Mega Lifesciences Public Company Limited (MEGA) Earnings Call Transcript & Summary

All Right. [Foreign Language] Good afternoon. We are going to start our review of the quarter. So I'm Vivek Dhawan, CEO, of Mega Lifesciences and I have my colleagues along with me here Mr. Francis, Mr. Manoj, Thomas Abraham, CFO, [Foreign Language]. So we are all here. So I think the first session will be taken by Manoj. Manoj is going to start and then I'll begin -- I'll give you a little bit of a brief, and then we'll open up for Q&A, right? That's the order. So Manoj, over to you.

Yes. Thank you. Thank you, sir. A warm welcome to everyone to the third quarter earnings call of Mega Lifesciences. My name is Manoj Gurbuxani. So this is how the agenda we will have for the upcoming 1 hour. We will start with financials for 9 months 2023 and third quarter 2023. And then we will have remarks from our CEO on the financial performance and the outlook for the company for 2023. And then we will open the forum for the Q&A. [Operator Instructions] So thank you very much for everyone's participation. So here we go with the 9 months performance of Mega Lifesciences. Our overall operating revenue for 9 months 2023 has been at THB 11.5 billion, marginal decline of 2.4%, and this decline is mainly coming from third quarter 2023, which is mainly coming because of the exchange of Thai Baht to USD. Now going into the segments, the branded business revenue for 9 months 2023 has been at THB 5,879 million, representing a marginal decline of 1.9% and this decline is mainly coming from third quarter 2023, as explained. In last year 9 months 2022, our branded business has grown at a double-digit growth rate of 14.3%. And in spite of that high growth rate, we have been able to maintain our 9 months 2023 branded business revenue. Post pandemic, the demand for COVID-friendly products have declined, have been tapering down, but our other category of products have been growing and which has resulted in 9 months 2023 revenue of branded business to be very similar to 9 months 2022. The distribution business on the revenue front has declined by 9.8% on an adjusted basis, adjusted for the dual currency effect of Myanmar, as we have explained. And this decline is mainly attributable to loss of funds principal in Myanmar as we had guided at the start of the year. Coming to the overall gross profits of 9 months 2022, our gross profits have been at 45% of the operating revenue, quite stable. Branded business gross margins have remained steady at 65.2%, as we had guided earlier. Generally, on the branded business front, we do a gross margin of 63% to 65%. And in 9 months 2023, we have been at healthy levels of 65.2%. The distribution business, gross margins have been at 22.4% adjusted for the dual currency impact. And the gross margins on the distribution business have improved because of exit of one principal in Myanmar, which had a relatively lower gross margin and gross margin for distribution business is also influenced by principal mix, amongst other factors. The SG&A expenses have been at -- remained steady at 26.8% for both the periods 9 months 2023 and 9 months 2022. And our overall adjusted net profits for 9 months 2023 have remained steady at THB 1,706 million, which is very close to the last year adjusted profits of THB 1,774 million. The reported net profits for 9 months 2023 have been at THB 1,519 million as against THB 1,840 million, with the decline of 17.4%, which is mainly coming on account of onetime ForEx impact for loss of -- for depreciation of Nigerian currency to the U.S. dollar. Our operating cash flows have overall remained healthy at THB 1,561 million, representing 103% of the net profits. We continue to remain a net cash company with a strong balance sheet. Overall, our CapEx spending has been at THB 193 million for 9 months 2023, with majority spending coming from consolidation of manufacturing operations in Thailand, Indonesia and Australia. Overall, we plan to launch 60 new products in FY 2023, out of which 30 new products we have already launched in 9 months 2023. This is on synopsis on the 9 months 2023, coming to the third quarter. Our third quarter has been at THB 3,803 million overall, representing a decline of 6.2%, which is mainly coming on account of appreciation of Thai Baht in third quarter 2023 as compared to third quarter 2022. Branded business has been at THB 1.9 billion, declined similar 6.2% against for similar reasons because of appreciation of Thai Baht in third quarter as compared to third quarter 2023. Distribution business decline of 8.2% on an adjusted basis, mainly as explained on account of a loss of one principal in Myanmar as we had guided at the start of the year. Overall gross margins have remained stable at 45.7%, similar to third quarter 2022. Branded business gross margins remain healthy at 65.3% and distribution business, gross margins have been at 24% as compared to 22.7% on third quarter on an adjusted basis. SG&A expenses at 26.8%, stable third quarter 2023, similar to third quarter 2022 levels. And adjusted net profits have been at THB 526 million, a decline of 9.8%, which is commensurate to the decline in the revenue. And our overall reported net profits have been -- at third quarter 2023 have been at THB 535 million, down by 18.7%, which is mainly arising on account of strengthening of Thai Baht to U.S. dollar. So this is a very brief synopsis of the financial performance for 9 months 2023 and third quarter 2023. Thank you. And I'll request our CEO, Mr. Vivek Dhawan to provide...Thank you.

