Kalbe Farma seeks to double Southeast Asia revenues

JAKARTA Wed Sep 11, 2013 3:54am EDT

A worker at Kalbe Farma's factory packs medicine in Cikarang, on the outskirts of Jakarta May 8, 2013. REUTERS/Enny Nuraheni

A worker at Kalbe Farma's factory packs medicine in Cikarang, on the outskirts of Jakarta May 8, 2013.

Credit: Reuters/Enny Nuraheni

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JAKARTA (Reuters) - Kalbe Farma (KLBF.JK) aims to almost double to 8 percent its revenues from Southeast Asia within the next two years as it expands beyond its home market Indonesia to take advantage of a regional trade zone.

With a market capitalization of $6 billion, Jakarta-listed Kalbe is Southeast Asia's most valuable pharmaceutical company but it derives almost all of its revenue from Indonesia.

Finance director Vidjongtius told Reuters that Kalbe planned to expand into Myanmar and Vietnam next year, in addition to boosting its presence in Singapore and the Philippines, to reap the benefits of the 10-nation ASEAN block's open market scheme that is expected to begin in 2015.

He declined to say how much the expansion would cost, but said Kalbe was looking into establishing joint ventures and possibly adding manufacturing capacity.

"As a company we need to expand in ASEAN, a region that has more than 500 million people and which has a lot of potential," Vidjongtius said.

"We will strengthen the existing expansion plan in ASEAN, either through new joint ventures, subsidiaries or establishments," he added.

Kalbe's expansion plans will open it to competition from companies that are better established in the region, such as Malaysian-based Pharmaniaga Bhd (PHMA.KL), Singapore-listed Eu Yan Sang International (EYSI.SI) and Euro-Med Laboratories Philippines (EURO.PS).

Indonesia accounts for 96 percent of Kalbe's revenues, and like other consumer firms, currency volatility and increasing operational costs have kept its net margins largely flat around 12.4 percent this year compared with the previous year.

Kalbe has to import most of its raw materials, which have become more expensive as the rupiah fell against the dollar to its lowest in almost 4-1/2 years.

Vidjongtius said Kalbe was considering raising consumer prices and focusing on higher-end goods, which enjoy better margins among its 500-brand product mix. He declined to give further details.

"Pharmacy is part of primary needs. If people fall sick, they need medicine," he said. "Domestic consumption is still high."

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($1 = 11,160 rupiah)

(Reporting by Andjarsari Paramaditha; Editing by Miral Fahmy)

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