Sinopharm Q1 net profit up 31 pct on rising healthcare demand

SHANGHAI, April 29 Mon Apr 28, 2014 9:55pm EDT

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SHANGHAI, April 29 (Reuters) - Sinopharm Group Co Ltd , China's largest drug distributor, saw first-quarter profit jump 31 percent to 701.5 million yuan ($112.19 million) on Chinese demand for healthcare products, according to an exchange filing published on Tuesday.

This compared to 534.9 million yuan in the same period last year, when the pharmaceutical giant went on to post its weakest ever annual profit growth of 13.7 percent, half the rate of growth of the year before.

Chinese and international pharmaceutical firms are facing a toughening environment in China's healthcare market, where spending is set to hit $1 trillion by 2020, according to a report by McKinsey & Co.

Sinopharm, which had revenues of 166.9 billion yuan last year, saw group first-quarter operating revenues rise 20 percent to 45.8 billion yuan from 38.2 billion yuan in the same period last year, the company said.

China's pharmaceutical sector has come under the spotlight since a probe last year into corruption, which hit British drugmaker GlaxoSmithKline Plc as well as other global and local rivals.

China's leaders have also been toughening regulations and reining in prices as they look to provide higher quality, affordable healthcare to the country's near 1.4 billion people.

This has squeezed corporate margins and profit growth. According to a Reuters' analysis of over 60 Chinese healthcare companies, the firms on average saw profits shrink 2.4 percent in 2013, from 17.9 percent growth in 2012.

Sinopharm's 2014 profits are estimated to hit 2.8 billion yuan this year, up 24 percent against last year, according to 16 analysts polled by Reuters.

The firm's Hong Kong-listed shares were down 2 percent in trading on Monday, and are now down 11 percent this year, lagging a 5 percent drop in the benchmark Hang Seng Index . ($1 = 6.2530 Chinese Yuan) (Reporting by Adam Jourdan and Samuel Shen; Editing by Stephen Coates)

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