Aspen records 45% increase in HEPS
Johannesburg – JSE listed Aspen (Apn), Africa’s largest pharmaceutical manufacturer, has recorded impressive interim results for the period ended December 2005.
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Headline earnings per share (HEPS) increased 45 percent to 86.3 cents (59.4 cents).
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Revenue increased by 27 percent to R1,687 billion (R1.4 billion).
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Operating profit rose 34 percent from R355 million to R474 million.
These results are reported under International Financial Reporting Standards for the first time.
Stephen Saad, Aspen Group Chief Executive said “the pleasing results were underpinned by the good performance delivered by the South African Operations. This was achieved despite the ongoing legislated price freeze for the private market. The consumer division fared well primarily due to the excellent performance by infant nutritionals.”
South African Operations
The South African business delivered a strong performance. Revenue increased by 27% and earnings before interest, investment income, tax and amortization (“EBITA”) recorded growth of 25%.
Revenue contribution from the Pharmaceutical Division increased by 24% with finished dosage forms (“FDFs”) up 25% and active pharmaceutical ingredients (“APIs”) up 23%. The growth in FDFs was achieved despite sustained downward pressure on prices. The growth in the API business was export driven at attractive margins.
In the present deflationary environment growth has been achieved through increased volumes significantly bolstered by the contribution from new products. Twenty new molecules were launched by Aspen during the six months. Aspen has derived more revenue from new product launches in the private market than any other company over the previous one and two year periods, the most active new product launch period in the Group’s history.
Revenue from anti-retroviral (“ARV”) products increased materially. Total sales from the South African private and public sectors together with exports into Africa exceeded R100 million.
Revenue from the Consumer Division rose by 32% delivering an increased contribution to Group earnings.
The primary driver was the excellent performance by infant nutritionals which also benefited from supply problems experienced by the market leader in this area. Infant nutritional margins widened as Aspen successfully took over production of the complete range, substituting more expensive imports with local production.
Aspen’s manufacturing facilities continue to operate at high production levels. The oral solid dosage (“OSD”) facility is being used substantially for the manufacture of ARVs and is still in the process of building its capacity capabilities. Previously reported difficulties in maintaining optimum inventory levels and in service delivery are again being experienced as the escalating demand for ARVs is prioritised. The capacity of the OSD facility will be enhanced by approximately 40% with the commissioning of a second integrated granulation suite in the forthcoming months.
The production capabilities of the sterile facility in the process of construction in Port Elizabeth have been expanded to cater for increased volumes. Consequently the project time frame has been extended with initial production scheduled for the beginning of 2008. The expected capital cost of the enlarged plant has increased to R295 million.
International Operations
Aspen Australia increased revenue by 50% to R208 million. However, R50 million of the increase in revenue is attributable to a distribution agreement with Novartis which will only begin to contribute to earnings in 2008. EBITA of R27 million was up 11%.
In the UK, Aspen Resources increased EBITA by 19% to R21,8 million whilst Co-pharma’s EBITA declined from R3,1 million to R2,4 million on flat revenue.
Prospects
Growth in the use of generic medicines in the South African market as well as the performance of the new product launches are expected to be key drivers to Aspen’s growth over the remainder of the financial year. Greater legislative certainty may also emerge during this period. The strong increase in sales of ARV products should continue, particularly in export markets, albeit at significantly lower margins to the balance of the business. Unlocking production capacity to match demand growth will remain a focus.
Investments completed and currently under negotiation are planned to strategically position Aspen for continued growth. The joint ventures with Matrix and Lupin will help place Aspen as a leader in fighting infectious disease.
The construction of the sterile manufacturing facility and the development of sterile products will create a domestic and international presence for Aspen in a specialist product area. Opportunities in existing and new territories continue to be evaluated for strategic fit with the Group.
It is anticipated that growth in HEPS for the full year will be significant, but the percentage growth for the second 6 months will not match that of the first 6 months.