Johannesburg – JSE listed Aspen (Apn), Africa’s largest pharmaceutical manufacturer, has announced a sound set of results for the financial year ended June 30, 2007. These results take into account the higher effective tax rate of 28,9% (2006:25.3 percent).
- Revenue increased by 17% to R4,026 billion (R3.449 billion).
- Operating profit increased by 20% to R1,077 billion (R968 million).
- Headline earnings per share (HEPS) grew by 13% to 210,1 cents (185.4 cents).
- Capital distribution of 70 cents (62 cents) per ordinary share was declared.
Stephen Saad, Aspen Group Chief Executive said “these are solid results. The South African pharmaceutical division has performed well again and there has been excellent growth in the ARV business. We are now the largest pharmaceutical company in the private market as well as in the public sector. Our international business has also recorded good growth.”
SOUTH AFRICAN OPERATIONS
The South African business remains the key driver of the Group’s performance. Revenue grew by 15% to R3,266 billion (R2,849 billion) and EBITA showed a 20% increase to R1,053 billion (R913 million).
The Pharmaceutical Division underpinned the strong returns of the South African business. Revenue increased by 17% to R2,397 billion (R2,054 billion). Adjusting for the effect of the sale of 50% of Fine Chemicals Corporation (Pty) Limited (FCC) midway through the prior financial year, revenue increased by 20% on a like-for-like basis. Finished dosage form (FDF) pharmaceuticals showed a 19% increase in revenue. In April 2007, Aspen topped the market share charts for the total private pharmaceutical market for the first time. The Group retained its generic leadership position with an unchanged 35%. Aspen increased its share of the over-the-counter (“OTC”) market, despite this sector’s pedestrian growth.
Sales of FDF ARVs reached R439 million, denoting a growth of 65%. Aspen increased its ARV offering towards the end of the financial year with the introduction of Viread® and Truvada®, originator products distributed on behalf of Gilead Life Sciences, which are considered amongst the leading treatments available for HIV/AIDS today. Aspen has achieved strong growth in the export of ARVs into Africa and it is one of the leading suppliers of ARVs on the continent reaching some 500 000 patients.
The Consumer Division reported satisfactory growth in revenue of 9% to R869 million. Toothpastes and infant nutritional brands delivered good increases.
Investment in Aspen’s Group Operation’s production capabilities continued, with the total investment since 2003 set to pass R1 billion in the year ahead. The construction of the Sterile Facility is nearing completion with commercial production scheduled for the second half of calendar 2008. An upgrade project on the heritage General Facility has commenced which will add capacity and technology to this facility. An extension to the Oral Solid Dose (OSD) Facility will realise additional bottle packing capacity to cater for the increasing demand for this packaging format for ARVs.
INTERNATIONAL OPERATIONS
The international business increased revenue 26% to R760 million and raised EBITA by 31% to R145 million. These results benefited from a full year of contribution form the Astrix joint venture (2006: contribution for six months).
Aspen Australia was the leading contributor to the international business. Results were bolstered by selective product portfolio expansion and a strengthening of the Australian dollar relative to the rand. Revenue increased by 28% to R509 million (R396 million) and EBITA increased by 35% to R71 million (R53 million).
Aspen Resources, the UK-based intellectual property and sourcing company, also benefited from relative Rand weakness in growing EBITA by 40% to R56 million. Poor performance with a negative contribution to EBITA of R4 million was however recorded by Co-pharma, the Group’s other UK-based company which trades in the commodity generics sector. Aspen’s USA business is focused on assessing market opportunities in that territory and trading activity was not material.
Astrix, the Indian-based manufacturer of ARV APIs, which is 50% owned by Aspen, experienced reducing margins in the second half of the year as competition in this market intensified. Supply of the ARV APIs to Aspen accounted for almost half of the Astrix revenue.
PROSPECTS
Aspen is well set to maintain its leadership position in the South African pharmaceutical market. Growth prospects for the year ahead are positive, with the investment made in the product pipeline and the production facilities expected to give added momentum to the Group’s performance.
Announcement of the public sector tender awards for the next two years is imminent. Aspen is optimistic that it will secure an increased share of this business. The ARV tender is due for submission later this year for award early in 2008. Aspen expects to remain an important supplier of ARVs to the South African government.
Aspen’s growth trajectory in ARVs is expected to be maintained. The Group has the production capacity and the product offering to deliver to the increased demand for ARVs as the World Health Organisation works towards its target of universal access by 2010.
The legislative environment for pharmaceuticals remains uncertain. This is by no means a circumstance confined to the South African market. The responsibility for delivery of healthcare, which is borne by governments throughout the world, inevitably gives rise to interventions by the regulator which can influence business prospects. Aspen continues to engage actively with the DoH on matters such as international benchmarking and the annual price review. The nomination of pharmaceuticals as a strategic industry by the South African governments is taken to be an extremely positive development. Aspen looks forward to working with government in building the industry in South Africa.
The continued investment in the Group’s manufacturing facilities is of strategic importance. This investment has allowed Aspen to raise its manufacturing standards, which is particularly pertinent with South Africa’s entry into the Pharmaceutical Inspection Convention (“PIC”) with effect from 1 July 2007. The manufacturing standards and capacity established by Aspen have positioned the Group to reach export markets and to enter into manufacturing and trade partnerships with leading multi-national pharmaceutical companies.
In an increasingly competitive global pharmaceutical market Aspen will seek to utilize the strength of the business it has developed in South Africa to establish partnerships and create opportunities to extend its business in international markets.