The company plans to tap commercial banks for acquisition finance to buy assets
UAE’s Julphar eyes several Mena acquisitions, and may announce deal in Q3
Julphar is looking at several mergers and acquisitions across the Middle East and African markets and may announce its first deal as soon as the third quarter of this year.
“We are working on several M&A transactions and we are pursuing [them] as we want to grow organically and inorganically,” Jerome Carle, the general manager of Julphar, told The National in a phone interview. “I’m very confident we will be able to make an announcement in the next quarter,” he said without naming the target company or how many other deals the company is pursuing.
The Ras Al Khaimah-based drug manufacturer will tap the commercial banks for acquisition finance to fund the deals which, Mr Carle, said could be up to $50 million (Dh184m) in size. For the larger deals, the company could seek its shareholders’ approval and may explore various options depending on the size and scale of the transactions.
Though acquisitions are part of the company’s growth strategy, Julphar has not set a specific fund aside for the purpose.
“It is difficult to say how much we will spend in total but the company is very strong in the Middle East and Africa and this will remain the region where we will prioritise our investments,” Mr Carle said. “We are also considering some [asset purchase] options in the markets where we are not currently present and we are discussing them with our board.”
The last acquisition for Julphar, which is among the biggest generic drug manufacturers in the Mena region, was Dubai-based Gulf Inject, which it bought for Dh22m in 2017. The GCC’s pharmaceutical market is expected to see some consolidation. Companies are looking to boost profits by gaining scale after years of muted growth in the wake of a three-year oil price slump that forced spending cuts by governments and crimped healthcare budgets.
Julphar reported a 58 per cent drop in first quarter net profit to Dh18.4m from the corresponding period in 2017. The company’s quarterly net sales declined 21 per cent year-on-year to Dh264m.
Currency variations in several markets including Algeria, Tunisia, Libya, Ethiopia and Sudan, impacted Julphar’s earnings in 2017, which was a challenging year for the company. Its customers and distributors couldn’t open letter of credits due to shortage of foreign currency at central banks in some markets, which crimped the company revenues as shipments had to be delayed.
Price cuts in some of the Mena markets and instability in key geographies such as Libya, Yemen and Syria which, in the past, were among the major overseas revenue earners, have also impacted Julphar's earnings.
“When you add those markets together, you realise how important they are,” he said. “In the broader Middle East you have roughly 700 million people who are potentially our customers. You remove markets like that, it becomes challenging to catch up.”
Entering new markets is one way of countering the slowdown of businesses elsewhere, Mr Carle said. It is now eyeing entry into more east and west African countries, through its Ethiopian hub where it owns a medicine manufacturing facility.
“Ethiopia is a market which we are establishing as our gateway as Africa is a big growth platform for us,” Mr Carle said.
Julphar also plans to open up new markets in South East Asia from its base in Bangladesh where it made an acquisition in 2015, he added.
The company, which distributes medicines to over 40 countries, has set its sights on double-digit growth this year. It is on course for a profitable second-quarter with new product launches in cardiology and respiratory. It plans to launch 25 products in the UAE and register 200 new products in the region.
The UAE’s pharmaceutical sales are forecast to grow to $3.84bn by 2021 from $2.62bn in 2016, according to BMI research, a unit of the Fitch group. Pharmaceuticals represented 16.2 per cent of total healthcare spending last year and are projected to represent 18 per cent of healthcare expenditure by 2021.
Saudi Arabia, where the company opened up a 300m riyals manufacturing facility last year, along with the UAE account for about 50-60 per cent of Julphar’s total revenues. The company plans to consolidate its leadership position in the home market and broaden its reach within Saudi Arabia, as part of its plans to achieve double-digit growth, he said.