Hi. Good afternoon, everyone. A warm welcome to everyone to the First Quarter 2025 Financial Performance of Mega Lifesciences. Thank you, everyone, for your participation. We have with us our CEO, Mr. Vivek Dhawan.
Hello. Good afternoon. Vivek here. Thank you for joining.
We have Mr. Thomas Abraham, Chief Financial Officer.
Hello. Hi.
We have Francis Rego, Senior Vice President.
Hello. Good afternoon.
And myself, Manoj Gurbuxani. For today, the way we will conduct this call for the upcoming one hour, we will start with the brief synopsis of the financial performance for first quarter 2025. Thereafter, we will have our CEO's insights on the financial performance for the first quarter and the future outlook. Then we will open the forum for the Q&A. We would request when you raise your questions, please let us know the company you represent and your name while you are raising your questions. Thank you. Going by the agenda, I'll first give you a brief of the first quarter 2025 financial performance. On an overall basis, the first quarter 2025, our revenue has been at THB 3.2 billion, representing a decline of 14.1%, which is coming from the Maxxcare business in Myanmar.
Going by the segments, the branded business for first quarter 2025 was at THB 1,984 million, reflecting a growth of 2.8%. The branded business is doing well. If we normalize the impact of the decline in Myanmar for the branded business and the currency impact, which is coming because of the appreciation of Thai Baht to USD on a YoY basis, the Mega Lifesciences branded business, in fact, is growing for other markets at low double digits. The distribution business for first quarter 2025 declined by 33.5%, which is fully attributable to decline in distribution business in Myanmar. This is the reason also why the overall upline is declining at 14.1%. Going now on the gross margins, the gross margins for first quarter 2025 have remained healthy at 52.5% of the operating revenue as compared to 46.8% for first quarter 2024.
The improvement in gross margin is mainly coming because of the segmental mix and also improved gross margins of Maxxcare business. Branded business gross margins have remained healthy and stable at 65%, a marginal improvement as compared to last year when the gross margins were 64.3%. Distribution business gross margins also have remained healthy at 29%, at against 25% last year. The overall SG&A cost has remained stable at THB 1,064 million, flat, representing 33.2% of the operating revenue as against 28.6% of the operating revenue last year. SG&A expenses as a percentage to revenue is looking higher, which is primarily on account of decline in Maxxcare business. Otherwise, in absolute terms, it has remained flat. The reported net profits have been at THB 415 million, very similar to last year at THB 478 million.
In spite of decline in the Maxxcare business, the decline in net profits is marginal, which is mainly happening because of the growth in branded business. The adjusted net profits have been at THB 486 million, similar to last year at THB 494 million. Similar reason, in spite of decline in the Maxxcare business, we have been able to maintain our adjusted net profits for first quarter 2025, which is mainly happening because of the growth in branded business. Our operating cash flows are healthy at THB 398 million, representing 88% of profits. We continue to remain a net cash company with a strong balance sheet. We have spent close to THB 270 million on CapEx for first quarter 2025, which is mainly arising from capital advances we paid for acquisition of land in Vietnam.
A small portion has been spent towards manufacturing operations in Indonesia, Thailand, and Australia, which is mainly coming from capacity expansion in our manufacturing facilities in Indonesia. The CapEx future spending, we will be spending close to THB 515 million, which is mainly coming from capacity expansion for our Indonesian manufacturing facility. This is apart from the $3 million to $4 million CapEx we spend every year as maintenance CapEx. This has been very brief, the synopsis of first quarter 2025. I will request our CEO to provide his insights on the financial performance and the future outlook. Thank you.
Thanks. Manoj. I think Manoj has covered most of the performance historic last quarter. I think the challenge all of you will observe is distribution. As you know, distribution is a Myanmar-focused business. Large part of it comes from Myanmar. If I'm not wrong, somewhere between 80% more was there in the old days. A lot of it was also consumer business. With licensing difficulties and all that, the consumer business has dropped significantly. Pharma is still good. The focus for us also and going forward as well, I think, with the condition in Myanmar, unless things change, the pharma business is what we are. Also, our focus remains there is to get licenses and to keep doing business. That is stable and delivering profits. We are not expecting major growth out of Myanmar.
