Hanmi Pharmaceutical(128940) said that with regard to the controversy over uncollected accounts receivable at its affiliate Beijing Hanmi, long-overdue receivables cannot be seen as immediately uncollectible or losses, and that it would strengthen the group-level receivables management system. It is seen as an attempt to calm concerns after reports that Beijing Hanmi's uncollected accounts receivable have surged recently raised investor worries.
Hanmi Pharmaceutical said in a statement on the 29th that it is closely reviewing improvement measures, including Beijing Hanmi's collection plan and steps to prevent a recurrence, and noted it is not true to conclude that accounts receivable uncollected for more than three months are entirely uncollectible or entirely losses.
Earlier, some media reported that Beijing Hanmi's uncollected accounts receivable jumped from about 20 billion won at the end of the first quarter this year to about 100 billion won in the second quarter, and that a significant portion arose from transactions with Korri Group affiliate Lunmeikang. Concerns were raised that if the uncollected receivables become prolonged, it could weigh on not only Beijing Hanmi's profitability but also Hanmi Pharmaceutical's consolidated results.
In response, Hanmi Pharmaceutical explained that Beijing Hanmi's accounts receivable have shown a seasonal pattern of increasing at year-end and being collected at the start of the year. It said total accounts receivable decreased from about 900 million yuan at the end of last year to about 670 million yuan now.
However, receivables in arrears for more than three months fell from about 320 million yuan at the end of last year to about 90 million yuan in February this year, then rose again to about 430 million yuan now. The company said it is analyzing the recent increase in long-term receivables in arrears while rechecking collection plans by counterparty and the receivables management system.
Hanmi Pharmaceutical emphasized that accounts receivable uncollected for more than three months are merely a classification item under accounting management standards.
It also said Beijing Hanmi's business competitiveness is being maintained. Beijing Hanmi's sales in the second quarter this year were 60.7 billion won, down from the same period last year, but it explained this was the result of a combination of changes in market conditions, including the seasonal off-peak due to fewer respiratory patients in China and the expansion of the national centralized procurement system.
The company said it plans to strengthen its growth base by expanding market share for items subject to centralized procurement, nurturing non-subject items, and developing new drugs. It explained that Beijing Hanmi has contributed to the group's finances based on cash flow generated from its China business, and that Hanmi Pharmaceutical has received a cumulative 138 billion won in dividends from Beijing Hanmi since 2009.
Hanmi Pharmaceutical's consolidated sales in the second quarter this year were 467.2 billion won and operating profit was 131.1 billion won, up 29.3% and 116.9%, respectively, from the same period last year. On a separate basis, it posted sales of 407 billion won and operating profit of 128.7 billion won, up 47.3% and 195.8%, respectively.