Sigma warns on H1 earnings

Pharmaceuticals group to feel impact of higher cost base on profit.

Sigma Pharmaceuticals Ltd has warned its first-half earnings are likely to come in below the previous corresponding period's as a higher cost base weighs on the group.

In a statement to the Australian Securities Exchange, Sigma flagged a softer result despite trading in the first half being in line with expectations, as well as slightly stronger sales in the same period.

"Notwithstanding the stronger gross profit, the reported first-half earnings before interest and taxation (EBIT) result is likely to be below the prior corresponding period as a result of a higher cost base arising from investment in key areas of the business including Multi Channel," the group said.

Sigma also noted it was hopeful of recovering a portion of funds associated with the receivership of wholesale customer The Harrisons Group.

In March, BankWest, the key bank lenders to the Harrisons Group, appointed Deloitte as receivers to the group.

At the date of the appointment, the Harrisons Group trade debt was approximately $9 million.

"While no final agreement has been reached, Sigma believes it is in a strong position to recover a proportion of its claim," the group

"It is unlikely however that Sigma will fully recover the amounts owing and therefore Sigma expects to increase its provision for bad and doubtful debts once this matter is finalised."

Sigma's half-year accounts will also include a $4 million charge associated with the settlement and legal costs from proceedings commenced in 2008 by Vifor (International ) Limited.

The group said the matter related to Sigma’s injectable iron product, Ferrosig.

Excluding the adjustments related to The Harrisons Group and Vifor, Sigma said it still anticipates its underlying full-year EBIT to increase.