Thank you, Manoj. I think he's given you a flavor of what's actually happening. I think there will be concerns that we had a bad quarter. But I think, overall, we are in the right direction. This is something that is expected. The COVID boom that a lot of companies enjoyed especially being a supplement business, having vitamins and minerals and vitamin C and vitamin D and many other such products been clear have all went off the roof and they did very well in that period and resulting in a much higher profit than we had actually planned out. Our plan was to get to THB 2,400 million by '25. And we are still very confident that we'll get to that number by '25. That's our stand. We had this uptick in these 2 years, which was because of uncontrolled, unprecedented all these things that are unknown, but we managed to do very well in spite of that decline. If you look at the COVID products, we have declined anywhere in the range in many countries from 20% to 50%, not in our case. We have a good portfolio. We have drugs that are doing well. We have over-the-counter products that are doing well, Gofen, et cetera. And we have a lot of supplements and herbal medicines that are not related to COVID. If you look at the whole portfolio, we are doing well in spite of COVID, in spite of Myanmar hit with a [indiscernible], by the Ukraine war around and in spite of the fact which is a onetime thing in Nigeria, which is a major currency change, which was replanned because the country corrected their currency to a new rate, which became official. But we've been managing that for a long time, but it impacted in our books. So that's the situation at the moment. But having said that, look at the real cash flow, look at the real growth in the branded business. In spite of all this, our brand business is fairly close to what we did last year, right? And also some other factors are also very true. If you see 2022, I think our quarter 3 and 1 -- 2 to 3 were the -- quarter 3 was the highest profit we ever made in history in Mega. So that was also an exceptional quarter. When you compare quarter-to-quarter using '22, that won't happen. But if you look at '21, '20, our quarter 4 is always a better quarter. So hopefully, if things go right, we should have a better quarter 4 and things should look a lot better than you are seeing. So overall, we are still sure that we should be closer, if not very far to than what we did last year, which is already to my mind, a great achievement. And we have 2 more years to get another THB 200 million on our top line, which we are confident of doing with what we have planned the number of drugs that we shared. We have 16 in pipeline. We launched 13 already. We've got a total 16 unique products, and many of them are being launched in the country and a pipeline of -- huge pipeline of drugs happening. Indonesia, we are running at increasing our capacity utilization by the day. We are producing a lot more and we are seeing much better results. A lot of products have been registered. So hopefully, by '28, as we said, we should reach $30 million, our plan was to reach by '28 or '30, I think originally, I think, '28. In between '28 and '30, we are looking at about $30 million, we should get there with a lot of oncology, new drugs getting registered, product approvals coming in the country and that should show an uptick. And while other countries also are drug registration in Thailand, Vietnam, Malaysia, everywhere, the number of products getting approved have grown. And so the expectation from our pharma business more over-the-counter drug business and even supplements, I mean I'm -- if I look at 2019 and look at our base of any product, coming to '23, our base has actually grown. We are not lower than '19. So in the last 3 years, if we grow at an average rate of 5%, 7%, we would never -- we would still not be there. So the good sign that many of our products are higher and still remain there. So after COVID, if the expectations were they will remain and grow at 30% rate, that would not happen. But so it's gone back -- gone down some parts of it, and they still remain higher than the '19 numbers. So that's a good sign. And also