Pharmaceutical company Aspen expects to report an overall stronger underlying performance in the second half of the current financial year, after a tough six months to December 31.
During the six months under review, normalised headline earnings a share increased by 6% to 692c.
The results were favourably influenced by the acquisition of AstraZeneca's global anaesthetics portfolio, which generated R2.8-billion in revenue during the period, paired with the R400-million sale of Hydroxyprogesterone Caproate, in the US, following the conclusion of a supply and distribution agreement with a major pharmaceutical company.
Aspen’s results were further boosted by cash generated from operating activities having more than doubled to R3.2-billion as measures to improve working capital management took effect.
However, the results were offset by an anticipated decline in the South African business and margin pressure suffered by the nutritional business in Latin America owing to reduced production activity as surplus inventories arising from Aspen's withdrawal from Venezuela were redeployed.
Legislated price decreases, British pound weakness following the Brexit poll result, supply constraints and adjustments to the distribution model weighed on performance in the Europe Commonwealth of Independent States (CIS) territory and foreign exchange losses, primarily arising from the rand strengthening against forward exchange contracts, further impacted on the company’s results.
The International business remained the largest segment of the group, contributing 50% to revenue from customers. Sales to customers in this business increased 11% to R10-billion.
The Europe CIS territory was the biggest contributor to the International business, increasing sales to customers by 2% to R6.7-billion, while sales of finished dose form pharmaceutical products to healthcare providers in
this territory were up 9% to R4.5-billion.
This performance benefited from the inclusion of AstraZeneca anaesthetics.
In Latin America, revenue from customers increased 11% to R2-billion and commercial pharmaceutal sales were 26% higher at R1.3-billion. Excluding the AstraZeneca anaesthetics, the underlying pharmaceutical portfolio increased sales by 4% to R1-billion.
Revenue from nutritionals grew in local currencies, but the weakness of the Mexican peso, in particular, caused reported revenue to decline 9% to R700-million. Margins were also unfavourably affected by lower volumes of production in the Vallejo manufacturing site, in Mexico.
SUB-SAHARAN AFRICA BUSINESS
In light of the cancellation of the collaboration with GSK in sub-Saharan Africa (SSA), outside of South Africa, the business segment previously referred to as SSA has been combined with South Africa, under the heading of the SSA business.
Sales to customers in SSA declined by 1% to R4.6-billion.
While nutritionals revenue grew 9% to R500-million and manufacturing revenue improved 34% to R700-million, commercial pharmaceuticals remained under pressure as the lack of resolution of supply chain issues continued, resulting in an 8% decline in sales to R3.4-billion.
Despite a month-long strike at the Port Elizabeth and East London manufacturing sites in August, significant progress had been achieved in overcoming the supply constraints affecting the commercial pharmaceutical division, which delivered improved results in the latter months of the period.
The building of a second sterile facility in Port Elizabeth is under way, creating new opportunities to bring additional production to this site.
Sales to customers in the Asia-Pacific business increased 36% to R5.2-billion.
This region contributed most to the sale of AstraZeneca anaesthetics, contributing R1.6-billion. In Australasia, sales from the base pharmaceutical portfolio grew 3% to R2.3-billion. Sales of nutritionals were 23% lower at R400-million and margin percentages came under pressure.