IMA becomes casualty of 'price war'
posted a net profit of €13m for 2005, down 24 per cent from 2004,
since a rise in revenues was offset by one-off charges, operating
costs and a reduction in prices as the company tries to remain
IMA, which boasts GlaxoSmithKline, Pfizer and AstraZeneca among its clientele, is trying to maintain its profits in what it claims is a "price undercutting and discount war", with pharmaceutical machine and system manufacturers feeling alarmed due to empty portfolios and long customer decision-making lead times.
Responding to the increased regulatory focus on manufacturing practices that has made many drug manufacturers apprehensive, many machinery makers have dropped their prices to maintain their market share.
As a result, the gain in revenues IMA managed, up 7.2 per cent to 398.8m was wiped out by a 1 per cent rise in sales costs and a 1 per cent drop in gross margin, yielding an operating profit of €35.6m, down from €36.7m in 2004.
The firm said it saw stable demand in North America, good growth in Latin America, the Middle East and Russia, and poor demand in Europe and South East Asia.
Further reducing earnings, in addition to a generally unfavourable dollar exchange rate compared with the previous year, were a writedown and amortisation of goodwill for €3.5m, associated with longer than expected lead-times of new products along with inefficiencies for moving to new premises and unfavourable trade cycle in IMA-Kilian, and non-recurring expenses involved in reorganising the group of €2m.
"In 2005, the Group has consolidated its leadership position in our core businesses, but above all it has shown an ability to identify and pursue new paths for development in high potential markets," said Alberto Vacchi, IMA's managing director.
"The alliance with the Telstar Group (Spain) in the field of freeze-drying machinery for the pharmaceutical industry are proof of this."
IMA concluded a joint venture agreement with the Telstar Group's freeze drying machinery business in August and last week it completed the acquisition of Vima Impianti, a company that manufactures machines for dosing pharmaceutical products, for feeding plants manufacturing products in capsules and tablets, as well as dedusting systems for the pharmaceutical industry.
As the company sees increasing barriers to market entry, it hopes it can reposition itself in the industry to remain a leading presence - 90.3 per cent of its sales in 2005 were exports.
In its 2006 forecast, it expects an operating profit of around €44m, up €8.4m from 2005, buoyed by new opportunities in the biotech sector and a strong growth in generics.
Capsule filling is the biggest market for IMA, where it holds a 33 per share, but it also has a strong presence in blister packaging (28 per cent), sterile filling (20 per cent) and coating (17 per cent).