Due to the increase in the price of Chinese herbal medicines, the profitability of many pharmaceutical companies has declined

Affected by the expansion of market demand, the implementation of the new version of the Pharmacopoeia, natural disasters, as well as business hoarding, speculation and other factors, the price of Chinese medicinal materials will increase significantly in 2021, which will bring pressure on the performance of the majority of Chinese medicine companies
.
Recently, many pharmaceutical companies have stated in their performance reports that the company's profits have declined due to the impact of rising raw material prices
.
The profitability of many pharmaceutical companies has declined.
Jiaying Pharmaceutical recently released its 2021 annual performance report.
The company's total operating income was 575 million yuan, a year-on-year increase of 5.
5%; the net profit attributable to shareholders of the listed company was 1.
4773 million yuan, a year-on-year decrease of 92.
55%
.
Among them, in terms of single-quarter net profit, both Q2 and Q4 suffered losses, which were -3.
5786 million yuan and -3.
0173 million yuan respectively
.
Regarding the reasons for the decline in performance, the company said that it was mainly affected by the sharp fluctuations in the price of Chinese medicinal materials
.
Some of the main raw materials of the company's products, including turkey worms and isatis root, all increased in varying degrees.
The increase in the price of Chinese herbal medicines increased the company's manufacturing costs to a certain extent and increased the pressure on the company's operating performance
.
Wohua Pharmaceutical first disclosed its annual report on the evening of January 20.
The report mentioned that due to the sharp rise in the prices of Chinese herbal medicine raw materials, packaging materials, and energy, the company’s 2021 annual performance was “stable and slightly down”, with an operating income of 943 million yuan, a year-on-year decrease of 6.
3 percent.
%, the net profit attributable to shareholders of listed companies was 163 million yuan, a year-on-year decrease of 8.
6%
.
How to deal with rising prices of medicinal materials? In the case of rising prices of Chinese herbal medicines, the cost of pharmaceutical companies is under pressure
.
So, how should companies respond? It is understood that many pharmaceutical companies have taken measures such as improving the level of production technology, developing their own medicinal material planting bases, upgrading equipment, and improving processes to achieve the purpose of reducing costs and increasing efficiency
.
For example, in response to the increase in raw materials, Wohua Medicine has actively taken measures.
It is reported that in early 2021, the company will start the production process optimization project of Gushukang capsules, which will effectively reduce the water, alcohol, steam and sewage treatment costs and product costs, and increase the extraction space by 16.
7%.
%
.
Jiuzhitang has strengthened the market monitoring of key materials, and carried out strategic reserve and inventory management in a timely manner to stabilize the risk of fluctuations in raw material prices.

.
At the same time, the company continuously improves the production technology level, optimizes the product production process, and controls the production cost
.
In the first three quarters of 2021, the company achieved a total operating income of 2.
99 billion, a year-on-year increase of 12.
4%; a net profit attributable to the parent of 270 million, a year-on-year increase of 18.
5%
.
Taiji Group put forward a specific strategic plan on the cultivation and operation of Chinese medicinal materials - "1020 Project", which focuses on the development of "10 large-scale planting bases" represented by Hebei, Northeast China and Chongqing, with Pinellia, Atractylodes and Golden Buckwheat as the The representative "20 core planting varieties", make great efforts on the superior products, further improve the quality of medicinal materials, and use large-scale and standardized high-quality planting to drive the benefits of the products
.
In response to the increase in raw material prices, the company stated that it will ensure the stability of raw material supply and prices by developing its own medicinal material planting bases, conducting strategic cooperation with base customers, and strategically storing bulk medicinal materials.
Reduce the impact of rising prices of medicinal materials on costs
.
Another example is Zhongxin Pharmaceutical.
The company once stated on the investor interaction platform that in the face of fluctuations in raw materials, the company's medicinal material companies use the bidding procurement platform to purchase raw materials in a timely manner through scientific procurement decision analysis, and effectively and reasonably control procurement prices.
Reserve bulk materials needed for industrial production
.
In addition, the company organizes cost reduction projects every year
.
Enterprises achieve the goal of reducing production costs through measures such as centralized procurement, process improvement, equipment upgrades, energy saving and consumption reduction, and cost reduction
.
Disclaimer: Under no circumstances does the information or opinions expressed in this article constitute investment advice to anyone
.