Cathay International swings to H1 profit after devalution of renminbi

Chinese healthcare investor Cathay International Holdings swung to a half year profit as operational recovery gathered pace, particularly in its pharmaceutical subsidiary, from the devaluation of the renminbi.

For interim results for the six months ended 30 June, gross profit increased by 28.4% to $31.4m, compared to the same period last year. Revenue fell slightly by 1.8% to $61.1m and operating profit increased by 127.7% to $5.5m.

Loss attributable to the parent company narrowed to $1.9m from $4.3m in 2015.

The FTSE listed company said it and its subsidiaries were impacted by the devaluation of the renminbi by 6.6% in the first half of the year.

Lansen, its pharmaceutical subsidiary which it owns about 50%, increased its revenues by 2.2% to $49.3m, compared to the same period last year. Gross profit rose by 20.8% to $29m and operating profit increased by 3.9% to $7.6m.

Pharmaceutical product sales increased by 5.6% to $29.5m mainly due to growth in sales of Pafulin, Mycophenolate Mofetil dispersible tablets and leflunomide tablets.

Its wholly owned subsidiary Haizi, which manufactures and sells inositol and di-calcium phosphate (DCP), reported a 30.2% decrease in revenue to $4.2m due to the low average market price of inositol.

In response to the low revenues generated the company has improved the quality of DCP and reduced production costs by modifying the processing techniques used.

The Haotian healthcare and plant extract business also reported a decrease in revenues by 26.7% to $1.9m.

The company’s wholly owned cosmeceutical subsidiary Botai reported revenues of $2.4m. Operating profit increased to $1.4m from a $300,000 loss in 2015.

Zhejiang Starry Pharmaceutical, Lansen's associated company listed on the Shanghai Stock Exchange on 9 March and Lansen's interest in it was diluted to 16.1%. Cathay International’s 8.1% interest in Zhejiang Starry is about $78.2m.

The company also has an investment in the Shenzhen Fuyuan Landmark Hotel which reported its revenue was down 6.6% to $6.5m mainly due to the devaluation of renminbi.

Chief executive Lee Jin-Yi, said: "The strategy that the group put in place to develop its core businesses and create a better platform for stable growth has started to come into fruition, as demonstrated by the significant increase in revenue from Lansen's pharmaceutical and cosmeceutical businesses. Other areas of the business are still working hard to improve their contribution and cost effectiveness by improving processing techniques, modifying and expanding production capacities and continuing to build marketing and distribution networks.

"I am encouraged by the performance of the group in the first half of 2016 and had it not been for the devaluation of the renminbi we would have seen a modest increase in revenue compared to last year. It is still clear that challenges lie ahead, but we believe the group's operations are gradually recovering from the setbacks experienced over the past year and will enter into a new period of growth over the short-to-medium term."

Shares in Cathay International Holdings were up 0.05% to 19.01p at close.