This article first appeared in The Edge Financial Daily on May 29, 2019
KUALA LUMPUR: In an effort to mitigate its foreign exchange (forex) risks, particularly the Turkish lira, IHH Healthcare Bhd is looking at reducing non-lira debts up to US$250 million (RM1.05 billion) from this year.
“We are looking to refinance another [and up to] US$250 million into lira. We will swap some of that into lira,” its group chief financial officer Low Soon Teck said at the media briefing yesterday after the company’s annual general meeting (AGM), noting the refinancing will start this year.
He added that the conversion of non-lira debts to the lira will be done in “stages”.
This means IHH is anticipating its non-lira debts to reduce further from US$420 million currently.
Notably, last year’s earnings were largely impacted by finance costs as a result of non-lira loan borrowings for its Turkish operations.
For the financial year ended Dec 31, 2018, the group’s net profit shed 35% to RM627.69 million from RM969.95 million a year ago, despite a 3% increase in revenue to RM11.52 billion from RM11.14 billion, due to higher net forex losses for Acibadem Holdings’ non-lira loans.
As at the time of writing, the lira stood at 6.0468 against the US dollar. Over the past year, the Turkish currency depreciated roughly 31% against the greenback.
To date, its non-lira debts are at US$420 million versus US$670 million on Dec 31, 2018.
Low noted IHH completed a capitalisation exercise of US$250 million of non-lira debts last month to manage forex exposure at Acibadem.
“The group is looking at conserving the foreign currency cash that it received from foreign patients, accumulating it to pare down debts in the course of the year,” Low added.
The mandatory open offer for IHH to acquire an additional 26% stake in Fortis Healthcare Ltd still stands, according to its managing director and chief executive officer (CEO) Dr Tan See Leng.
He said there has been “progress” and IHH is “just waiting for judgement” from the Supreme Court of India by the third quarter (3Q) of this year.
To recap, the supreme court had previously ordered a status quo on the sale of Fortis to IHH.
IHH completed the purchase of a 31% stake in Mumbai-listed Fortis Healthcare Ltd in November last year after rounds of competitive bids.
Tan noted IHH had achieved all its 10 initiatives set out in its 100-day turnaround plan, including that Fortis’ operations in 4Q had turned profitable; earnings before interest, taxes, depreciation and amortisation saw a 120% growth; being able to directly reduce direct costs in terms of sales; and an improved manpower productivity.
For the fourth quarter ended March 31, 2019, Fortis reported a net profit of Rs135.6 crore, versus last year’s net loss of Rs932 crore.
“Dr Tan is positioning IHH for growth in one of the world’s fastest-growing markets for healthcare, and we expect it to continue to be accretive to IHH in future,” said its chairman Datuk Mohamad Azlan Hashim.
On Monday, IHH announced that Tan will be leaving the group when his contract expires on Dec 31, 2019.
“While we are saddened, we also have the utmost respect for his decision. On behalf of the board of directors, I would like to put on record our deepest appreciation for Dr Tan’s immense contributions towards building IHH Healthcare to become one of the most trusted healthcare groups in this part of the world,” Azlan added.
Tan will be replaced by Dr Kelvin Loh Chi-Keon, currently Columbia Asia Group’s CEO, who will join the IHH Group as CEO (designate) and executive director, undertaking a transitionary process from July 1, 2019, said IHH in an announcement on Bursa Malaysia.