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Acquisitive Aspen lifts FY revenue, earnings, profit

Pharmaceutical firm Aspen Holdings has delivered a 15% growth in normalised headline earnings a share to R1.22 apiece for the year ended June 30, lifting its share value for the seventeenth consecutive year.

Print Send to Friend 0 0 The continent’s largest pharmaceuticals manufacturer said the lift in normalised headline earnings to R5.6-billion was achieved despite an unfavourable exchange rate environment in which the US dollar was particularly strong, devaluing revenue flows and increasing the cost of goods in the group’s principal trading currencies.

Despite the currency headwinds, Aspen succeeded in raising revenue by 22% to R36.1-billion and growing operating profit by 14% to R8.4-billion for the 12 months, benefiting from the contribution of acquisitions concluded in the prior year.


Operating profit from the group’s international business division increased 27% to R4.6-billion, CEO Stephen Saad told investors on Thursday, aided by the “significant” new business acquisitions in 2014, which contributed more than half of the group’s earnings before interest, taxes, depreciation and amortisation (Ebitda) of R8.9-billion. Revenue from customers in Europe increased 45% to R10.5-billion, with finished-dose form pharmaceutical sales to healthcare providers contributing R6.9-billion to total sales.

“The acquisition in the second half of the year of Mono-Embolex, an anticoagulant with almost all of its sales in Germany, further strengthened [our] offering in this therapeutic area. “The largest part of the balance of the sales in the region was from active pharmaceutical ingredient (API) sales. However, the relative weakness of the European currencies to the rand reduced reported revenue from this region,” he noted during a presentation of the company’s results, in Johannesburg. Sales to customers in Latin America – excluding Venezuela – grew 44% to R3.4-billion, supported by the infant nutritionals acquisition in the prior year and despite performance being constrained owing to poor supply by contract manufacturers of certain key pharmaceutical products.

In Venezuela, sales to customers were up 143% to R2.7-billion, largely on the back of hyper-inflationary accounting principles and a change in the rate of exchange applied in the translation of local currency results from the prior year. Sales to customers in the rest of the world were down 10% to R1.6-billion, influenced by the disposal of the rights to commercialise fondaparinux products in the US.

Capital expenditure projects, meanwhile, remained under way at Aspen Oss, in the Netherlands, and Aspen Notre Dame de Bondeville, in France. “Sales into the international market now contributed 48% of total sales, while South Africa’s share is now 23%. “Sales growth has largely been driven by annualised effects of the acquisitions of the Merck, GSK and IMF as well as organic growth of the base portfolio,” he held.

Looking locally, the South African business recorded a solid operating profit growth of 11%, despite the challenges of a weaker currency and inflationary cost pressure. Revenue in the South African business increased by 16% to R8.6-billion, with private-sector pharmaceutical sales improving 12% through a combination of organic growth and new product launches. In the public sector, sales grew 14%, led by demand under the group’s antiretroviral (ARV) tender with government, while the consumer division raised revenue by 23% owing to a strong performance from infant nutritionals, with Infacare making “impressive” gains in its share of this category. “The increase in the ARV tender revenue, coupled with the ongoing weakening of the rand relative to the dollar, as well as high wage and energy cost inflation, has placed pressure on Ebitda margins. “[Despite this], expansion projects continued at the Port Elizabeth finished-dosage form manufacturing site and at the API manufacturing site, in Cape Town,” Saad commented. He added that the building of a high-containment facility, in Port Elizabeth, was nearing completion, while manufacturing trials in the hormonal suite had started and the upgrade of the packing facility had been completed. Construction of the additional specialist sterile manufacturing facility also started over the period, while production was under way in certain of the newly built suites at the fine chemicals operations. In sub-Saharan Africa, revenue increased 1% to R2.8-billion, notwithstanding a “disappointing” performance from the GSK Aspen Healthcare for Africa Collaboration, which was hampered by supply problems. Weakening in-market currencies contributed to narrowing margins and a reduction of 6% in Ebitda to R313-million.

Revenue in the Asia Pacific region, meanwhile, dropped 5% to R8.1-billion for the year, along with Ebitda, which declined by 10% to R1.7-billion. In Australasia, sales to customers were 8% lower, at R7.2-billion, despite branded pharmaceuticals and infant nutritionals both showing positive growth. “This was, however, reversed by the effect of disposals, as well as the termination of licences and contract manufacturing arrangements in the second half of the prior financial year. “These were undertaken in accordance with the strategy to achieve greater focus in this business,” Saad explained. Moreover, the cost of goods in Australia increased owing to the weakening of the Australian dollar against the US dollar, in which many input costs were denominated. Sales to customers in Asia accelerated by 39% to R1.3-billion through a combination of organic growth and recent acquisitions, led by strong advances in Japan.

Borrowings, net of cash, increased by R200-million over the year to R30-billion, with R2.5-billion of this arising from unfavourable relative foreign exchange rate movements. Group operating cash flows remained strong and cash generated from operating activities increased by 26% to R4.8-billion, while gearing declined to 47% at the end of the financial year.

Looking ahead, Saad revealed that Aspen was aiming for sharper focus in key therapeutic areas, with the objective of delivering improved return on investment. Consequently, a broad range of noncore products distributed in Australia and in South Africa had been divested in transactions that had closed in the first quarter of the new financial year and had garnered revenues of R1.7-billion. “The global pharmaceutical industry continues to adjust to changing demands in patient needs, heightened regulation and evolving economic circumstances. This has been marked by significant merger and acquisition activity, as companies seek to strengthen and refocus their strategic positions. “Aspen remains alert to the potential for value-creating opportunities aligned to the group’s development plans,” he advised. Saad added that the group had been seeking opportunities to expand its infant nutritionals business and had recently been engaged in negotiations to explore such an opportunity. “Although these negotiations have not progressed to a satisfactory conclusion, Aspen will continue to investigate prospects to build its infant nutritionals franchise,” he noted. Aspen expected further currency volatility to continue to weigh on its 2016 financial year results, but was readying for an additional R2.5-billion in Ebitda by 2019 as a result of its various acquisitions. The company declared a capital distribution of 216c per ordinary share for the 12 months

(Source: Engineering News)