Pharmaceuticals company Adcock Ingram on Wednesday announced that its gross profit as a percentage of sales remained under “extreme pressure” during the second quarter of the 2014 financial year as a result of the unfavourable revenue mix, the rand depreciation by more than 20% against a basket of currencies and certain facilities running significantly below capacity.
The company said in a trading update that second-quarter trading, as at the end of February, had shown no improvement, with year-to-date consolidated revenue effectively flat on that of the prior corresponding period, while its South African business was lagging 6% behind the corresponding period.
Adcock added that the performance of its over-the-counter and prescription generics portfolios remained concerning, exhibiting volumes significantly behind those of the prior corresponding period, while January IMS Private Sector data on a moving yearly total basis showed that Adcock Ingram was lagging market growth in those sectors.
However, March ex-factory sales in the group’s Southern African business showed some encouraging signs, but it was not yet evident whether this was a result of wholesaler buy-ins ahead of the single exit price increase to be implemented on March 21, Adcock said.
The company added that costs related to the failed Chile-based CFR Pharmaceutical bid process were expected to total R140-million.
Of these costs, R35-million was expensed in the 2013 financial year, thus, leaving an amount in excess of R100-million likely to be expensed in the six months ended March 31.
“Adcock is currently undergoing a process of re-evaluation of some of its processes and structure. While the road ahead is likely to be bumpy the board chairperson Brian Joffe is optimistic that operational management will be up to the task of successfully building on the proud history of the company over the short to medium term,” Adcock said.