A move by Medical Disposables & Supplies Limited (MDS) to write down inventory stocked up from the COVID-19 pandemic swung its $80.20-million consolidated net profit into a $315.96-million consolidated net loss for its 2024 financial year which ended March 31.

The pharmaceutical and consumer distribution company released its audited financials on Monday, 46 days past the original May 30 deadline, highlighting that the group’s sales improved to $1.02 billion in the fourth quarter (January to March) but was affected by prolonged unavailability of key products and discontinuation of others which were in the prior period. Only the medical division was reported to have seen an improvement in the January to March quarter as sales improved from $129.71 million to an estimated $171.36 million due to new products, normalising supply chains, and onboarding new customers.

“The company has successfully protected its market position, but at the expense of reduced gross margins. Gross margins also took account of a significant stock write-down of $112 million relating to medical sundries that were purchased during the COVID-19 pandemic and for which sales have slowed — this is due to the supply chain for these items being normalised since the pandemic, with these items now more widely available in the market at significantly lower prices,” the MDS release stated on gross profit which dropped from $260.49 million to $92.89 million.

An increase in general expenses pushed MDS fourth-quarter performance from a consolidated net profit of $21.96 million to a consolidated net loss of $180.10 million as per the release. It should be noted that MDS reported unaudited consolidated net loss was $88.55 million for the preceding nine-month period.

For the overall financial year MDS’s sales were marginally down from $3.77 billion to $3.71 billion but its full-year gross profit dipped 30 per cent to $713.90 million, which was attributed to deeper discounts as the group tried to reduce inventory while writing down a portion of that balance.

The recent increase in costs for security, warehousing and insurance, along with a higher impairment on the group’s trade receivables balance, saw the group spin from an operating profit of $195.72 million to an operating loss of $175.27 million. After accounting for higher finance costs MDS recorded a loss before tax of $320.51 million.

Its 60 per cent subsidiary Cornwall Enterprises Limited reported a net loss of $59.68 million compared to a net profit of $20.16 million in the prior period. Due to the company not having expanded disclosures, the sales and other information of Cornwall Enterprises are unknown.

After experiencing its worst reported figures since listing in December 2013 MDS is now looking to reduce its $986.80-million debt balance, since it won’t be carrying as much inventory that it financed with expensive debt. This move comes at a time when it has reduced its trade payables and bank overdraft balances, paving the way for it to seek more working capital financing.

“Management has been aggressively pursuing several strategies to improve revenue and reduce/control expenses. There is also focus on debt reduction. The results of these actions are expected to become more evident from the second quarter (July to September) of the new financial year and onwards,” the release added.

The move to shifting its financing needs occurs at the same time as it became the exclusive distributor of the Velina brand of paper products in Jamaica through its consumer business that distributes candy, hair products, and other everyday products.

However, MDS will no longer benefit from a tax remission and will now be subject to a 25 per cent income tax rate. This is in addition to it no longer having Sandra Glasgow who resigned as director and mentor in December 2023 — a decade after being in both roles for the company.

MDS’s stock price closed Monday at $2.51, leaving it down seven per cent in 2024 and with the stock hitting a 52-week low of $1.75 on May 2 — marginally below its initial public offer price of $1.83. The company’s market capitalisation was $660.53 million.

While the Boothe family continues to hold an unchanged 201,154,333 ordinary shares, or 76.44 per cent of the company, there were other developments to the top 10 shareholding list. Apex Pharmacy & VM Wealth Equity Fund both disappeared from the top 10 listing while Christopher Berry appeared as the number nine shareholder with 2,098,156 ordinary shares, along with JMMB Securities Limited House Account #2 which had 4,004,738 ordinary shares. Mayberry Jamaican Equities Limited increased its interest to 10,637,753 ordinary shares while Mayberry Managed Clients A/Cs decreased its interest to 5,501,134 ordinary shares.