stocking up, retailer buying more, consumers stocking up, that's happened. So '24, we should see again, I think it should probably start to get better again in '24. That's the expectation worldwide, reports of anybody in the world is this -- cabinets are stocked, your pharmacies are stocked. So repurchase is going to start with. In our case, at least, we are a lot better. We are -- our product range has a wide area of products, and we are not suffering because of only one category. So having said that, I think most of it has been explained in the quarter results. CapEx, Manoj has talked about, Thailand, Indonesia. We have plans to invest more money in Thailand towards ESG and capacity expansions, some THB 80 million. Indonesia, we are, as per plan, building additional facilities to get ready for expansion, more products, including [ software ] lines and all this, we see another THB 510 million, so -- in the remaining period we are expecting about THB 590 million approximately in CapEx to be spent between the '24 '25 year period. So that's the whole plan. '23, as I said earlier, should be nearly the same numbers and '24 will still again look for growth. I think we should look at single digit -- mid to high single-digit growth in '24, that's our plan. But having said that, '25 guidance is still that THB 2.4 billion as we had promised, and we are going to -- we are 100% going to get there. So as a pipeline, we have some 157 products in pipeline, 79 products are registered or pending registration, 78 are being filed. So there's a huge pipeline of drugs coming out in our business, and we should see them helping in our future plans [for] pharma growth. Pharma will become a larger part, not larger, but I mean, still continue as a proportion. Both will grow, but pharma will definitely become a larger part of our... Nigeria, already explained more detail if you need, you can talk to the team and they'll explain to you how it works. At the moment, the Nigerian currency is still sitting at that NGN 990,000 and government is keen to make sure it floats and stays there. So it's open floated now is available. So for businesses like our pharma, we can still source and import products and get money out. And that's the very key and important thing. Myanmar, the same thing, large part of our business is pharma. In spite of restrictions, import licenses, turbulence in the country, we are still holding up well. I think our real challenge is that our expectation in the last few years were that we will see majority growth out of Myanmar, especially top line because we do distribution and that may be effective. But the pharma business where large parts of our business rest anyway, was our major focus seems to be that we can manage and maintain, but we cannot project 20%, 25% growth in the country. It will be nominal and will remain. But while we have to growth will come from other parts of the world, Vietnam, Indonesia, et cetera, we should see growth and compensate for what little decline or reduction in growth rates that we see out of Myanmar. I think that's probably it. I don't want to get into many other details. I've already told you why the COVID product, which is not us, we can look around the world, I mean there's enough data around the world from 26% to 35%, 40% reductions and many companies has started only in COVID have a much more difficult time. We've been doing this for all our lives. So our brands are known. People consume our products, not only for COVID but for many other health reasons. So I think Mega should bear better than others in this current scenario. Anything else that I need to significantly touch on. I think I will now leave you to ask questions because there are many small, small details, which all of you probably have in your mind and you would like to ask us. And the team is here to answer your questions. We are ready to answer your questions. I think there is no common thing areas I can think of that I should probably explain, so it's easier. But when you ask, we'll try and answer them as clearly as possible. So we are ready for your questions now. Open the floor, shall we open the floor and receive your question.

