Changchun Pharmaceutical Predicts a Loss of up to 800 Million Yuan Last Year due to Turning from Profit to Loss

Shandong Buchang Pharmaceutical Co., Ltd. (Buchang Pharmaceutical) announced its performance forecast for 2024, showing a net loss attributable to the owners of the parent company of approximately 808 million yuan to 428 million yuan. This marks a shift from profit to loss for the year 2024.

The “2024 Annual Performance Forecast” of Buchang Pharmaceutical indicates that the expected net profit attributable to the owners of the parent company for 2024 is estimated to be a loss ranging from 808 million yuan to 428 million yuan, compared to the same period last year where a loss is expected; the net profit after deducting non-recurring gains and losses is estimated to be a loss of 708 million yuan to 368 million yuan.

In the same period of the previous year, the net profit attributable to the owners of the parent company was 318.9733 million yuan, and the net profit attributable to the owners of the parent company after deducting non-recurring gains and losses was 291.5833 million yuan.

Buchang Pharmaceutical explained the reasons for the decline in profit, citing intense market competition and lower than expected market development. Additionally, based on the current operational situation and analysis of future operational conditions, it plans to make a goodwill impairment provision totaling approximately 700 million to 1 billion yuan. Furthermore, some products have seen reduced sales due to restrictions by medical insurance or inclusion in key monitoring catalogues by some provinces, resulting in lower revenue for certain products this year compared to last year. Since 2020, three injection products under the company have been successively removed from the provincial medical insurance catalogues, leading to a decrease in overall gross profit margin.

In addition, the New Yellow River, organized by the Jinan Daily Newspaper Group, stated on February 4th that aside from a significant goodwill impairment, high sales expenses have further squeezed Buchang Pharmaceutical’s profit margins. In the first three quarters of 2024, Buchang Pharmaceutical’s sales expenses were 3.271 billion yuan, although they decreased by 32.4% compared to the same period, still representing more than ten times the profit.

Data indicates that Buchang Pharmaceutical’s sales expenses in 2021, 2022, and 2023 were 8.3 billion yuan, 7.484 billion yuan, and 6.369 billion yuan, respectively, accounting for roughly half of the total revenue for each period. In the first three quarters of 2024, Buchang Pharmaceutical’s sales expenses were 3.271 billion yuan, with research and development expenses at only 0.18 billion yuan during the same period.

Moreover, Buchang Pharmaceutical has reportedly paid some of its sales expenses to a liquor sales company, causing confusion in the industry. From 2021 to 2023, Buchang Pharmaceutical made sales expense payments to Guizhou Mingshuai Liquor Sales Co., Ltd. totaling 57.3256 million yuan. According to Tianyancha data, the major shareholder and ultimate beneficiary of Guizhou Mingshuai Liquor Sales Co., Ltd. is Wang Xiuzhen, with a shareholding of 97.5%. An announcement released by Buchang Pharmaceutical in April of last year indicated that Wang Xiuzhen is a close family member of Zhao Tao, the actual controlling person of Buchang Pharmaceutical.

Additionally, in the top ten sales expense payment recipients from 2021 to 2023, Buchang Pharmaceutical also paid several travel agencies. In 2021, Buchang Pharmaceutical paid 7.2521 million yuan to Nanjing Zhilv International Travel Agency Co., Ltd. for “academic exchange expenses” and 7.2124 million yuan to Xi’an China International Travel Service Group Co., Ltd. for the same type of expense.

Buchang Pharmaceutical has previously evaded providing a specific explanation when questioned by investors on the Shanghai Stock Exchange’s interactive platform.

Recent data shows a three-year decline in revenue for Buchang Pharmaceutical, with revenues decreasing from 15.763 billion yuan in 2021 to 14.951 billion yuan in 2022 and to 13.245 billion yuan in 2023, resulting in corresponding net profits of 1.162 billion yuan, a loss of 1.53 billion yuan, and 319 million yuan, respectively. Concurrently, the company’s gross profit margin has been decreasing annually, reaching a historic low of 57.12% by the end of the third quarter of 2024.