News Room

Adcock Ingram Reports Improved Trading Performance Despite Difficult Market Conditions

Adcock Ingram today announced its results for the six month period ended 31 March 2013.

Highlights
• Turnover increased 9% to R2.46 billion
• EBITDA increased 15% to R564 million
• Distribution per share maintained at 86 cents
• Strategic acquisition of Cosme brands in India concluded at a cost of R782 million

Adcock Ingram demonstrated resilient operational performance for the six month period ended 31 March 2013, despite challenging market conditions and considerable Rand depreciation.

The company reported headline earnings of R317,4 million, representing a 5% decrease from the comparative period (R335,8 million) and a 5% decrease in earnings per share (EPS).

Commenting on the results, Adcock Ingram CEO, Dr Jonathan Louw, said, “In the light of challenging market conditions, Adcock Ingram has delivered satisfactory operating results, reflecting continued progress with our strategic priorities. We concluded the acquisition of Indian company Cosme Farma in January 2013, which, together with recent tender awards and the conclusion of further multinational contracts, supported strong turnover growth.”

Dr Louw added: “The substantial investment in upgrading our manufacturing facilities and distribution infrastructure to world-class standards is already paying off. Adcock Ingram’s Wadeville facility has recently received acceptance from the US Food & Drug Administration, placing us in an even stronger position to take advantage of additional capacity in both the general tablet and ARV tenders.”

Turnover for the six months grew 9% to R2,457 million (2012: R2,251 million). New business in the product mix accounted for 6,1% of the overall increase with two multinational partners, Novo-Nordisk and Lundbeck, contributing R109 million to the Prescription portfolio.
Gross profit for the six months decreased 1,3% to R1,037 million with the margin as a percentage of sales declining from 46,7% to 42,2%, adversely impacted by the significantly weaker Rand, which affected imported raw materials and finished products. Operating expenses were well controlled, resulting in operating profit increasing 9,1% to R475 million (2012: R435 million).

Rest of Africa
Despite supply constraints which adversely impacted exports to the SADC region, Adcock Ingram achieved revenue growth of 3% in relation to the comparable period last year. The East Africa turnaround is on course, following the resolution of regulatory bottlenecks in Uganda and Tanzania. In Ghana, the new management team is progressing well with revamping the factory and distribution infrastructure. As a result, Ghana and East Africa continued to show growth in sales, as did Zimbabwe after Datlabs became a 100% subsidiary at the beginning of the financial year.

Outlook
Adcock Ingram continues to maintain its focus on the acquisition of businesses and brands in high growth emerging markets. While the impact of the current economic climate on consumer spending is concerning and margins will continue to be impacted by cost pressures, and active ingredient prices which are directly linked to currency fluctuations, in the second half of the financial year this will be mitigated to some extent by the recent Single Exit Price increase. The second six months of the year will incorporate a determined focus on improving the working capital cycle within the business.

Commenting on the outlook for the business, Dr. Louw said: “The Adcock Ingram public sector business is benefiting from significantly increased volumes which are expected to drive greater efficiencies in the supply chain. We are confident of our ability to meet government requirements on a sustainable basis.”

He added: “We are pleased that the multinational partner of choice strategy continues to deliver attractive value. We’re exploring additional collaborations to continue the path of revenue stream diversification and to decrease mature product dependence.”

Renewal of Cautionary
On 31 May 2013, Adcock Ingram’s Independent Board of Directors updated shareholders on the Board’s progress in evaluating non-binding proposals to acquire 100% of or a controlling interest in the company's securities. Given that the terms and conditions of the proposals and the identities of the potential offerors with whom the Board is constructively engaging are not public, the Board advised shareholders to exercise caution when considering whether or not to accept any formal offer prior to receiving appropriate guidance from the Board.
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About Adcock Ingram
Adcock Ingram is a leading South African pharmaceutical manufacturer, marketer and distributor.. The Company provides an extensive portfolio of branded and generic medicines, has the leading presence in over-the-counter brands and is South Africa’s largest supplier of hospital and critical care products.


For media enquiries please contact:

Carol Roos
Director, Brunswick
+27 11 011 502 7300
+27 726901230
mailto://croos@brunswickgroup.com
or
Zolani Kunene
External Communications, Adcock Ingram
011 635 0130
082 561 9443
mailto://zolani.kunene@adcock.com