We are not projecting double-digit growth there, which we had earlier. We have to wait and see as long as we can continue to do our pharma business and continue to make profits that we were making before. We are in good shape. We have done all the correction in terms of cost reduction, manpower reduction. Everything has been done. If we can maintain our pharma business where we were, our margins and profits should be maintained. We are ready for expansion. We are also looking at some opportunities in Myanmar to look at building a manufacturing site as we had done before. It is part of our thinking at the moment. Nothing is finalized so that we can produce locally, supply locally, and make imports and licensing much easier. That is part of the plan. Nothing is confirmed yet.
As and when we do, we will get back to you. This is something we have discussed in the board. No plans and no numbers have been put behind it. In the long term, we are evaluating that, number one. Number two, Indonesia business is progressing well. There are growth rates happening from local production. Production has doubled and gone to two times and nearly going further beyond that in this year. Things are in place. Our factory is getting ready. We hope to have it ready by the end of the year. Hopefully, next year, we could in the first quarter. Later by second quarter, we should operate that new plant. We are also building a warehouse there as our requirements are growing and production is growing. Many new products are also getting registered.
Import only ones as well to the new plant because of that. Those also will get launched. Some good things have happened. We have just launched our first brand, GOFEN in [GOFEX], a call in Indonesia. One of the first in the country. We have a software line also we are building there for future supplies. These are some interesting things happening in many countries that we are working on. In Indonesia, we are committing and putting efforts and resources behind building that country to become a sizable both consumer health and pharma business to contribute to the future. I think in our earlier presentation, we have given 2030 and somewhat $50 million. These are projections if I'm not wrong. We believe we are on track to get there in the next five years. The other project that we have in hand is Vietnam.
Overall, Vietnam business is doing fine. The consumer health side is doing well. Unicar, VietBot is doing well. Many new products are being launched. At the same time, looking at the Vietnam government, we had mentioned with the facilities and the plan in the country, localizing production being there for the last 30 years. It's something that we have to do. We have got a land which is not very far from Ho Chi Minh, reasonably sized, I think 40,000 over acres, 40,000 sq m of a facility, a land area. We are going to build. Design is done. Hopefully, June, July, we should be finalizing the construction. Next year, by 2026, we should have the plant ready. There, but production can only start in a year's time after that. It is a longer gestation. It is a long-term investment as pharma plants are.
Looking at the growth in Vietnam and for us looking at really growing and being a serious player there, it's a long-term commitment to Vietnam. We believe in the future of Vietnam as well. That is what we are doing. That is the second, third project in hand. Other than that, Thailand, we have done all the expansions. We are also doing some more new dosage forms we are working on in Thailand, which we are evaluating to build in our Thai facility at the moment. A lot of interesting new projects are also working in our Thai plant. Otherwise, production has picked up and things are looking good. Our pharma business has become sizable now. As we mentioned in the past, it is now 35% around that range.
OTC, but we also put OTC, our consumer health, their pharma, but we put them in the consumer health division for Mega. That's about 15%. I think our Nutra or the vitamin complementary medicine, as we call it, a lot of them are drugs, various kinds of probiotics and all that. That's about 50%. Overall, 50, 15, and 35, approximately in that ratio. Progressively, we launched some 36 products, I think, this year between pharma and Nutra put together, pharma and [comp.] We've got about 120 products in pipeline. That's also progressing well in registration. Some very interesting new areas that we are working on. We went into some new areas last year, inhalers, ophthalmic area. We launched a few products in these new categories. We are also working on them very seriously to expand our reach and categories.
