Adcock Ingram, which counts Panado painkillers and the cold and flu product Corenza C among its brands, says an improvement in demand for over-the-counter (OTC) products and innovative marketing helped it grow trading profit by a quarter in its half year to end-December.
New products, such as additional Panado variants, helped boost Adcock’s consumer business to well above pre-pandemic levels, CEO Andy Hall told Business Day, with the group pleased by improved margins and about R200m in revenue from products that weren’t in the market a year ago.
“We’ve come through two years of Covid-19. I think we’ve finally got a sense that the business has normalised a bit in terms of demand patterns,” he said.
Turnover in its OTC segment was under pressure in 2020 as Covid-19 prompted changes in consumer behaviour, with the traditional cold and flu season not materialising as more people stayed at home and wore masks. Demand for many prescription drugs also took a hit due to a fall-off in surgeries as hospitals focused on fighting the pandemic.
On Wednesday Adcock described its 25% rise in trading profit to R543.2m as “exceptional”, with group turnover rising 16% to R4.3bn. The group generated R490m in trading profit in the six months to end-December 2019.
A stronger rand also helped with group margins, under pressure since 2019, with about 50% to 60% of the cost of the group’s products in foreign currencies.
The market reacted favourably to the results with the group’s shares lifting the most since June 2020, up 5.65% to R52.52. The shares have risen more than 15% over the past two years, roughly the period of time SA has been battling Covid-19.
The group said its consumer division’s performance was “very strong”, showing growth across all its top brands, including Panado, its number-one brand, which also responded well to an innovative marketing campaign that was linked to Covid-19 vaccinations. This division contributes about 18% of group revenue.
Other flagship brands, including Citro-Soda, Allergex and Corenza C, achieved double-digit growth.
The group’s OTC business was still 14% behind Covid-19, said Hall, but trending back to normality, with higher volumes of demand also boosting factory efficiency, with profit levels above pandemic levels. This division contributes about 23% of revenue.
Adcock increased its interim dividend by 30% to 104c per share, about a R183m payout for a company valued at R8.7bn on the JSE.
Hall said the group will continue to bolster its drug portfolio, eyeing products where it has more pricing power and which aren’t regulated. Price-regulated products currently account for about 54% of group turnover, with Adcock seeking a balance, with regulated medicines still proving defensive during economic downturns.
Update: February 23 2022
This article has been updated with additional information throughout.
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