United Drug profits to hit €67m despite price cut
United Drug said yesterday that it's on track to deliver full-year profits "broadly in line" with the almost €67m generated in 2009, despite the Government slashing the price it pays for off-patent drugs by 40pc earlier this month.
Speaking at the group's annual general meeting in Dublin, chief executive Liam FitzGerald told shareholders that management is trying to shift United Drug's focus to mould a company that is more internationalised and less reliant on more stringently regulated businesses.
Speaking afterwards to journalists, Mr FitzGerald said that while there are no plans to reduce the United Drug's activities in Ireland, he had made it clear to the Government that the pharmaceutical distribution company which also owns a number of healthcare-related companies could not continue to shoulder significant cuts to the prices it can charge pharmacists for medicines.
"Our margins are impacted by these changes," he said. "In addition to that, we have a fixed cost that provides a service which in our view is a public service. We can't change the fixed costs in relation to what we do, except where we change the profile of the service and ultimately, therefore, patients may suffer." The introduction of the 40pc price cut came about seven months earlier than the Government had previously planned as it tackled a expanding budget deficit.
Mr FitzGerald denied the group had been making excessive profits for many years on its wholesaling activities, and said the price cuts just introduced will shave close to €2m from the group's profits this year.
"The only reason we're maintaining the guidance we have in the market is because we're doing well in other parts of the world," he added. "We make less than a 2pc margin on our wholesaling business which, by reference to any industry, is not excessive."
In an interim statement to coincide with the AGM, United Drug said profits in its packaging and specialty division were "well ahead" of the first quarter in 2009. Mr FitzGerald said the unit's business in the US, where United Drug currently generates 8pc of its trading profit, experienced a "much better performance" in the second half of 2009. He said that trend had continued into the first quarter.
United Drug's medical equipment supply business had a "challenging year" in 2009, while capital spending in the UK and Ireland remained slow, according to the company.
Shares in United Drug closed almost flat at €2.21 yesterday.