Yes, please. You can introduce yourself. Let us know who you are and ask the question and we will answer them as best as we can. Thank you.

[Foreign Language] you can raise your question, please?

Can you hear me? This is [indiscernible] Capital. Just one question for me, right? So you have always set a target of doubling -- double the business for every 5 years or so since for the past 10 years. So just wondering, so I think in Thailand, you have been already a dominant player, and you are expanding into the other markets. So can you give us a bit more sense of how big is the market that you're addressing in total? And where do you see the opportunities in the longer term like which one is more challenging, which one would take more time and which one would you put more investments budget in to expand business to achieve that long-term goal that you have set?

I think if you look around that Thailand is a 60 million, 66 million population, Pharma business sits around $5 billion. But then the business changes from MSC originated drugs to generics to branded generics and first to launch. So this is common, right, new drugs come in, old ones get taken by generic companies who are first to launch. At the same time, the models also change. People start to self-medicate a lot more as they learn. As the wellness industry changes, you don't just wait for the hospital to get yourself treated. So as countries mature, aging population comes in the type of product they use, the type of disease they have. NCDs grow, where you have to manage yourself on a longer-term basis from infectious diseases. So I think it's just not only about markets -- one is markets growth. So we are in countries where there's still potential for upside of the market, okay? They will never become $400 per year per person spend or $110 per person per year spend like Australia or some other countries. But at $8, $9 average to $20, $30, there's still an upside of consumption growth, right? As hospitals become bigger, as drugs reach, as services reach, as population ages, as disease grows, so Vietnam is 100 million population sitting at $3.5 million, $4 million. So these countries have definitely an upside from Philippines to Vietnam to Thailand also and Indonesia as well. Okay, governments are now becoming covering universal coverage team, you see like Thailand, they had [ VPGS ], somebody Vietnam has something else. So the models change that they start buying products and providing to their social service, government provide it free or they have a model where you support it, you subsidize it. So I think in those models, the units grow and generic companies probably become bigger, and we are also playing in those categories where we are first to launch. So I think growth will come from the markets we are in. And we are in serious sizable area. Indonesia, we are very small, but they are very big places, but still in a $9 billion market that can become $16 billion. We have a chance to at least $16 billion is probably at consumer price, but if you come back at pharma factory price also to become a $50 million, $100 million business is not -- $100 million is not -- from [ '30 ] in another 5 years or 10 years, we said we keep doubling. So we should get to $100 million. So growth are going to come from these countries where Vietnam, we are sitting at $80 million, $90 million, we could become a $200 million company. There's a definite opportunity for that to happen. And Thailand with the growth in units and growth in consumption and growth in areas where we are and with oncology drugs and ophthalmic drugs, new drug that we are getting into. We should see an upside in that area as well. We are not only fighting in the old category. One is more consumption I believe growth in more consumption growth in the areas we are focused on and as people age, you have got health issues, you have incontinence issues. You get older, you have urinary tract issues. You have what we call benign prostate, BPH issues. So product categories change and we are playing in those areas, we are getting ourselves ready to grow in those areas in the markets where we are. Then the other part of our business though Africa is very fragile, it's got all kinds of issues with democracy with geopolitical issues. But still $100 million in Ethiopia, $200 million in Nigeria, if one day, they sort out their problems, and we have products and brands and registrations, and we have teams on the ground, and we have very good relationships. If you walk into Ghana, you walk into Kenya and we have serious brands in the market where we are. So if those markets do get better, even with dictatorships remaining and income levels growing, Tanzania has found gas, Uganda has found oil, somebody has got copper and with this change in geopolitics, they want to buy oil and gases and there and reduce the dependency from other parts of the world, like Russia or anywhere else. So I think as these economies get better and we're having an entrenched position. So this is a little bit longer-term game. This is also a [ develop ] from where they are today. Some markets are sitting at $800 million. At 200 million population like Nigeria probably has a less than $1 billion pharma market, right? So are there possibilities that in 10 years' time, they can become $2 billion or $3 billion, they should. So looking at -- one, is looking at them. Two is what can we do? One, the market gets better, two is what Mega can do better than the market and our plans are doing by being there, building brands, investing in brands, getting the right products in the market. We are also building new categories in this market. So put these 2 together without having to look at more geographies, forget it if anything in [Ecuador], peru and Colombia, they'll also become bigger, Peru, Colombia, Ecuador. We are in smaller Latin market. We are not going to be in the bigger Argentina and Brazil unless we acquire, but that's not what we plan to do. So we are going to build there and Ukraine, Uzbekistan also, but they are not that large, 20 million and Ukraine is still whatever the size they are, they have 32 million people left in the country, about 3 million, 4 million left the country. But still, they have [money] is there. We are still selling, we are still growing, but we are not expecting that to become 3x, 4x bigger at the moment with the situation they are in. But they are stable. And -- but the real growth is going to come from these 2 areas and with the growth that we can bring ourselves and as the market themselves. So with that, we still remain confident that 5, 6 years -- every 5, 6 years, we stand a good chance of doubling at least our own branded business. Now we never talk about our distribution business, we say, our branded business bottom line should double. Top line will be maybe 80 to 100, 120, but the bottom-line has a bigger. As you grow your top line, the bottom line doubling has a higher chance because a lot of other things, cost structure doesn't multiply the same rate, right? Okay. Margins may drop, but your volumes go up, right? You compete in generics, some become lower, some products you sell you launch first, you are higher. So this is a constant game we are playing all the time. It's a regular thing that we are doing. So with that, the expectations are we could do this every 5, 6 years. And I think we have done it once, we probably will be able to do it twice, at least this next '25, '26 was our plan. We may be able to do it in '25. I think earlier and we said '25, '26, 5 to 6 years, but we think we should be able to do that in '25. Then we will start our strategic planning session again in '25 and see what we can do in the next 5, 6 years. But I have a feeling in the next 5, 6 years, we'll probably have a similar goal to double the bottom line in the branded business.

