Adcock Ingram takes earnings knock

CAPE TOWN — Investors did not take kindly to news yesterday that pharmaceutical manufacturer Adcock Ingram had taken a 10% knock in headline earnings per share, to 198c, for the six months to March, triggering a drop in the company’s share price.

With Adcock Ingram reporting the business was under pressure from all sides, its share price fell 7,9% to close at R58,20.

“It’s been very tough,” Adcock Ingram CEO Jonathan Louw said. “The only upside we see is that our core businesses are in good volume growth, but profitability has been a big problem with the rate of inflation, costs of labour, active pharmaceutical ingredients, electricity, water and no price increase (permitted by the government)”.

Revenue rose a modest 4% to R2, 28bn, while earnings before interest, tax and amortisation fell 15% from the same period last year, to R490m.

Adcock Ingram reported lower sales of prescription medicines, which were hit by the withdrawal from the market of painkillers containing dextropropoxyphene and the loss of a state tender for the AIDS drug efavirenz. These developments cost the company R55m and R100m respectively in lost sales, Dr Louw said.

Adcock Ingram’s core overthe-counter division was hit by growing competition, which drove down prices, while consumers downgraded their choices.

The company’s fledgling African businesses also faced challenges. Its business in Kenya was forced to recall and then relaunch its painkiller Dawanol after the market was flooded with counterfeits, and in Ghana it temporarily closed its liquids factory as a result of water quality problems.

“This is clearly a business under pressure,” Jean Pierre Verster, an analyst at 36ONE Asset Management, said yesterday.

Mr Verster said the problems were short-term challenges, and it had a lot of potential.