Adcock Ingram reports ‘resilient’ interim trading performance

24th February 2021 By: Simone Liedtke - Writer

South African pharmaceutical manufacturer Adcock Ingram on February 24 reported a 4% increase in turnover, to R3.8-billion, for the six months ended December 31, 2020, during which the group experienced challenging trading conditions brought on by the Covid-19 pandemic, as well as a depressed economy and lower demand for certain categories of medicine and products.

CEO Andy Hall, however, said that, despite these challenges, “Covid-19 has also presented the company with opportunities to adapt to the ever-changing environment, and at the same time, deliver on its promise of ‘adding value to life’ by producing and supplying life-saving and acute medicines especially at a time when they are needed most”.

The 4% turnover increase was driven by an increase in the mix of 4.9%, which includes plush show and household care products, and an average price realisation of 4.7%, with organic volumes declining by 6%.

The gross margin declined from 38.4% to 34.5%, as it was adversely impacted by the unfavourable exchange rate, a relatively unfavourable sales mix and lower factory recoveries at Clayville owing to the decrease in demand for cough and cold products.

Operating expenditure decreased by 4.4% resulting in an 11.7% decrease in trading profit to R433-million. 

DIVISIONAL UPDATE

The commercial divisions have had to operate under some extremely challenging conditions, the company further said, noting that the consumer division displayed a laudable performance, supported by significant demand for immune-boosting products owing to the pandemic, as well as the addition of the Plush portfolio.

The over-the-counter division’s decrease in turnover was as a result of the absence of a cold and flu season in South Africa in 2020, though the prescription division’s growth in turnover was supported by a strong performance in the antiretroviral (ARV) portfolio following orders from the government, but the division was impacted by the lower levels of patients that consulted doctors, lower dispensary traffic in pharmacies and the postponement of elective surgeries which negatively impacted a number of key portfolios.

The renal segment in the hospital division benefitted from increased demand for acute renal dialysis owing to Covid-19, which Adcock said compensated for a decline in demand for products used in elective surgeries, trauma and medical cases, as a result of the pandemic.

Headline earnings for the year decreased to R312-million, translating into headline earnings a share from continuing operations of 186.5c, a decrease of 14.6%.

The company resolved to pay an interim dividend of 80c a share.

Despite the continued pressure on margins following the lower-than-expected Single Exit Price increase, Adcock said it would continue to focus on cost control, cash generation and preserving the balance sheet strength, while continuing to seek acquisitions to broaden its portfolio.

“The company and its people continue to play a crucial role as an essential service provider in the healthcare industry during the pandemic and we have been fortunate enough to be able to continue producing and supplying medications, particularly life-saving medicines such as intravenous fluids, ARVs, and other acute medication,” Hall said.

He added that the pandemic had highlighted the importance of frontline healthcare workers who have worked tirelessly to save lives.