Overall.

Yes, overall -- branded plus, but I'm saying real growth is when we say growth bottom line. Top line may not grow double, but may go 180, 170. Distribution has their own limits and if things don't change in [indiscernible] that was our biggest -- I mean out of the total business 65%, 70% came from there, right? So that may not happen. That depends if things change, it may come back. But that's the fact. It's the fact that you all know very well. I don't know if that answered your question, sorry.

Yes. That's clear.

We have a few more hands, please, number one. Anybody, Narumon, do you want to start?

Yes. Narumon from KKPS. I have two questions about the financial numbers. It will be great if you elaborate more on this number. Question #1 is that regarding to the MD&A in the third quarter 2022 in your last year, the core profit was adjusted down from like THB 658 million to THB 583 million. So what is the reason for the retroactive adjustment? You want me to raise the second question before you answer?

Let Manoj answer.

Yes, please. So THB 658 million was the reported profits, and we have just made 2 adjustments to that. One is the gain which is arising on account of ForEx. Last year, the currency has significantly depreciated Thai Baht to USD, which had given us a THB 97 million gain, which is what we have adjusted. And THB 21 million was coming from the losses arising on account of new business, which has brought our profits from THB 658 million to THB 583 million on a normalized basis.

Yes. I understand that. But if you look back at the third quarter '22, right? If you look at the MD&A last year, I think the number is quite different. I mean, you had just [down] core profit last year as well. So I just wonder what is -- what situation change, why you adjust the FX like last year, I think about FX gain, right? But this year, you adjust to FX loss. So I think the number is quite...

Yes. So last year, we had this dual currency impact coming on account of Myanmar, which we started reporting from quarter 4 but the actual impact was coming from quarter 3 onwards. So what we have done here is a dual currency impact of Myanmar which was the adjustment to the gross profit. That is what we have normalized in our -- the numbers which you are representing in third quarter 2022 is coming on account of that.

I think you can get on a different call.

Yes. Yes. Narumon, we can explain to you in detail. I hope you understand the dual currency impact of Myanmar, but maybe I can explain you in more details on a separate call.

Sure. So we should not see any impact in the fourth quarter and onwards, right? it should be one time, right, in the third quarter last year.

That is right.

It would be like lag effect from FX. Okay. Okay. My second question is in this quarter, third quarter 2023, this quarter, the reported foreign exchange was lost about like THB 100 million, right, in the other financial statement. But in the MD&A, it was like THB 30 million, so what's the difference between those 2 figures? I mean, reported loss for FX in financial statement, but gain in MD&A.

Yes. [Foreign Language].

Sure. This is again coming on account of the Myanmar dual currency impact. Narumon, maybe after this call, maybe I'll give you a call and explain you these in more detail. Again, same reasons what I've explained to.

Sure. So my last question, did you see that the deterioration of business in Myanmar. Is it like -- is it related routinely stable or worsen.

I think it's more or less stable. And next year, I think we just saw the budgets. They are also looking at some growth next year. So it looks like it stabilized now. And I mean, it's still -- the conditions are still not normal, as you know. So there are lot of issues. But still, I think as a company, we are looking towards some growth next year. If everything remains the same and things don't get worse.

I think we had Yuwanee, you had some questions?

