Aspen’s marginal rise in revenue disappoints, but is in line with expectations
Africa’s largest pharmaceuticals company’s earnings hamstrung by high financial costs
Africa’s biggest drug manufacturer Aspen Pharmacare reported a mere 1% increase in group revenue to R18.67bn for the six months to December after the market closed on Thursday .
While management said the results were in line with expectations, they were likely to disappoint investors and knock the company’s share price when the market opened on Friday morning.
In September the market took a dim view of the share when Aspen turned in a dismal 3% growth in group revenue for the year to June and announced a lower-than-expected price for the sale of its infant milk business to French dairy giant Lascalis.
Aspen sold the infant milk business for $860m, considerably short of the $1bn-$1.5bn the market had been expecting, in order to pay off debt. The double whammy saw Aspen shares take their biggest intra-day knock in two decades in September, plunging as much as 26% in intra-day trade, before recovering slightly. The company’s shares also took a battering last January, slumping 10% on speculation that it was a target of short-sellers Viceroy Research.
A good performance by Aspen’s commercial pharmaceuticals business in emerging markets was offset by a 10% decline in revenue from its manufacturing business, and earnings were diluted by higher financing costs, Aspen said. Borrowings, net of cash, increased by R6.7bn to R53.5bn, of which R1bn was due to rand weakness relative to foreign-denominated loans.
Aspen said reducing debt was a priority, and in addition to the sale of its infant milk business, it was selling off its non-core pharmaceutical business in the Asia-Pacific region. Reducing the group’s debt would enable it to build its product portfolio of niche specialty products in emerging markets, it said.
Normalised headline earnings per share slumped 9% to R7.43 for the period, partly due to higher financing costs.
Aspen listed on the JSE in 1998 and was initially a predominantly generic pharmaceutical manufacturer. It changed tack in 2014 and embarked on a series of acquisitions that shifted its focus towards niche, branded products such as anesthetics and thrombosis drugs.
Its most promising opportunities in the short-term lay with a portfolio of women’s health products being developed for launch in the US, it said.