Pharmaceutical manufacturer Adcock Ingram increased its dividend due to higher revenue, trading profit and profit.
The company, valued at R8.73bn on the JSE, reported that its profit increased by almost one fifth, trading profit 15% and revenue 8% year on year in the six months to end-December as the interim dividend was hiked 20% to 125c.
This comes despite the uncertain macroeconomic environment, particularly since the start of the war in Ukraine almost a year ago, leading to a rise in energy, food and commodity prices and higher inflation. Most central banks, including the SA Reserve Bank, have hiked interest rates in response.
“Trading conditions are expected to remain challenging, with consumers facing considerable hardship as a result of elevated transport, electricity, food and borrowing costs,” the company said.
“The strength of the group’s broad and affordable portfolio of well-known brands should continue to withstand many of the macroeconomic challenges in SA,” it said.
The company, founded in 1891, manufactures, markets and distributes healthcare and consumer products, including Allergex, Panado and Bioplus.
In terms of trading profit, the consumer division, which focuses on consumer goods, was the best performer followed by over the counter (OTC), which is aimed at the brands sold predominantly in pharmacies.
The company is disappointed by the below consumer price inflation increase in the single exit price (SEP) of 3.28% for 2023, which it said will not make up for the “abnormal cost” increases relating to raw materials and packaging, the weak currency and the above inflationary increases in wages and utilities.
SA’s headline consumer inflation came in at 6.9% in January, higher than the Reserve Bank’s target band of 3%-6%.
Medicine prices in the private sector are tightly regulated by the health department, which usually allows only one upward change a year.
The SEP is the price of a medicine at the factory gate and includes a logistics fee to cover the costs of transporting and storing the goods as they move through the supply chain.
All customers, regardless of the volume they purchase, are charged the same SEP. The dispensing fees that pharmacists and doctors charge for providing medicines to patients are regulated separately.
According to the company’s 2022 integrated report, public sector healthcare covers about 80% of the population and accounts for almost half of the total spend.
CEO Andy Hall told Business Day in August that the company is on the acquisition trail as it looks to add well-established personal care brands to its stable that are at least 10 years old.
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