Addendum announcement from Astra Industrial Group related to Pursuant to the announcement of interim financial results for the period ending on 30-06-2014 (Six Months)
Further to Astra Industrial Group announcement dated July 20th 2014 and due to the significant amount of inquiries that we have received from the investment universe related to the drivers of the drop of profitability of the second quarter, Astra Industrial Group wishes to further elaborate on the profitability drop in second quarter:
First with regards to the Pharmaceutical sector, the decline in sales during the second quarter was mainly due to slower than expected growth in the overall market, in addition to the patients reaction towards MERS virus that caused them to avoid hospitals and clinics as much as possible. Such factors resulted in sluggish demand during the quarter along with the oversupply because of inventory overstock. However, company continued its marketing efforts to boost sales which resulted in higher marketing expenses during the second quarter. We would also like to highlight that the construction of new Injectible facility in Dammam is completed that resulted in increased pre operating expenses. The required approvals from Saudi Food and Drug Authority have already been obtained for the experimental testing of the facility which will take around 4 - 5 months. Upon successful completion of the trials, the company will start commercial operations.
1. Weak sales for Al Tanmia for Steel due to poor demand in the market for its products knowing the fact that the company is still in the early phase of commercial operation, which requires to build strong brand name and reliability among the customers for its products. In addition to that, the recent developments in Iraq has resulted in scaling down production volumes and sales of Al Tanmia for steel resulting in higher operating cost, which was disclosed as per announcement dated June 19th 2014. In spite of this, the company is continuously developing and improving the level of efficiency of the plant by implementing the international best practices for production produces together with putting continuous efforts to strengthen the team and marketing plans for the company.
2. Lower sales for International Building Systems factory mainly due to the delays in awarding and implementation of some of the projects which have been contractually agreed with clients together with increased production cost which was due to increase in cost of labor and utilization of the leased equipment's.
First with regards to the Pharmaceutical sector, the decline in sales during the second quarter was mainly due to slower than expected growth in the overall market, in addition to the patients reaction towards MERS virus that caused them to avoid hospitals and clinics as much as possible. Such factors resulted in sluggish demand during the quarter along with the oversupply because of inventory overstock. However, company continued its marketing efforts to boost sales which resulted in higher marketing expenses during the second quarter. We would also like to highlight that the construction of new Injectible facility in Dammam is completed that resulted in increased pre operating expenses. The required approvals from Saudi Food and Drug Authority have already been obtained for the experimental testing of the facility which will take around 4 - 5 months. Upon successful completion of the trials, the company will start commercial operations.
1. Weak sales for Al Tanmia for Steel due to poor demand in the market for its products knowing the fact that the company is still in the early phase of commercial operation, which requires to build strong brand name and reliability among the customers for its products. In addition to that, the recent developments in Iraq has resulted in scaling down production volumes and sales of Al Tanmia for steel resulting in higher operating cost, which was disclosed as per announcement dated June 19th 2014. In spite of this, the company is continuously developing and improving the level of efficiency of the plant by implementing the international best practices for production produces together with putting continuous efforts to strengthen the team and marketing plans for the company.
2. Lower sales for International Building Systems factory mainly due to the delays in awarding and implementation of some of the projects which have been contractually agreed with clients together with increased production cost which was due to increase in cost of labor and utilization of the leased equipment's.
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