Pharmaniaga : MSWG Reply Letter 27th AGM (Additional)

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Our Ref Date

PHARMA/SD/PB/MSWG/2025/019/FWM

: 8 July 2025

Minority Shareholders Watch Group Level 23, Unit 23-2, Menara AIA Sentral No. 30, Jalan Sultan Ismail

50250 Kuala Lumpur.

(Attn : Dr. Ismet Yusoff, Chief Executive Officer)

27th ANNUAL GENERAL MEETING (AGM) OF PHARMANIAGA BERHAD (Pharmaniaga) HELD ON WEDNESDAY, 18 JUNE 2025

We thank you for your email dated 18 June 2025. Our response to your additional enquiries are set out below:

1. The Logistics & Distribution Division posted a higher EBITDA of RM216.1 million for the year under review, compared with a loss before interest, taxation, depreciation and amortisation (LBITDA) of RM22.3 million in FY2023. This increase was mainly attributable to higher concession sales and the penalty waiver by the Government. The concession segment's revenue growth was primarily due to the addition of new products to the Approved Products Purchase List (APPL) and price revisions under the new concession cycle, which resulted from increased supplier costs. (Source: Page 26 of IR 2024).

   1. What steps is the Group taking to maintain its current EBITDA level? Are there any operational changes to ensure this performance continues without depending on external factors like penalty waivers?

      Our response:

      The Group is implementing several strategic and operational initiatives to maintain its current EBITDA level and to ensure that future performance is not dependent on non-recurring external factors such as penalty waivers. These initiatives include:

      Strengthening Core Business Segments

      The Group is focused on enhancing its concession and non-concession businesses by expanding its product portfolio, improving service offerings, and capturing new market opportunities, particularly in the private sector and export markets.

      Operational Efficiency Improvements

      Ongoing efforts are being made to optimise the supply chain, including improvements in inventory management, warehousing, and distribution operations. The Group is also leveraging digitalisation and automation to reduce costs, improve accuracy, and enhance productivity across its logistics and distribution network.

      
      
      
      
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      Cost Rationalisation and Resource Optimisation

      Cost-control initiatives remain a key priority, with continuous review and rationalisation of operating expenses to ensure sustainable margins. This includes streamlining processes and implementing energy and resource-saving measures.

      Investment in Technology

      The Group is investing in transport management systems (TMS) and data analytics platforms to improve operational visibility, decision-making, and service efficiency.

      These measures are designed to build resilience into the Group's operations, supporting sustainable EBITDA performance in the medium to long term, independent of one-off factors such as penalty waivers.

   2. As new products are added to the APPL, what factors does the Group consider when deciding which products to include in the APPL to increase revenue and profitability?

      Our response:

      The inclusion of new products in the Approved Products Purchase List ("APPL") is solely determined by the Ministry of Health ("MOH"). As the appointed distributor, Pharmaniaga does not influence the selection of products under the APPL. Instead, our role is to ensure timely and efficient distribution of the drugs and non-drugs to government hospitals. Pharmaniaga earns a fixed distribution fee for each stock keeping unit ("SKU") delivered to government hospitals.

   3. How frequently does the government revise concession pricing and how does the Group adapt to these changes in its budgeting and operations?

Our response:

Concession pricing for drugs and non-drugs under the Ministry of Health (MOH) is typically revised every three years. As the appointed logistics and distribution concession holder for the Government, Pharmaniaga's distribution fee per SKU is fixed for the duration of the concession period.

However, should the prevailing distribution fee become insufficient to sustain operations due to significant external factors such as fuel price increases, electricity tariff adjustments, or other cost escalations, Pharmaniaga reserves the contractual right to request a revision of the distribution fee on a per-SKU basis.

This mechanism allows the Group to safeguard operational sustainability and ensure continued, efficient service delivery under changing economic conditions.

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(A member of Boustead GroupJ

Should there be any further enquiries or clarification, please do not hesitate to contact our Puan Wan lntan ldura Wan Ismail ([e-mail]) or Encik Syaruzaimi Yusof ([e-mail]) at 03-3342 9999 ext. 262.

Thank you.

Yours faithfully,

For and on behalf of,

PHARMANIAGA BERHAD

ZU IFLI JAFAR

anaging Director