Yes, a few questions, please. First, this -- for this year, do you think fourth quarter will be the peak season -- peak quarter again?

I think, generally speaking, fourth quarter tended to be better if you look at things historically. Now this year was probably the first year after the COVID, so we are hoping that the last quarter should probably look better. So overall, our feeling is that yes the fourth quarter, we should be able to catch up a bit. That's how we have guided also in the beginning of the year onwards. By end of the year, we should be able to get closer to last year's numbers. Thank you.

And compared to other quarters of this year, will it be the peak quarter, at least in terms of sales. I don't want to compare to last year, I want to compare to this year.

I think we can only relatively compare with last year. So it's, again, the last 3 quarters post COVID how things have changed. It's very difficult to project and predict. So compared to last year, we feel, yes, definitely, we will do better. But compared to previous quarters, it's still a year unfolding after COVID, I don't think we can -- with any amount of certainty, guide you that way. So compared to last year, definitely, but overall by end of the year close...

It has to be a better quarter, but if you look at many, many years, every year before last quarter.

Compared to last previous quarters this year, will it be a better because it's already a high quarter so we cannot compare -- this year compared to the previous quarters in this year, will the last quarter be better or we are seeing compared to last year's last quarter, this year will be better. This year because it's already on a high. So we can't really see how it's going to unfold.

Okay. Second question is for next year. I think you mentioned that the revenue growth will be mid- to high single digits. Where will this come from the branded or the distribution.

Branded business. We're only talking branded business here, largely branded business. Distribution will also distribution in Myanmar, if Myanmar Pharma grows, it will also grow. So if revenue growth is going to happen, 5% to 8%, it also comes from Myanmar as well a little bit, but a lot of other businesses, we hope to grow as well, a little bit faster than Myanmar. So there are a lot products in pipeline, as I mentioned before, I have mentioned that there are products in pipeline, new product approvals have come, which are getting launched, will get launched. So there is expectation that there will be growth from these areas, new products in the same country and correction after COVID, what we have seen decline this year, stocking decline, old decline, there would be some correction even in the consumer health division as well.

So if conditions in Myanmar is stable, you will see some growth in the distribution business.

Yes. Already, we are seeing compared to '22, it is much better this year. So we are seeing a lot of companies have readjusted their plans. Some of them have started local manufacturing for consumers. So it's happening. Some are looking [other ways].

So it will be mid- to high-single digit for distribution. Do you think if things are stable.

I am saying overall, Yuwanee, I'm not putting any words in my mouth because if you keep saying it again, again, I cannot answer that question. But as an overall, we should be getting into mid- to single digit higher digit in next year, all combined. Could be brands that are at 50% growth, some grows at 12% and distribution grows at 5%. So average, we should grow at more than 7%, 8%, between mid- to 5% to 10% in that range. [ Harry ], you had a question?

Can you hear me okay?

Yes.

Great. I have several questions. The first is just related to the third quarter revenue growth. And you mentioned in the comments before that a large part of that was due to the impact of Thai Baht depreciation. So could you share with us what the growth would have been if you strip out that change in currency?

Flat.

Okay. It would have been flat without the FX? Okay. And then when it comes to the FX losses that you've seen. Are you expecting that to continue to increase in the rest of the year? Like what are the FX losses you're expecting for the full year?

I think, see, major part is Nigeria, THB 150 million. Other than that, the impact is -- basically the impact is on gross margins because of the appreciating Baht because of gross -- because we invoice, we are exporting so invoice in Baht -- I mean in dollars. So as the Baht gets stronger, it gets back to your gross margins. So ForEx trend other than the Nigerian currency should continue because I think last year, last quarter was 35%, right? So last year, the last quarter was already 30%, the Baht was already at 35%. So in this year, last quarter, probably if the Baht stays at 35%, maybe not a big impact. But the timing difference impact, because of what was sold in previous months, that gets receivable -- we receive it during the last quarter to that extent, there will be some losses. But it will be better than the other quarters if the Thai Baht remains at 35 because last year, the Baht had already appreciated to 35% in the last quarter.

Okay. Then that second element is what impacts your revenue?

Correct.

