Zuellig Pharma Korea turns profitable in 6 years

Last year, sales of 885.3 billion won and operating profit of 900 million won

Salary cut and ↓SG&A 11.3 billion

Still risky with a capital impairment rate of 85%

Zuellig Pharma Korea, a global drug distribution company, escaped from complete capital impairment last year (total capital was negative).

 

Operating profit also turned to black for the first time in six years.

 

We are concentrating our efforts on improving performance by significantly reducing SG&A.

 

According to the Financial Supervisory Service on the 4th, Zuellig Pharma Korea recorded sales of 885.3 billion won and an operating profit of 900 million won last year.

 

Sales decreased by 2.7% from 909.9 billion won in the previous year, but operating profit turned to black from a deficit of 13.9 billion won.

 

This is the effect of reducing SG&A by more than W10bn.

 

In 2021, Zuellig Pharma Korea spent 94.1 billion won on SG&A.

 

Last year, it decreased by 11.3 billion won to 82.8 billion won.

 

In particular, the amount of wage payments plummeted from 32.5 billion won the previous year to 18.4 billion won.

 

Earnings improved, and the company was able to escape from a complete capital impairment that had lasted for two years.

 

Complete capital encroachment refers to a state in which a company has no surplus due to a large deficit, and even the paid-in capital has been eroded, resulting in a negative total capital.

 

Zuellig Pharma Korea was completely capital impaired with a total capital of -1.5 billion won and -14.5 billion won in 2020 and 2021.

 

Last year, the capital impairment rate was significantly lowered to 85.4%.

 

Even if not complete capital impairment, partial capital impairment, in which the total capital is smaller than the capital stock, continues.

 

This is because the company still has a deficit of 22 billion won.

 

Zuellig Pharma Korea's poor performance began in earnest in 2017.

 

A situation where sales increased but no profit occurred for five consecutive years.

 

In 2017, the company's sales increased by 9.2% from the previous year to 971 billion won, while net profit turned into a loss from 3.1 billion won to -1.8 billion won.

 

In 2019, sales exceeded 1 trillion won for the first time, but the net loss widened further.

 

The loss in 2021 reached 10 billion won.

 

Every year, the net loss led to the depletion of retained earnings and the accumulation of deficits, causing the debt ratio to rise out of control.

 

The debt ratio, which was 1340% in 2017, soared to 30,000% at the end of 2019.

 

In the end, it fell into complete capital encroachment in 2020.

 

Although performance improved last year, the debt ratio is still at a risky level of 15435%.

 

As Zuellig Pharma Korea is an unlisted company, there are no direct sanctions for capital erosion.

 

Listed companies are subject to delisting if they have a complete capital impairment or a capital impairment rate of 50% or more for two consecutive years.

 

However, excessive debt can adversely affect business operations.

 

Trade payables account for most of Zuellig Pharma Korea's total liabilities.

 

Trade payables, which are money to be paid to pharmaceutical companies that purchased drugs, reached 271.9 billion won as of the end of last year.