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APN - Aspen Pharmacare Holdings Limited - Aspen increases revenue by 31 percent
Aspen Pharmacare Holdings Limited ("Aspen")
(Incorporated in the Republic of South Africa)
(Registration Number 1985/002935/06)
(Share code APN ISIN: ZAE000066692)
PRESS RELEASE
WEDNESDAY, 7 MARCH 2012
Aspen increases revenue by 31 percent
Johannesburg - JSE Ltd listed Aspen Pharmacare Holdings Limited (Apn), Africa`s
largest pharmaceutical manufacturer, has announced pleasing results for the
interim period ended 31 December 2011, once again proving Aspen`s resilience
across its global businesses.
Group Performance
* Revenue from continuing operations rose by 31 percent to R7.5 billion (R5.7
billion).
* Operating profit before amortisation from continuing operations adjusted
for specific non-trading items ("EBITA"), improved by 32 percent to R2.2
billion (R1.6 billion)
* Diluted normalised headline earnings per share (DNHEPS) from continuing
operations increased by 22 percent to 308.1 cents (253.3 cents).
Growth in earnings was affected by higher funding costs on the debt raised to
acquire the pharmaceutical division of Sigma Pharmaceuticals Limited in
Australia ("the Sigma business") in January 2011.
Stephen Saad, Aspen Group Chief Executive said, "The Group`s strong showing for
the period was the result of excellent performances across the offshore
territories with Asia Pacific leading the way. The Asia Pacific region increased
its contribution to Group EBITA from 8% to 34% in the current period."
South African Business
Revenue in the South African business was 11% down at R2908 million with the
Pharmaceutical division declining 9% and the Consumer division declining 19%.
Despite the headline results, the underlying performance of the Pharmaceutical
division was good. Annualised revenue growth measured by IMS at 31 December 2011
indicated Aspen`s generic products increased by 16.2%
The contributing factors to the performance reversal were largely one-offs in
nature and, where appropriate, mitigating actions have been taken which will
benefit the business going forward. These factors have been well communicated
and are as follows:
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* The Pharmaceutical division`s two biggest products, Seretide and Truvada,
both came under pressure from generic substitutes for the first time in the
second half of the 2011 financial year;
* Offtakes under the antiretroviral ("ARV") tender were significantly lower
than expected during 2011 as the South African government used donor
sponsored products rather than accessing the tender awarded;
* Aspen retained its leading stake in the recently awarded public health ARV
tender which commenced in January 2011. Aspen has both the lower volume
share of this tender and reduced pricing on the prior tender. Given the
supply of donor funded stock to date, these sales decreases have not been
mitigated by the anticipated increases from expanded coverage;
* The license with Pfizer for a range of infant milk products which had
contributed revenue of approximately R250 million per annum to the Consumer
division expired; and
* Production for most of July was lost due to a union led strike.
EBITA was 17% lower at R841 million. Profit margins came under pressure due to
reduced production volumes as a result of the poor ARV tender offtake, the cost
of production lost through the strike, inflationary increases in wages and
energy, as well as the weaker Rand.
The revenue lost on the genericisation of Seretide has been recovered by Aspen`s
own generic, Foxair. The December 2011 launch of Tribuss, the first generic
triple combination ARV to market, provides the opportunity to regain lost
revenue incurred on Truvada`s genericisation.
The Consumer division performance was disappointing. It was hoped that securing
the major portion of the public healthcare tender for infant milk formula would
help offset the loss of the Pfizer license. However, volumes ordered by the
state since the tender was awarded have been erratic, and sustainable demand has
yet to be established.
Investment in capital projects at the production facilities is ongoing. Major
projects underway include adding tableting capacity in Port Elizabeth, moving
liquids manufacture to East London and introducing new technologies in Cape
Town.
Asia Pacific Business
As anticipated, the Asia Pacific business was the leading growth driver for the
Group. Revenue of R2859 million is more than three times greater than the
comparative period whilst EBITA has grown from R133 million to R736 million.
The EBITA achieved in the past six months is 15% greater than that achieved in
the full 2011 financial year.
The acquisition of the Sigma business has clearly played a material role in the
exponential growth recorded by the region. The successful merger of the Sigma
business with the pre-existing Aspen business in Australia has been fundamental
to this achievement. The merged business is operating as a single unified
structure allowing the realisation of synergies and efficiencies. Together with
the delivery of the first procurement savings, this has translated into a steady
improvement in operating profit margins. The strong market position of the
Australian business has assisted it in concluding a co-marketing agreement with
Lilly for its market leading psychotic disorder product, Zyprexa, and the
generic of the molecule, Olanzapine.
