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Sigma's fledgling China site going strong

AAP logoAAP 8/09/2016 Trevor Chappell

Sigma Pharmaceuticals says its fledgling online business in China is performing strongly as consumers snap up infant formula and papaya ointment.

The drugs wholesaler and pharmacy services provider also says it does not fear competition from private hospitals operator Ramsay Health Care, which intends to expand its pharmacy network beyond its hospitals.

Sigma supplies drugs and support services to pharmacies under the Amcal, Amcal Max, Guardian Discount Drug Stores, Pharmasave and Chemist King banners, as well as independent pharmacies.

The company's profit rose 25 per cent in the six months to July 31 to $23.7 million.

It boosted its market share and lifted income from services and products not related to prescription drugs listed on the Pharmaceutical Benefits Scheme.

Sales revenue generated by PBS-listed drugs also rose because of the inclusion of hepatitis C drugs on the register making treatment more affordable. But due to the low margin on hepatitis C drugs, the profit impact was much smaller.

Sigma said it was optimistic about future growth, and has upgraded its guidance on underlying earnings growth for its 2016/17 financial year to 10 per cent, from up to five per cent.

Chief executive Mark Hooper said the Amcal website in China, launched in June, had made a small contribution to Sigma's earnings, but sales for the first couple of months had been double the company's expectations.

"We've found that a lot of the high sellers, like milk formula and Lucas' Papaw Ointment, which have been popular with Chinese consumers through other channels, is also selling well for us," Mr Hooper said.

"We are finding there is quite a bit of interest in other products in the range that we offer.

"Some of the offers that have gone into China have been a very narrow range. We're offering over 7,000 products."

Mr Hooper also said Sigma was not afraid of competition from Ramsay Health Care-operated pharmacies.

"When someone like Ramsay announces that they're pushing into the pharmacy space, it sends a bit of a shockwave through the market, but I don't think we should ever be afraid of competition," he said.

"Yes, it will make it a more interesting place to play, but it's not burning a hole in my brain at the moment."

Sigma shares gained 13 cents, or 11.3 per cent, to $1.285.

SIGMA OPTIMISTIC AFTER STRONG START TO YEAR

* Half-year net profit up 25pct to $23.7m

* Sales revenue up 28pct to $2.15b

* Interim dividend up 0.5 cents to 2.5 cents per share, fully franked.

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