Choked Midpharma finds breathing space in JD2m issuance premium

AMMAN — Accumulated losses eroded 90 per cent of Midpharma's capital by the end of the first quarter of this year, prompting shareholders to grab the issuance premium for a lifeline. 

Arab Professionals, the auditor which is a member of Grant Thornton, indicated in the interim consolidated financial statements, that the accumulated losses of Middle East Pharmaceutical and Chemical Industries and Medical Supplies Company at the end of March 2015 totalled JD8.8 million, or 90 per cent of JD9.9 million paid-up capital.

Shareholders agreed during a recent extraordinary meeting of the general assembly to lower the accumulated losses by tapping the full JD2 million issuance premium..

According to the auditor's report, the loss during the first three months of this year amounted to JD1.4 million compared to JD1.1 million loss during the same period of 2014. 

The profit and loss statement showed that net sales during the January-March period of 2015 fell sharply to JD0.1 million from JD0.8 million in the first quarter of last year.

The balance sheet at the end of March 2015 showed Midpharma's debts to banks amounted to JD8.6 million.   

Assets totalled JD19.7 million, of which JD10 million were fixed, JD3.5 million of inventory and JD3.5 million in receivables. 

The auditor said the gravity of the deficit require the company to inform the Jordan Securities Commission and Amman Bourse about the extent and reasons for the losses as well as the proposed remedial plans.

Chairman Mazen Hamzeh Tantash told the shareholders that this (difficult) phase will be overcome and that the company will work to fundamentally put an end to adversities, noting that funds have been injected in the company, and mentioning in particular JD2 million that were inserted by the end of 2014.  

"Around JD1.5 million of liquidity is available from the company's sales this year and funds have been deposited by partners in payable accounts," he said during the meeting.

Noting that the JD1.5 million was enough to buy raw materials and get the production cycle rolling, the chairman described this position as the minimum.

"This is the situation at present in the company to exit the bottleneck," he added. 

Tantash indicated that Middle East Pharmaceutical and Chemical Industries and Medical Supplies Company will later increase the capital and inject funds at that time to buy raw materials.

He referred to the "flammable" regional as a main factor that confounds business activities in terms of opening letters of credit and delaying the procurement cycle, pointing out that Midpharma's warehouses are receiving a considerable volume of goods returned from distributors unable to sell the company's products.        

He expressed special thanks to Midpharma's 237 employees (229 in Jordan and 8 at a subsidiary in Algeria) for their patience and endurance despite delay in paying salaries.

"The board of directors realises the importance of human resources for the success of the company, and even if we have to pay staff in advance," he said. "But, the company's situation that is under pressure and the lack of liquidity are among the reasons delaying salary payments."

"Members of the board, senior Midpharma executives and staff will exert maximum efforts to come up with a strategic solution that would serve the interests of shareholders, suppliers, customers and employees in entirety," the chairman added.

Midpharma operates two plants situated on about 32,000 square metres of land it owns at Mubas near Baqaa refugee camp, 20 kilometres north of Amman.

Besides the plants that produce medicines in a wide range of pharmaceutical forms, the site includes the warehouses, laboratories, control departments and buildings housing marketing and financial management.

Responding to a question from a shareholder, Tantash clarified the misconception about a plant in Algeria indicating that, in 2015, a 21-dunum plot of land in the industrial estate was allocated to the company to build a factory within three years. 

"We are now waiting for the contracts to be signed," he said, noting that the projects are old.   

In the 2014 annual report, Tantash described the conditions as difficult and beyond its control as a result of erratic cash flow in addition to regional instability.

He said that because of an increase in financial burden, the company's liquidity became more strained and had to be handled on a daily basis.

The financial statements at the end of last year revealed that financing charges exceeded JD1 million, valued the capital investment at JD9.7 million and showed sales in sharp fall to JD6.6 million (JD10.4 in 2013) million, attributed to economic recession and the international financial crisis.

Noting that exports to Saudi Arabia, Sudan, Yemen, Lebanon, Libya, United Arab Emirates, Qatar, Bahrain, Oman, Kuwait, Iraq, Syria, Algeria, Sri Lanka and Azerbaijan  accounted for JD3.5 million of total sales,  the company's 21st annual report listed sales to markets in North Africa, Europe, Kazakhstan and Azerbaijan as top priority for this year's plans.

Midpharma also plans to obtain franchises from international companies to produce new products or to obtain contractual manufacturing deals to exploit the plant's full production capacity.

Middle East Pharmaceutical and Chemical Industries and Medical Supplies Company closed 2014 with a JD2.3 million loss (JD0.4 million) after a halved gross profit that reached JD2.2 million (JD4.6 million).