Yes, And then the bit I was actually referring to is just the what you recognize in the net ForEx -- net ForEx gain or loss, I think, which is THB 410 million in the 9 months at about THB 84 million or THB 94 million in the third quarter.

Sorry, what is the question, Harry?

So first, you were referring to the impact on the revenue growth. But this question is more related to the net ForEx gain or loss that you report as well, which was THB 410 million and my question was just how you -- do you expect that to be constant for the rest of the year? Or do you expect more net loss to occur because of Nigeria?

I think it really depends. If the Baht remains, there will still be impact of timing difference. What we sold at 37% in the last quarter, when we received that money in the last quarter, we'll have to take an impact. So this is the timing difference. But on the sales, on the gross margin part, it will be more steady because Baht has already [appreciated] to 35%, last year also last quarter was 35%. So the impact is going to be lower, but there would be slightly an impact.

Okay. And my understanding is that a net ForEx loss of the operating expense that you reported, that's all related to Nigeria in this 9-month period.

Yes, the THB [ 187 ] million, which you look at, which we have normalized mainly is coming from Nigeria.

That's out of the THB 410 million?

So THB 410 million is coming from the Myanmar dual currency impact.

I think we should get on a call after this, so we can move to other questions.

I agree, but I also think it's quite important, given the so many questions about it simply this is an issue.

THB [ 170 million ] Nigeria, which may not happen again, has already been up to that level, 1,000 anyway. We don't expect, we are not seeing that happen. So there does have to be a correction. What's happening because of the dual two currency impact is a different thing. That is shown at [what is] below the line. That Manoj can explain to you that impact is not going to be all the time. They're just -- it's a methodology that we have brand business in Myanmar. So it's not an impact. It's a methodology that causes that. [So there are few things in there].

Just a concern. The last quarter, if Baht remains at this level, our gross margins won't have an impact, but the impact would be because of the AR that will receive at 35%, which we sold at 37% to that extent. So that is going to be the impact. So it's going to be much lesser than what you saw in the previous quarter. So that is the general guidance we can give you. We can get more specific than that. Thank you.

Got it. Okay. And then last question was just when you get the adjusted net profit in the MD&A, what's that -- is that difference is also the THB 170 million or...

So adjusted net profit is a result of the ForEx, which is mainly coming from Nigeria. And the second impact, which you see is coming the losses of the new business, which we add back because we are in the gestation period. So that's what these are 2 major adjustments, which we do in the adjusted net profits.

The first [indiscernible] was answered double coming from Indonesia. Bottom line largely not top line already answered, Double-Double group. How API prices are trending. API prices, we have so many, not one is effective. Some are lower. If you talk about vitamin C it is much lower because the demand has gone up by 40% and there are some APIs that may have a higher impact. Generally, it all depends on demand and ingredients coming out of -- if it's an API for drug, they come out of India and China, largely India depends on China for intermediates. So there's not a major, major impact that was some parts earlier because of some of the areas that were constrained by agriculture crops. So it's not -- the impact is not sizable. I mean, there is some, but it's not very sizable in the overall business there. The third quarter said it's flat. It's not declined, but if take away the currency impact there. All right. We look at any more questions and if there are none, we can also close our session now. If you have anything, you can always come back. Francis, Manoj, Thomas, all of them are here at your service [for nations]. So once again, thank you. We have one, Harry yes, please.

Yes. Just related to the comments you made about the fourth quarter. And I think if we look at 2020, 2021, third quarter was the strongest. But is that -- could you say that was due to COVID -- as the COVID impact? And typically without COVID the fourth quarter is the strongest.

