LONDON (Alliance News) - Cathay International Holdings Ltd Friday posted a big rise in pretax profit for 2014, driven by strong performances from its Lansen and Haizi businesses, although it cautioned that retail drug pricing will continue to be challenging in China.
Cathay invests and operates pharmaceutical and healthcare businesses in China.
Cathay posted a pretax profit of USD10.1 million, up from USD3.2 million a year before, as revenue rose to USD150.0 million from USD114.8 million.
In the Lansen business, revenues rose 23%, driven by strong growth in its speciality pharmaceuticals, generic drugs and plant extracts businesses.
The Haizi business was boosted by its first full year sales of nutrient inositol. During the year it produced 1,447 tonnes and sold 996 tonnes of the product. However due to the market being flooded by new supply, the price of inositol fell. Cathay believes that the price should gradually recover as the market for nutrition supplements using inositol grows.
Additionally, its hotel business saw revenue rise 4.4%, as room occupancy improved, offset a decline in average room rates.
Cathay said that during recent provincial-level drug auctions in China, local governments have set ceiling prices to force pharmaceutical companies to follow, and governments are also encouraging second rounds of bidding to further lower retail drug prices.
However, in the longer term, the Chinese government would like to abolish price control on most drugs and leave pricing to the market, Cathay said.
It expects its operating cash flow to improve in all of its business segments in 2015, and will focus on reducing its borrowings and finance costs in 2015.
"We expect to see further challenges in 2015 as the government continues its reforms to China's economy but we believe the streamlining and synergies within our businesses will give us a competitive edge so we can continue to grow and deliver value to our customers and shareholders," said Chief Executive Officer Lee Jin-Yi in a statement.
Shares in Cathay are trading up 9.5% at 23.00 pence Friday afternoon.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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