JSE-listed pharmaceuticals manufacturer Adcock Ingram reported a 1% year-on-year increase in headline earnings per share (HEPS) to 218.5c apiece for the six months ended December 31.
The company on Thursday said its HEPS would have increased by 6% year-on-year, were it not for an ex-gratia payment of R10-million to a broad-based black economic empowerment (BBBEE) consortium, as well as the impact on treasury shares following the unwinding of the BBBEE scheme that the company undertook in the period under review.
Adcock added that its margins had remained under pressure as a consequence of continued pressure on the consumer.
The company declared an interim dividend of 100c apiece, which remained unchanged compared with the six months ended December 31, 2018.
CEO Andy Hall said the company’s focus in the six months under review had been on strict cost control and customer service, which helped the company achieve trading profit growth of 1% year-on-year to R490-million.
Headline earnings from continuing operations for the period under review increased to R372.8-million, compared with R361.2-million in the prior comparable six months.
Hall noted that the benefit of the group’s diversified portfolio had been evident in the six-month period, with the challenges in the heavily regulated over-the-counter and prescription businesses, being largely compensated for by the less-regulated consumer and hospital products portfolios.
The company’s gross margin declined from 38.7% to 38.4%, negatively impacted by water supply challenges at the Clayville facility, in Gauteng, and poor efficiencies and throughput at the Wadeville facility, in Gauteng.
Production inflation continued to exceed selling price increases, with utility costs having increased by 11.4% during the six months under review, and wages by 7%.
Adcock explained that the weaker rand had also impacted on the weighted cost of the company’s basket of imported raw materials and finished products – which increased by 6.1%.
On the positive side, the throughput at the Aeroton facility, in Gauteng, was excellent and the sales mix in the consumer division was good, with the company’s major brands all growing.
“The effect of the current economic climate on consumer spending and behaviour remained concerning. In the absence of sustainable single exit price increases, margins will remain under pressure from cost increases, particularly labour, transport and utilities, and active pharmaceutical ingredient prices, which were directly linked to currency inflations,” Hall pointed out.
To protect margins, the company has placed a heightened focus on driving productivity in its factories, ensuring continued strict cost control and expanding its product portfolio, particularly in less regulated product classes.