Sopharma Trading top line expansion slows down in Q3 2016, Q4 acceleration expected

Dimitar Dimitrov, CEO of Sopharma Trading, and Ognian Donev, CEO of Sopharma, meeting investors

Leading pharma distributor in Bulgaria, Sopharma Trading, booked third consecutive quarter of slower than expected growth. In 3Q16, top line growth turned negative of 1.63% y/y to BGN 150m on higher 3Q15 base when the Company had major big medical equipment deals. Overall, 9M16 sales are down 0.34% y/y to BGN 447.7m on all segments – pharmacies, hospitals, wholesale and big medical equipment deals, slower than expected.

Some Q3 margin erosion for Sopharma Trading

The Company also booked some margin erosion on labor costs adding 8% y/y, in line with the average labor cost rise in Bulgaria for the period and despite better interest collection on overdue receivables. Net income margin slipped to 2.26% for the 9M16 from 2.37% a year earlier. The former is also below ELANA Trading analysts’ initial estimates, which urges revision of both top and bottom line expectations downward.

Q4 could smooth out results, November results accelerate

Latest October 2016 data signals some smoothing out possible in both top and bottom line performance as later big medical equipment deals were booked in 4Q16 vs. bigger equipment deals in 3Q15. Accordingly, overall 10M16 data point to flat sales and 1.5% y/y rise in earnings before taxes.

New government turbulences with the latter resigning in mid-November to bring uncertainty in the state health care system in the short to midterm, thus ELANA Trading analysts continue sticking to a downward revision in Sopharma Trading’s performance expectations.

Latest statement by the Company reported BGN 55.2m sales in November, up 9% y/y. Overall 11M 2016 preliminary results point to a 0.9% y/y rise in the top line to BGN 557.3m in revenues and 2% y/y rise in earnings before taxes to BGN 14m.

About Sopharma Trading

Sopharma Trading is the leading Bulgarian pharmaceutical distributor with a 23% market share. The company is part of the Sopharma group that integrates one of the leading generic and organic pharmaceutical producer in the country – Sopharma (3JR BU), together with other supporting operations.

Read more in ELANA Trading Q3 equity report