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The consolidation and rationalisation of the Australian facilities has
continued. The Tennyson site has been sold. The Croydon and Noble Park sites
are in the process of phased closure. Production is now centred at the
Dandenong facility and supported by the Baulkham Hills facility.
Expansion of Aspen`s presence in South East Asia is receiving attention from the
regional management team. The newly established business in the Philippines is
in full operation with close to 100 sales representatives deployed.
International Business
The International business increased revenue by 5% to R1 443 million and raised
EBITA by 17% to R455 million. Latin America was a leading contributor to the
growth with sales to customers in that region rising 23% while revenue in the
Rest of the World territories remained unchanged on the prior year. The
widening of profit margins can be attributed to a favourable position in the
cycle of transitioning global brands to Aspen distribution as well as the
realisation of the first savings in the global brands cost of goods reduction
programme.
Sub-Saharan Africa
Gross revenue improved by 25% to R835 million and EBITA added 23% to R136
million in Sub-Saharan Africa. The primary driver in these positive results was
the GSK Aspen Healthcare for Africa collaboration, which performed strongly in
Nigeria and French West Africa.
Prospects
Although the South African business will continue to face the influence of
unfavourable events in the second half of the 2012 financial year, it is
anticipated that further progress will be made in overcoming these factors in
the second six months of this financial year. A sound platform is provided by
double-digit growth expectations for generic and over-the-counter products.
Foxair continues to gain market share, diminishing the losses experienced since
the genericisation of Seretide. The first to market status of Tribuss will
place Aspen as a leader in the provision of triple combination ARV therapies,
helping to compensate for Truvada`s genericisation. With the exhaustion of
donor funds, the demand for ARVs under the public sector tender has returned to
expected levels. The greater production volumes flowing from this will improve
cost effectiveness of production. Profit margins will be further assisted by the
2.14% increase in the single exit price allowed by the Department of Health,
which becomes effective in March 2012. In the Consumer division, a re-
organisation of management is aimed at achieving improved focus.
The demographic growth drivers present in South Africa are expected to continue
to underpin an increasing demand for medicines in the country. As the market
leader in both the private and public sectors, Aspen has a pivotal role to play
in meeting this demand. Aspen is well equipped to meet this responsibility with
a strong pipeline of new products to increase choice and accessibility to
medicines in South Africa. Government also remains committed to supporting
local manufacture which should benefit the Group as the country`s leading
pharmaceutical manufacturer.
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In Asia Pacific, the Australian business will continue to focus on delivering
improved cost of goods through various projects already underway. The
Australian regulator`s price disclosure cuts come into effect from 1 April 2012
and will lead to price reductions on products which were previously discounted
by more than 10%. The effect of this legislation on Aspen will be more than
offset by realisation of cost of goods savings and new product launches. The
revenue Aspen will gain under the Zyprexa/Olanzapine agreement with Lilly, which
is at low margins, will distort revenue growth and profit margins until the
effect of this product`s genericisation has stabilised. Further expansion of
Aspen`s representation in the region is planned with Thailand being among the
countries presently under consideration.
The International business will continue to benefit from savings realised in
cost of goods on a phased basis over several years. There is ongoing assessment
and consideration of opportunities to support the growth momentum in the
International business with a particular focus on Latin America. An assessment
of market prospects for the introduction of Aspen`s infant milk formula products
in this region is underway.
The good performance in Sub-Saharan Africa will be supported by the commencement
of new product launches from the Aspen pipeline in the next six months. The
Group has reached agreement with the minority shareholder in Shelys, Aspens East
Africa business, to acquire their 40% shareholding for USD 24.5 million. The
transaction remains subject to exchange control approval.
The results of the Group over the past six months have again proven Aspen`s
resilience. Earnings contribution is now spread across a number of geographies,
demonstrating the evolution of Aspen into a diverse pharmaceutical group with
growing businesses across the globe. Management intends to continue to seek
opportunities to widen the extent of the Group`s territorial reach and to
increase the depth of its product offering.
ends
Issued by: Shauneen Beukes, Shauneen Beukes Communications
Tel: +27 (012) 661-8467 : Cell: +27 82 389 8900
On Behalf Of: Stephen Saad, Aspen Group Chief Executive
Tel: +27 (031) 580-8603
Gus Attridge, Aspen Deputy Group Chief Executive
Tel: +27 (031) 580-8605
Roshni Gajjar, Aspen Investor Relations
Tel: +27 (031) 580-8649 : Cell: +27 82 879 1826
Sponsor:Investec Bank Limited
Date: 07/03/2012 13:02:01 Supplied by www.sharenet.co.za
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