JGL business results for 2010
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JGL business results for 2010

7 min of reading Published: 01.3.2011.

JGL is a fast-growing pharmaceutical company founded in 1991 which developed from a central laboratory for manufacturing and controlling magistral and galenic preparations of the “JADRAN” Rijeka pharmacy. Systematic investments into employee knowledge and new product development, in addition to a close relationship with our customers and investments into modern technology for manufacturing and controlling drugs, have resulted in JGL becoming the third pharmaceutical company in Croatia.

Company growth
Since its founding the company developed with high growth rates. The overall company revenue increased from HRK 1.5 million in 1991 to HRK 630 million in 2010, with which amount the JGL Group ended the business year. The average growth rate in the period observed amounted to 23% a year, placing JGL among highly propulsive and fast-growing companies. Sale revenue made at foreign markets in the period observed grew at the average rate of 40%, contributing to a 65% share in JGL total sales in 2010.

In 2010 JGL achieved the following results:

  • HRK 500 million of overall revenue
  • HRK 312 million in export
  • Sales increase of 36%, export growth in the amount of 67% compared to 2009
  • Total of 480 employees
  • A total of 29 additional persons were employed in Croatia in 2010
  • HRK 28.9 million were invested

The following tables give us an overview of the realization in 2010 compared to the past three years. It is clear that 2010 was the best business year in terms of all sales and financial parameters from the company founding.

The table shows that long-term assets grew by 11% in comparison to 2009, and short-term assets recorded a 13% growth. The stocks remained at the levels equal to those in 2009 and the receivables decreased by 2%. The capital and reserves grew by 20% and the long-term obligations marked a more significant increase by 60%.

The table also shows that the company made up for the minimum decrease in sales in 2009 more than successfully, recording a sales increase of 36% in 2010. Expenditures grew at the same pace and profit for the year 2010 increased by 33% compared to 2009.

Due to significant investments into fast growth in the period observed (new product and market development, technological and personnel development, etc.), JGL’s profitability was at an enviable level, clearly visible in the following diagrams. The EBITDA margin for 2010 amounted to 16.30%, the EBIT margin was 10.30% and the net margin 7.37%, respectively.

Significant events within JGL in the period from 2007 to 2010

Launching JGL’s business to well-regulated markets such as the EU over the past four years was made possible by significant investments into technology (a new quality control laboratory was opened, and a semi-solid forms plant was redesigned). The same trend continued in 2010. Significant investments were made into the quality assurance system – investments were made into the Good Manufacturing Practice (GMP) in the warehouse for incoming raw materials and in the microbiological laboratory (Pulac location), as well as into the eye drops technology (Svilno location). After the recertification audit regarding ISO 22000:2005, the ISO 9001:2008 (Quality Management), ISO 13485:2003 (Medical Device Quality Management Standard) awards and the European GMP certificate related to the technology of producing sterile ophthalmological preparations, dry oral forms (tablets and capsules) and semi-solid forms (creams and ointments), in 2010 JGL affirmed its position among European producers, with a fully certified quality management system.

A special feature of JGL production is the sterile eye solution and spray production which, due to large investments and high quality demands, lacks high quality producers since it resembles “niche” production. Numerous companies have recognized our potential as a business partner in that segment, which is why a project of manufacturing the first generic drug was launched in the prostaglandin group of eye drop production, used for the treatment of glaucoma. The company has, within the project and thanks to its own technological innovation and successful production validation process, manufactured the first drug in Europe to be successfully launched on several European markets through its licence partner – the Swiss company Siegfried. The contractual production realization sales amounted to HRK 4 556 000 in 2010. JGL is producing the drug for large generic companies such as Ratiofarm, Sandoz, Actavis and Mylan. The production plan for 2011 included 2 500 000 packagings of eye drops. The sterile eye drops production certification for Canada is also under way, which will result in new projects, both development and production projects within the eye drops portfolio.

Over the past four years the company has launched 149 new products and in 2010 alone it launched 31 new products, as shown on the diagram below.

The business period from 2007 to 2010 stands out due to the publication of the Sustainable Development Report which provided insight into the economic, environmental and social business activities in the period of 2008/2009. JGL’s socially responsible business was recognized by the Croatian Chamber of Commerce in February 2011, when JGL received the Indeks DOP award for the biggest progress in comparison to the previous year.

The strategic guidelines validity was confirmed over the past four years, through many other acknowledgements such as the “Ulagač godine” (Investor of the Year) award by the Agency for Export and Investment Promotion, the “ICT Gold” award (the first Croatian national award for the best ICT implementation by a non-IT company) and the “Zlatni ključ” award for the best exporter to the Russian market. Our umbrella brand JGL was honoured with the prestigious “Superbrands Croatia” status, in addition to the Aqua Maris and Adrience brands that have already been awarded the same status.

 

Overview of financial results per production programme

Prescription drug programme

The prescription programme dealing with generic drugs made net worth sales after discount in the amount of approximately HRK 137.2 million in 2010. When compared to the plan, this is approximately 1% over the plan, while in comparison with the previous year, it is an increase of approximately 8%.

In terms of individual markets, the local market prevails in this programme, accounting for as much as 83% of the sales. Approximately 5% over the plan was accomplished on this market, and about 6% over the plan in the previous year. On the Russia, Belarus, Ukraine and SEE markets apart from Croatia, some HRK 9.8 million were generated, which is lower in comparison to the plan and realization in the previous year (a variance of approximately 91%). The reason for lower results lies in not accomplishing this ambitious plan in Bosnia and Herzegovina, as well as in setbacks in Serbia and Kosovo.

