Good sales mix and better exchange rate lifts Adcock Ingram’s profit
Prescription drugs are Adcock Ingram’s biggest revenue generator, but over-the-counter medicines contribute nearly half its operating profit, the pharmaceutical group’s 2018 financial results showed.
Adcock Ingram’s over-the-counter division contributed 30% of the group’s revenue and 46% of its operating profit in the year to end-June.
"Over the counter, which focuses on products in the pain, coughs, colds and flu, and anti-histamine therapeutic areas through the pharmacy channel, has seen a turnover improvement of 7.6% to R1.99bn, with top brands like Adco-Dol, Allergex, Alcophyllex and Napamol showing double-digit growth. This business unit realised the full single exit price increase granted by government," the company said in its results statement, which was released on Wednesday morning.
"A gross margin improvement was realised in this year, driven by an advantageous sales mix and the improvement in the exchange rate. As a result, trading profit increased by 16.7% to R399m."
Prescription drugs contributed 34% of the group’s revenue, but only 28% of operating profit. This division grew revenue 15.5% to R2.2bn and operating profit by 15.2% to R239m.
"Volumes increased by 3.6% mainly as a result of the increased demand in the antiretroviral private market and an average price increase of 1.8% was achieved. A gross margin improvement was realised in the year, driven by increased antiretroviral throughput at the Wadeville factory and a better sales mix," Adcock Ingram said.
The group’s hospital division enjoyed a 63% surge in operating profit to R95m on a 7.2% growth in sales to R1.3bn. Sales to hospitals contributed 20% of the group’s revenue and 11% of operating profit.
"Additional volumes contributed 2.9% … following the award of the marketing rights to the Pharma Q injectable product range. The gross margin improved as a result of a change in the sales mix with gains in the private market and the improved exchange rate," the company said.
Its consumer division’s sale and operating profit remained nearly flat. Consumer products contributed 10% of the group’s sales and 13% of operating profit.
"In the second half of the financial year, the division underwent a leadership change. Subsequently, some reorganisation has taken place and we expect to see an improvement in customer focus, brand support and trading performance."
Adcock Ingram’s overall revenue grew 10% to R6.6bn and net profit grew 15% to R644m.
It declared a final dividend of 86c, taking the total for its 2018 financial year to R1.72, an increase of 24% from the previous year’s R1.39.