Africa’s largest drug manufacturer Aspen Pharmacare’s share price fell 7.49% on Tuesday, its biggest drop in nine years, after it said a stronger rand reduced revenue by R1bn in the second half of its financial year.

The market had taken a dim view of the update, but this was simply a case of the market expecting a slightly better performance during the period, said Fairtree Capital portfolio manager Jean Pierre Verster.

In constant exchange rate terms, revenue in the second half of the financial year was in line with the first half, but Aspen’s voluntary statement disappointed the market, sending the company’s share price as much as 10% lower before losses were pared.

Headline earnings per share (Heps) are expected to grow between 11% and 15% to between R14.42 and R14.94, while earnings per share are expected to rise between 15% and 19% to between R12.92 and R13.37.

Nontrading items

The company’s preferred measure of performance, normalised Heps, which adjusts for specific nontrading items, is expected to rise 8%-12% to between R15.80 and R16.39.

Aspen’s share price has been under some pressure since 2015, with the firm pursuing an aggressive growth strategy as it considers whether it should focus on generic medication or more specialist medication.

In the six months to end-December, the company reported revenue of R21.9bn — an 11% rise from the previous comparative period.

At the time, the company flagged the risks of a stronger rand, noting that 80% of its sales were denominated in other currencies.

The weaker rand should help with the company’s future performance, said Asief Mohamed, chief investment officer at Aeon Investment Management.

Aspen’s performance was still commendable despite the R1bn exchange loss.

Aspen’s results to end-June are expected to be published on or about September 13.

Focus will now turn to Aspen’s financial details, including the group’s position on the future of its infant formula business in China, said Verster.

Aspen has said previously it expects China to eventually overtake SA as its largest single market, but the group has battled with regulation and a tough trading environment.

Emerging markets

The company said in its interim results in March that revenue during the period from commercial pharmaceuticals grew 22% in emerging markets, making up 54% of revenue from this segment.

Emerging markets were expected to continue to be the most important contributor to growth.