I mean, historically, always there is -- we keep explaining this every time. We used to all the time why is the fourth quarter is always higher. A, you have sales contracts, you have decent debt with all the -- because we have retail business, so you have all these contractual obligations, closing sales. And no other reason. It's not that people are only buying more, but they're also -- and it generally was always 10%. We control that to not push too much stocks at the end, then the first quarter becomes lower, which is if you look at historical high fourth quarter lower first quarter. Everywhere, all businesses, pharma, everybody has somehow the other, this is very common. But how do you make sure it's not too much between plus/minus 5%, 10%, that's how you manage, but with COVID and all being around there because of shortages, lack of stocks, people who are buying as they needed, they didn't wait for -- they were not looking at the last quarter, it was very much dependent on where the COVID peak happened and where shortages were there, all the retailers were stocking up. So it was just that while madness going around and people were buying. Pharma businesses were down because there were no hospital visits. So that has come down. There was decline. If you look at [ pure ] pharmaceuticals, if you look at '22, '21, you'll find decline. And they have had you're all having had a good year in '23 now because the hospital business and what we call surgeries that were not necessary or elective surgeries, all these came back. So the Pharma business has seen an uptick, whereas the consumer business has seen a downturn and with other economic situation conditions as well with things happening around the world. And largely the COVID related products at SADC and all the other kind of products that are related to COVID have also mouth sprays and lozenges. You have seen a decline, but they have fever, flu and all is back. So some things are back in business, but not completely 0. But our business was never -- we didn't launch a product. I don't think we launched a single product only for COVID. 99%, I would say 98% of them were there. There were one or two that we have planned to launch would be repositioned with one. I think 1 or 2, we launched with -- all of them are already in business. So there we get bigger, bigger than we planned. And now they are back, but they're not down to -- they're bigger than they used to be. So we are in a better position today than we were in 2019 or '18, I would think so. So it's up to us now to grow those businesses from where we were. And some are already very large, so there has been that impact. But the good thing is that's not had a major -- in spite of that, if the brand business in turnover [at] even after correcting for currency, we are still flat. So that means it is still good because some other things are taken up, and this is 9 months gone in the fourth quarter is good, then we will be even be in a better shape. That's what we are trying to tell you. Factually, you analyze yourself, this is the fact. So yes, who doesn't have an impact. Please do Google, you'll find everybody from look at big companies look at the reduction in sales of any company even the U.S. biggies who are in the business overall during COVID, look at the -- forget the vaccine guy, they're really down by a much larger number. But some company live the [indiscernible] were not in those businesses. We didn't have any of those what we call antiviral drugs and all that. So our biggest gain was in the vitamin -- single vitamins area. In spite of that, things are not that bad. We always said, I think in the beginning of the year, we said there will be an impact. But looking at our portfolio, we knew that there will be some to manage that. Not all countries will have the same type of impact. So -- but we've had double [indiscernible]. We have this, we also got Myanmar, we've also got Ukraine. But in spite of all that, I think the business is strong. We show it's got strength, it got strong legs and it is holding on, and we have a potential to build on top of where we are in the markets we are sitting in. So that's where we are coming from, that we will deliver '25 in a very high likelihood, anything can go wrong, but there's a very high likelihood, let's say, 80% to 90% chance of delivering '25. And then within the next 5, 6 years, we are again talking about something similar at least doubling the bottom line by 30%. We plan to actually build a plant in Vietnam. You're asking about Vietnam acquisition. But I see, I think once we had informed you was that we are going to build a facility, greenfield in Vietnam is on track. We are working on it. There are some deal land issues, et cetera, that we are sorting out. And I think by next quarter, when we meet you and when we announced we should have the final details of timeline and when we should be ready. There have been some delays because of these technical issues that all land have got licenses and we are structured with what they can do. They were given for a certain purpose. So all these things are there. We are sorting that out that is what I am saying. But yes, it is on card and we have a serious plan to invest in a pharmaceutical factory. And there are reasons for it, which we have explained to you before. I won't spend time doing that now. But if anybody ever knows, next time we can explain to you why we are doing, what we are doing.

I think the next question is about distribution margin reason for going up. As we explained, yes, it is because of one principal lower contributing principal, leaving us and will this trend continue? If the product and the principal mix remains the same, yes, there's a good chance it can continue. But if the product [principal] mix changes, which happens in distribution, then it will change. So as of now, if things change -- things don't change, yes, that is a trend we are going to expect. Thank you.

Yes, we can conclude. So now you can conclude Mr. Manoj.

Yes. So thank you very much for everyone's participation. If you have more questions, you can always get back to us and we'll be more than happy to answer your questions. So have a good day. Thank you.

Thank you, everybody.