Put that together, I think we are on track to deliver what we had promised in 2025. I think based on 2019 profit, we had made a plan that we'll double our profits in 2025, which is very close. We are already very there. Maybe there's some impact because of the taxation, I understand. Our BOI privileges will get over in 2025, so that may have some impact on the bottom line. If you look at it in equal terms, we are there. We are very close. We are there. We will deliver on our earlier plan projection. On a longer-term basis, we are there. I mean, quarter-wise and year-wise, there may be some variation because of the nature of our business, delay in registration, launches. This is very common in the pharma business.
We are working on a five-year, next five-year plan at the moment. The company is going through a disruptive thinking model to do many new things, invest in the future. Hopefully, we'll look at another doubling in five years or more. We will get back to you, I believe, by quarter one next year with our plan. Somewhere in that vicinity, we expect to grow our business and become bigger. Again, go out and build strong brand, Mega We care, around the 32-33 countries we are in. Our focus is only Southeast Asia, Sub-Saharan Africa, a few countries in Latin America, the new ones, Peru, Colombia, etc. In a few of them in CIS, Ukraine, Uzbekistan, we are working on. That's about where we are focused on.
We want to really go out and go deeper, stronger in those areas and build them into serious branded businesses. One of other concerns we may have, I think in the past in Nigeria, but I think Nigeria has turned around the corner. That big hit was something that none of us could control. We did everything we could. Now we are better prepared with local lines and all the other facilities, stock line in hand, which we can correct prices. Things are turning around. I think first quarter, we have made a profit. I mean, that was only once in what, 10, 20 years we had a bad year in Nigeria. For 20 years, 15 years, we have done well in the country. We hope to get back to normal Nigerian business here. Otherwise, profit also first quarter is good.
If you look at 33% decline in distribution and the brand growth, the brand growth we are reporting is 2.8%. But as I understand, if you look at the dollar, it was very strong in the first quarter. It also has an impact on growth. Real growth is a higher single digit, not lower single digit. Brand growth is growing at a higher digit. That is why our bottom line is still looking good at THB 450 million, adjusted to THB 480 million. I think overall, business is in the right direction. We believe that with more focus and building our brand in the markets we are in, we should be able to deliver on the growth that we have promised in 2025, that higher single digit growth and that bottom line that we have also discussed earlier.
From my side, I think that is probably all, unless I have missed something that I should tell you for a common question that answer. Then we can take some of your specific queries if there are any. Nothing else. I mean, the rest is standard, natural food, wellness, we care. They're all parts of our basically, we report them for various reasons to separate them, to look at them individually. But actually, natural food is a branded business under Natural We care, which is also a line extension of natural, preservative-free, color-free, healthier products for mother and child and elderly. We just report it for the purpose of keeping it as a separate entity. Wellness We care is a Mega social enterprise, which also helps to build our brand image.
We do a lot of work with doctors, pharmacies, our own people, and helping them improving health conditions. As you see every day, NCDs and growing non-communicable diseases in every country, government not being able to afford, hospitals having difficulty paying for all these medication and surgeries. I think one of the future lies also in prevention. Mega being in that business, it's a very important part of our offering that we make in countries where we say we care for your wellness and we help people to stay healthy as long as they live. It is an initiative and we spend money there as part of our social enterprise. Our wellness foundation also is doing something in that area. We educate people in every country. I think that's about it from my side. Please, the floor is open to you.
We are here to answer questions as many as we can. If there's anything we miss, we are always available, I think, to answer them anytime at your convenience. Thank you so much.
[Foreign language] The first question is, Indonesia factory progress and [appropriately ].
break even. Break even I will mention in three years. I think one year, next year or the next following year, we should break even. We're getting close already. We're very close this year, as I understand. Probably next year, to bump, the thing is to bump production up. Because of the limitation while we are building, we could not bump it all up. Next year, if things are good, our blister packers and all machines get installed, capacity goes up. Most likely within next or the year after that, we start.
EBITDA basis, we should. Next year? Next year. [crosstalk] EBITDA basis this year, otherwise factory clear. Maybe a year or two. By 2013, we are talking about what, $5 million that we have put on a $50 million. Something like that, that's the profit we are looking for. By next within 2025, 2026 years, we should be very close to getting there. Factory is progressing very well. It's nearly the building is done. There are some little requirements by the new FDA. They've asked us to build some new areas to join both the factories, which is going to take a little longer. Plus minus two-three months, we are there. I think we have planned first quarter next year, at the most maximum second quarter.
