SOUTH Africa’s biggest drugs manufacturer, Aspen Pharmacare, on Thursday reported a 14% rise to 423.6c in diluted headline earnings per share for the six months to December, as growth in its international business compensated for the pressure facing its domestic operations.
Its performance stood in stark contrast with that of rival Adcock Ingram, which had failed to diversify geographically, said analysts. In November, Adcock reported a 17% drop in headline earnings per share to 350.5c for the year to September 30, down from 422c the previous year, as the weak rand and tough trading conditions took their toll.
Aspen sells generic medicines in more than 150 countries, and has operations in South Africa, sub-Saharan Africa, Asia, Australia, Latin America and central Europe.
"There is a line in Aspen’s SENS (Stock Exchange News Service) statement, saying ‘the international business was the leading contributor to the growth achieved’, which describes in one sentence why they are so much better than Adcock," said Afrifocus analyst Alec Abraham. "Things are difficult in South Africa."
He noted that while revenue in Aspen’s domestic business had climbed 8% to R3.84bn, earnings before interest, tax and amortisation remained virtually unchanged at R956m.
"Aspen’s diversification into global markets has definitely helped offset its weak South African public sector operations," said Aeon Investment Management analyst Asief Mohamed.
The weak rand, which made imported raw ingredients more expensive, and government price controls squeezed margins in SA.
Aspen CEO Stephen Saad said the company was now selling its HIV medicines to the government at a loss. "Turnover and profitability are down in the public sector in South Africa, but private market (revenue) grew at double digits."
Organic growth and acquisitions propelled Aspen.
The company bought Glaxo Smith Kline’s two antithrombosis drugs, Arixtra and Fraximparine, as well as MSD’s Dutch manufacturing plant for active pharmaceutical ingredients.
Further, Aspen acquired the licences to sell Nestle SA’s infant formula in Australia, Latin America and southern Africa.
The international business contributed R1.1bn, or 33%, of the group’s earnings before interest and amortisation, up 79% on the R603m for the corresponding period last year.
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