Thumbs Down For Sigma Result

Despite its optimism, drugs maker and distributor Sigma Pharmaceuticals would probably wonder why its 2007 annual result was given a bit of a roughing up by the market yesterday.

The shares fell 8c to $2.55 despite signs the merger with Arrow Pharmaceuticals was paying off with a solid pipeline of new generic drugs, higher sales and margins and of course better profits.

Perhaps investors were taken aback by the ‘static’ in the result from the new accounting rules or perhaps the result had been well anticipated by last week’s short run up in the shares above $2.60 so some easy profits were taken.

The market overall was up by around half a per cent and the healthcare sector on the whole was better with small price rises for rivals Symbion (+1c to $3.71) and API (+6c to $2.12).

The outlook commentary seemed confident enough with SIP expecting underlying profit growth of 10 to 15 per cent for the 2007-08 financial year.

Sigma reported a full year net profit for 2006/07 of $101.8 million, which was down 2.9 per cent on the prior year but before tax earnings rose 34.1 per cent to $134.6 million, showing the impact of the Arrow merger which happened in December 2005.

According to some brokers the underlying result looked a bit short of pre-release estimates with some forecasting earnings up around the $120 million mark.

Sigma said the main reason for the decrease in net profit after tax (NPAT) was the impact of a significant item in the 2006 result.

As a result of Sigma’s merger with Arrow Pharmaceuticals, Sigma was required to restate tax values for various Sigma assets.

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