SIP Sigmapharm Fpo (delisted)

Australian pharmacy owner and medicine distributor Sigma Pharmaceuticals Ltd. (SIP.AU) said Thursday it returned to profit in fiscal 2011 following two years of losses after gains in market share and cost savings.

The company said in a statement net profit for the 12 months to Jan. 31 was 49.2 million Australian dollars (US$51.4 million), up 121% from the previous year's loss of A$235.4 million.

"Sigma continues to build an increasingly more efficient business that will manage market competitiveness into next year," said Chief Executive Officer Mark Hooper in a statement.

The company, which owns the Amcal, Guardian and Amcal Max pharmacy brands, said revenue for the year was A$2.85 billion, down 2.1% from last year's A$2.91 billion because of government reforms to its subsidy scheme for medicines, the Pharmaceutical Benefits Scheme, and Pfizer Inc.'s (PFE) decision to distribute directly to pharmacies.

"Although major PBS reforms are expected to dampen sales, we will continue to respond through cost reduction measures and the re-negotiation of customer terms to negate the impact on Sigma's business," Hooper said.

UBS analyst Andrew Goodsall told Dow Jones Newswires that while the result was good and praised management, Sigma faced looming headwinds as the federal government prepared to cut prices paid under the PBS on April 1, which would affect 30% of Sigma's business.

"Sigma will have to run fast to stand still," he said of future earnings.

Hooper acknowledged during a conference call with analysts that PBS reforms could see PBS growth for Sigma be negative for the first time this year.

As well as cutting costs and renegotiating terms with customers, Hooper said Sigma would implement a new retail strategy through stores and the internet to bolster growth.

He said the company intended to maintain a high dividend payout ratio in the future.

The company said it would pay a final dividend of 2 Australian cents a share, and a special dividend of 1.5 cents a share. Last year the company did not pay an interim or final dividend but a special dividend of 15 cents a share.

-By Gavin Lower, Dow Jones Newswires; 61-3-9292-2095; gavin.lower@dowjones.com

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