The culture in Indonesia taking supplements. What is the plan to grow Indonesia market?
Supplements, we do a few of them. We also have herbals made locally there in the country. There we buy locally and sell. We also have a herbal range. Mega has a herbal range also we are registering. That is not jamu, but that is international herbs. From saw palmetto to other herbs, we are also building on that. I think our focus last year also is OTC drugs. We are registering a few of our OTC drugs, GO, GAS, GOFEN, etc. We are building on those areas, OTC drugs more than pure vitamins and herbals, which we have some selected areas. We have picked some areas to play, not every area. In the drugs and the OTC consumer health areas. Some in the supplement, as we call them, it's not supplement, but specialized areas in medical nutrition, in probiotics for diarrhea, etc., kids' health.
We are picking certain areas where we want to play and build on. That is work in progress. Sure.
Sure. [Foreign language]
Hello. [Foreign language] .
I think you have a question.
[Foreign language] Thank you very much for your sharing, นะคะ. Okay, I have a few questions. Let's start with the situation in Myanmar. Yes, we have seen a very, you know, declining from distribution sales in, actually, distribution sales of which are mainly from Myanmar, right? My question is that when will the deterioration effect from Myanmar be like fading? When will Myanmar be like reset to the new low base? In your opinion, probably like... I think, yes, I know it is a very difficult question, but just... Just to be sure about.
I think by fourth quarter, it should probably reach its bottom, right? This year.
Already what we are doing is the pharma is being largely... We do not separate the two out. Unfortunately, we do not do that at the moment. Pharma is also coming down. The good thing is we are protecting the margins, right? We are also growing some of the other areas and protecting the large profitable businesses are protected. That is why our profit in pharma remains strong. While there is a decline in certain consumer, big decline, pharma also there is some decline because of import permit restriction. Number two, also demand, right? If 50% of the market is fighting a war and you cannot reach those territories, then also the market size also shrunk. Market size has shrunk and income has shrunk. Both put together in that market we are playing, we are still doing quite well at the moment, right? That is the key.
Our margins are being protected with that kind of size. That is the big thing. We believe by the end of this year, whatever decline has to happen in the fourth quarter, you will see it cannot go further below that. We should see if things get better, things improve, countries improve, and the war goes away. Hopefully they will also get a little bit... Election coming up. Yeah, election coming up, they want to look nice. All these things happening, you know, and the China trade war goes away, then mining, all these things that Burma is a big supplier of minerals to the Chinese, that side. Maybe there will be some focus. If the other wars go away, they will focus on solving Myanmar problem, right? We are hoping after election, other things, a little improvement should happen.
It can't get worse than that. That's the whole thing.
[Foreign language] Okay.
That's what we understand. That is what our thinking is. It shouldn't get worse than this. We can maintain what we have. With future one or two years with election, with all this, there should be some improvement. We are not saying there'll be major improvement unless something else, something drastic happens. It should come to an end point there. It can't go below that.
Yes, I agree. I ask this question because we have seen the very strong recovery of the owners' brand business for Mega, right? Once the negative effect from Myanmar has been fading, fading, and fading, we would see a very strong recovery on your core earnings. That's my...
Yeah, that can be possible, but let's wait and see. We don't want to make any predictions on that.
We don't want to get out in that area because this is again making assumptions, right?
Okay.
Yeah, till the fourth quarter, it will remain. We are, but we are very confident that branded business from all other markets, the way it is going. If that happens, we can still go above single digits. We should be in very good health. The real big thing is that if it will go this 5%, 6%, 7%, 8% of branded business and the dollar doesn't go up and down to 30% and then 35, then we are in good shape.