This programme was launched on the Russia, Belarus, Ukraine and CIS markets with realization surpassing the previous year by as much as 59%. The plan was indeed even more ambitious, but a satisfying variance of approximately 94% was eventually achieved. The plan for all CIS countries recorded high growth rates (Russia, Ukraine, Kazakhstan and Georgia).

In terms of programme structure, the following groups recorded the biggest success:

  • A-drugs with an effect on the digestive system and substance exchange – 15% growth
  • B-Preparations with an effect on blood and blood-forming organs – 12% growth
  • C-Preparations with an effect on the cardiovascular system – 5% growth
  • L-Drugs for the treatment of malignant diseases and immunomodulators – 153% growth
  • P-Drugs for the treatment of infections caused by parasites – 165% growth

JGL ranks 15th among all producers (of both generic and original drugs) on the Croatian market, assuming 5th place among the generic drug producers (following Pliva, Belupo, Krka and Sandoz). JGL’s share in the overall Croatian pharmaceutical market amounted to 2.69% in 2010 and it increased from 2.66% recorded in 2009.

JGL’s portfolio consisting of around 300 products on the Croatian market is largely focused on drugs. In 2010 JGL participated in the overall market of HRK 4.9 billion (covering prescription drugs given at pharmacies and drugs used in health institutions), which is an increase of 1% compared to 2009, with a 2.7% share which amounted to a 4% profit growth compared to the previous year.

If one takes into account an even narrower segment – only prescription drugs issued in pharmacies (and excluding consumption in hospitals), JGL’s share among its competitors in this segment is even bigger and amounted to 2.95% in 2010. JGL ranks 13th among the producers in the above-mentioned segment, with a 4% growth compared to the previous year, in a market the total value of which was HRK 3.9 billion in 2010, which grew by 4% compared to the previous year.

Non-prescription programme

The non-prescription programme which merged the old OTC and cosmetics programmes generated approximalety HRK 155 million in 2010. When compared to the plan, it is a variance of 96% while realization in the previous year exceeded the plan by a significant 43%.

A decrease of approximately 7% was recorded on the local market compared to the previous year, as well as the plan variance of only 87%. Lower results were also recorded in other Russia, Belarus, Ukraine and SEE countries with a decrease of 4% compared to the previous year, and a plan variance of only 77%.

Unlike SEE, this programme recorded a high increase (variance of 218% compared to the previous year, and 105% compared to the plan) on the CIS market.
This programme is also present on the Hungarian market where the plan was exceeded by 61%, even though amounts on this new market are still small.

In terms of programme structure, the following groups and brands recorded the biggest success:

  • OTC drugs – 97% growth
  • Dramina – 25% growth
  • Hepan – 22% growth
  • Prolax – 104% growth
  • Prolife – 103% growth
  • Purgal – 107% growth
  • Children’s ointment – 106% growth

 

Aqua Maris programme

The Aqua Maris programme, which was exempt from the former OTC programme through strategic reorganization due to its significance, recorded further growth in 2010. It was realized with approximately HRK 179 million, presenting growth in the amount of approximately 59% compared to the previous year and the plan fulfilment variance of 110%.

It recorded the lowest results (20% less than the previous year) on the Croatian market, but on the markets in other SEE countries it did better by approximately 15% compared to the previous year.

Year 2010 was a great year for its key market in Russia, Belarus, Ukraine and CIS. The plan was realized with a 114% variance, while the previous year was exceeded by 66%.

The success on the primary market of MBU Russia is of particular significance, with realization of approximately HRK 143 million, which is a growth of 78% and plan fulfilment by 120%.

In terms of other markets, realization was also recorded in Hungary and Poland, but not to a significant extent. The reason for this is a change in the wholesale partner on those markets.

Contractual production

The new contractual production programme generated approximately HRK 4.6 million, what marks a significant increase of HRK 170 thousand in the previous year. It significantly surpassed the plan (of approximately HRK 1.9 million).

Main markets

After twenty years of its existence, JGL is exporting, or is planning to export, its products to 24 markets. The export share in the overall company revenue for the year 2010 amounted to 66%. By the year 2015 an introduction onto 20 new markets is planned, focusing on the Brazilian and South American markets, as well as markets in the USA, Great Britain, Central Europe, Scandinavia, the Middle East and Western Europe.

The diagram shows a continuity of growth on the local market and a slight decrease on the international markets in 2009 due to the global financial crisis. This decrease was reversed and growth continued in 2010.
The average growth rate over a five-year period was:

  • Croatia: 11.4%
  • Abroad: 27.1%

 

Employment

Despite this downward employment trend, we achieved the planned positive employment trend in 2009, when JGL hired 17 new employees. This continued in 2010 when we employed 30 new employees in Croatia.

These results stem from the fulfilment of sales and export growth plans, and the fact that JGL, with its financial achievements in the past year, was able to invest in improvement and expansion of the existing production capacities, including constant investments in training and development of resources which ultimately resulted in a direct positive effect on overall performance and company productivity.

Investments in 2010

The investments made into the production and development capacities in 2010 amounted to HRK 25,484,759. The amount of HRK 12,304,167 was invested into production capacities, mostly into the semi-solid form department, with the objective of moving the department to a new location and obtaining the EU GMP certificate. Investments were also made into the new packaging technology (stick pack) in the Aqua Maris production department. Investment into construction of the sterile II department began as well. The amount of HRK 1,415,485 was invested into development analyses, and HRK 1,248,966 into the quality control department (laser measurement of spray particle size). The remaining part pertains to investments into other assets.

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