped

Publicly listed PT Kalbe Farma says it is confident that its internal cash can support expansion this year amid its plan to abandon the possibility of raising funds from selling treasury stocks. The company is planning to spend between Rp 1 trillion (US$103 million) and Rp 1.5 trillion in capital expenditure this year. About 30 percent of the total amount will be used for prescription pharmaceuticals and new factories; another 30 percent for distribution expansion; 20 percent for a new plant of over-the-counter drugs and energy drink products; and the remaining 20 percent for the development of a nutrition division. 

“We have Rp 2 trillion to Rp 3 trillion in cash flow. We won’t need third-party funds,” Kalbe’s finance director and corporate secretary, Vidjongtius, said on Monday. Moreover, the company is planning to write off the treasury stocks it holds. As its share price fell during 2008-2010, the company purchased a number of its own shares and currently holds 780.99 million shares, around 7 percent of its total shares. Shares in Kalbe (KLBF) closed at Rp 1,100 apiece on Monday, a rise of 0.91 percent compared to last Friday. 

The Jakarta Composite Index (JCI) recorded a new historic high of 4,490.56 on Monday, 0.19 percent up compared to previous trading. Vidjongtius said Kalbe planned to propose the treasury stocks’ write-off at an extraordinary general meeting scheduled for May. “Following the write-off, Kalbe’s ROE [return on equity] will increase,” Vidjongtius said, adding that the company would maintain a dividend payout ratio of 50 percent minimum. Kalbe had previously said that it would use proceeds from treasury stocks to support its expansion, including acquisitions. 

“We are now focusing on acquisitions that do not require large amounts of money, with approximately Rp 100 billion to Rp 200 billion,” Vidjongtius said. As part of its expansion plan, Kalbe is aiming to achieve deeper penetration in Southeast Asia, which is expected to see an integrated market in the years to come. Vidjongtius said the company planned to increase its distribution to the Philippines, particularly with its Extra Joss energy drinks, and to Myanmar and Vietnam. 

He said there was barely any increase in the energy drinks market in Indonesia, whereas in the Philippines, it was growing at around 10 to 15 percent per annum. “We see competition from local producers, however; so, we will be innovative, such as selling some of our products in sachets,” he said, adding that entering foreign markets with distribution was more realistic than directly investing in manufacturing development. Kalbe’s exports contributed around 4 percent to its total sales in 2012. 

The company expected higher figures of 7 to 8 percent within five years, according to Vidjongtius. According to its unaudited financial report, Kalbe’s sales reached Rp 13.63 trillion in 2012, an increase of 24.9 percent compared with Rp 10.91 trillion a year earlier. The biggest contributor to sales was the distribution and logistics division with Rp 5.18 trillion, a rise of 33.7 percent compared to 2011, thanks to the entry of a new principal, PT Abbott Indonesia. 

“However, the margin from the distribution division is lower than other divisions [prescription pharmaceuticals, consumer health and nutrition],” Vidjongtius said, pointing at the company’s gross profit margin, which fell around 3 percent to 47.8 percent in 2012 from 50.9 percent in 2011. Kalbe’s unaudited net profits stood at Rp 1.73 trillion in 2012, an increase of around 17 percent from the Rp 1.48 trillion reaped in 2011.

source : the jakarta post