[Foreign language] Okay, let's move to branded business, [Foreign language] . Yes. We look at your MD&A, right? The branded business sales in Africa is very strong, 14% growth, right, in the first quarter. Other countries up about 6%, right?
Could you give me more color on that or about should the growth be sustaining in the second quarter of this year?
Do not just go by quarter to quarter, Africa becoming 14% and 18%, but there will be an average that 5%-8% growth that we are talking about. Sometime in a quarter, Africa will have a small base, goes up. If Asia grows 4%-5% on a big base like Thailand, the amount is phenomenal, right? The volume, it has a big impact on the bottom line because your production quantity is much different. 5% of 75% is a large number, right? 15 and 14% of 15% is also equal. So units grow, volume grows, business grows, bottom line improves. It is very different. I think both are in different stages. There are certain new launches, certain new countries, things are happening.
Nigeria is doing well, is growing, and we are bullish. We are putting in efforts in Africa anyway. That is the market we want to grow. In the next five years, as I said, this should become, both growth will not become 50%, but it definitely becomes a larger part of our business and a profitable part of our business. Contributing. I mean, if you look at all of Ethiopia, 100 million pieces there, countries improve, oil exports are going on from every year that all these things get better. Nigeria 250, 100. This is a 700-800 million people market, right? All the disturbances are there, but a lot of them are getting better. If you go to Ethiopia, better airport, better road, better building, a lot of things are happening around the country.
If they all get a little bit better by the day in the next four, five years, countries improve, Mega has strong brands. I mean, we really, really are building some good brands in that area. Also, we do pharmaceutical, but brands also. Put that together, I think we should have, I believe, and if you think of it, we should have a good chance to become a good player there because we have people, we have team, we have product approvals, we have a brand we have built for a long time.
[Foreign language] You mentioned about high single digit growth. [Foreign language] Apology, [Foreign language] . What about high single digit? What is for top line of branded revenue growth or bottom line growth?
I'm talking only about revenue growth.
Revenue growth [Foreign language] ? High single.
Yeah, we are only reporting revenue growth, right?
We said 2.8% if it's not adjusted to dollar. Without dollar adjusted, brand grew 2.8% in the first quarter. Actually, if you look at it, it's more, it's 5 point something. Because of the dollar, 7%, 7%, about 7%. That is what is the real growth if you don't need the dollar connection in that time. I'm only talking about that, that if we can continue to grow that 7% in between 6%-8% average, nothing is exactly 7, but 6%-8%, we should be able to deliver our bottom line. That is what I was saying. We did that in the first quarter, 7%. It's only because the baht rate, it looks 2.8%.
Brand revenue growth without effect, [Foreign language] . Okay, my last question [Foreign language] . In Indonesia, [Foreign language] . You talked about the new manufacturing facilities, right?
Yes.
Coming next year, should we concern about additional cost burden from new commercial run of the new manufacturing or any fixed cost we should concern? And how far we go for like bottom line break even in Indonesia? You mentioned about EBITDA break even, probably fourth quarter this year, right? What about?
Approximately this year, if not next year for sure. Next year we are looking at, not next year, I would say 2026, 2027, we are looking at bottom line break even in Indonesia.
[Foreign language] .
Growth, I mean, the thing is we are already loving the plant, and the plant was small, so it's tight. With this coming up, happening, we have some extra manufacturing space to build capacity also, but we can then produce more. We can double the units out of this, out of the new plant.
That's how we are putting machinery, but other things in there. The good thing is today we are limited, but if we have more, we can probably also be getting new products to register, new products as well. We need the capacity, right? It should not add to the cost that much, but the number of people and all may not change. Running cost may not change dramatically because, yes, we'll run this plant and that one will probably, the old one will not run. Minor increase, but also it should probably get adjusted with higher outputs. That is what we think. There will be some increase, but with higher output, it should get adjusted.
[Foreign language] . May I have one last question? [Foreign language] . On tax issue, right?
Without BOI, is there any mitigation plan to mitigate the high probably result of the higher tax effective tax rate? [Foreign language] .
