Profit after tax for the nine months to December last year fell 10.7 percent to $68 million at Medical Disposables, compared with $76 million in 2021. For the quarter, it rose from $37 million to $38. Profit after tax attributable to the company’s shareholders ended 2022 with $58 million, down 10.7 percent from $65 million in the previous year. For the quarter, it climbed 40 percent to $28 million after minority interest compared with $20 million in 2021.
Improved profit margins played a pivotal role in the company’s fortunes in the December quarter, with gross profit margin increasing from 26.8 percent in 2021 to 29 percent in 2022, helping to propel it to the most profitable quarter for the nine months of operations in 2022. Gross Profit margin for the nine months in 2022 increased to 27.26 percent from 25.85 percent in 2021.
Gross profit hit $273 million from sales of $941 million, up from $250 million from sales of $930 million in the second quarter to June. Gross profit for the December quarter improved by 16.6 percent or $39 million compared to the 2021 third quarter.
Sales for the third quarter grew by $66 million or 7.5 percent over the third quarter in 2021, moving from $875 million in the 2021 December quarter, driven by increased demand for pharmaceutical and consumer items, the report stated.
Sales increased by 10.8 percent or $270 million for the nine months to December 2022, to $2.76 billion from $2.49 billion in 2021 and delivered a 16.9 percent improvement in gross profit of $108 million to $753 million from $645 million in 2021.
Selling and administrative cost dipped in the December quarter, compared with the September quarter, to $78 million versus $83 million, while selling and distribution cost rose just $2 million to $114 million. Finance cost spoiled the party, jumping to $31 million from $28.5 million and “was due mainly to an overall upward adjustment in financing, particularly working capital. The increased usage of the working capital lines of credit was deemed necessary to hold greater levels of inventory in an effort to mitigate against any additional supply chain risks that could lead to further out-of-stock instances,” management stated in their report accompanying the Financials.
“Out of stock issues continue to affect the Group’s profitability as suppliers are faced with global supply chain challenges within their operations. The availability of key speciality products such as vaccines and oncology medicines has become infrequent and inconsistent. Our internal estimates have tracked over $100 million in lost sales due to the shortages,” the company stated. That would translate to close to $30 million more in pretax profit.
The operations generated cash inflows of $109 million for the nine months, but working capital needs consumed it all as inventory rose sharply.
At the end of December, inventories increased by $360 million to $1.53 billion, up from $1.17 billion in December 2021. Receivables declined to $603 million at the end of December 2022 from $708 million at the end of 2021. Cash and bank balances rose to $128 from $72 million at the end of 2021. Loans due to lenders amount to $1.14 billion, up from $965 million at the end of 2021 and is just a bit less than shareholders’ equity, that stood at $1.17 billion compared with $1.07 billion at the end of 2021.
The profit for the nine months resulted in earnings per share of 11 cents for the quarter and 22 cents for the nine months.
The company’s focus is on organic growth and expansion from acquisitions where possible, in furtherance of this goal, management is placing a great deal of emphasis on staff retention and recruiting talented personnel to enhance its pool of above average talents. The initial impact will be increased staff costs that will be above the increased revenues, but that will pay good dividends in future years.
ICInsider.com projects earnings of 45 cents for the year and $1 for the fiscal year ending March 2024. At the last traded price of $4.85, the stock trades at 11 times this year’s earnings and five times that of 2024, suggesting much upside potential for the stock price, with the market average PE ratio now around 13 and with several priced above 15 times earnings.