Yeah, mitigation, [I'll handover to Manoj] .
Yeah. So we always look forward to applying for the BOI tax incentives, and we are working towards it. But this year, the first quarter, the tax rate has been at 15.6%, but quarter two to quarter four of this year, the tax rate should be close to 20%. On average, for the full year, it will be in the range of 18%-19%. As the privileges come in in the future, we can go back to the effective tax rate, which has been at historic levels. This year, you can expect tax rates to be in the range of 18%-19%. Thank you.
[Foreign language] .
Any other questions from anyone?
You see, yeah, yeah, Mingling, you can ask your question, please.
Yes, I want to ask about my last question. The third question. Can you walk us through the process of selling products in other countries like Nigeria or maybe Myanmar? I want to know about the FX impact.
Generally, we import into the country, store in our own warehouse, and we correct the price in local currency to the latest rates in the market. Generally, we are also ahead of the market. We are selling at plus some percent. When we collect in the local currency, we convert it to dollar. In Myanmar, it is converted immediately to dollar. In Nigeria, we had all time sometime receivable, and the time to convert it, it takes longer. That also, we have now got a model, right?
We have a local line, then we convert money into dollar and thereby reducing our exposure in the market. That's all. We correct the prices, but if the exchange rate goes from NGN 400 to NGN 1,000, NGN 500 is a big jump. If NGN 1,500 becomes NGN 1,560 or NGN 1,420 or NGN 1,600, it's a very small NGN 100 change equal to 100 over 1,500. How much is it? It's about what? 5%, 4%, 5%. It's not much. We don't have a big issue there. That's how we manage the price. We correct the selling price to the market rate, and we convert it. That's how we manage.
When we can call Manoj or Francis or me, we will explain in detail.
Yeah. Can you please let me know which organization you are from? Sorry.
I'm from Alpha Absolutes. It's a private fund company. Yes, I can call you later.
Walk me through the process. Thank you very much.
Thank you. Thank you.
Can I have more detail on the Indonesia market? The reason I asked about the culture in Indonesia is that I heard that they take supplements and drugs differently from Thailand. In Thailand, we tend to use vitamins or drugs that are not from herbs, not much from herbs. I heard that in Indonesia, they tend to eat supplements or drugs with herbs. That is why I asked that. Is it difficult to make marketing in Indonesia or any plant that you can involve the culture into your product?
Every country is a minute different. Vietnam eats a lot of herbs. Philippines eats a lot of different vitamins. When we go to a country, we have to follow the drug regulation, right? Every country has regulations. You cannot mix herbs with drugs.
You cannot mix herbs with vitamins. Some countries cannot do that. Some countries can do that. Our objective is very different. We make what is scientifically correct. We sell herbal medicines as herbal drugs. We do not sell magic a little bit here and there. In Indonesia, there is a culture called jamu. It is a local medicine. Like Thailand has Thai traditional medicine. Also, we have many Thai traditional medicines. So many. Also very big, but very cheap. In Indonesia, you also have Indonesian traditional medicine. You also have vitamin supplements, and we have vitamin supplements with herbs also mixed, some of them. There are different categories. We have products in the vitamin supplement category, some. That is not our biggest business there. That is one part of our business. Our business is pharmaceuticals, a largest over-the-counter drugs, self-medication medicine.
Two, and number three is vitamin supplement, herbs, etc., etc., which we register and market in the country as allowed by the law, right? They are all different categories. Culture in Indonesia, we are not competing with the low-end jamu, large volume across the country category. We cannot do that. It is locally made. The law is all for local production, only for Indonesians. Only Indonesians can manufacture and sell jamu medicine. It is very different. International herbal products, German herbal products, these products, etc., we can sell, we also sell.
Okay. Thank you.
Any other questions from anyone?
All right. Thank you, ladies and gentlemen. It has been good to talk to you today. If there are any more queries, questions, things you want to know, please contact our colleagues, my friends here. We will be happy to answer them.
Look forward to seeing you again next quarter. Thank you so much. Have a good day.