Aspen stays loyal to SA base even as foreign profit grows

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Londiwe Buthelezi

The International business drove Aspen Pharmacare’s growth in the six months to December last year, and it is looking set to be the major profit centre for the local drug manufacturer.

But as much as Aspen’s foreign prospects shine, the pharmaceutical firm is not interested in listing on any other stock market besides the JSE.

In the period under review, Aspen’s local business generated revenue of R3.8 billion, an 8 percent improvement from the previous comparable period. Revenue from the international business soared by 94 percent to R3.4bn.

When it came to operating profit adjusted for specific non-trading items, or Ebita, the international business passed the local business with R1.1bn, a rise of 79 percent, while the local business’s Ebita was unchanged at almost R1bn.

The sub-Saharan African business lifted revenue by 41 percent to R1.4bn, while Ebita climbed 53 percent to R200 million. In Asia Pacific revenue rose 27 percent to R4.3bn while Ebita added 4 percent to almost R1bn.

“The international business will be the biggest portion of Aspen going forward, but the South African business remains important to us. We won’t list anywhere else. We want to remain a proudly South African company. But growing here has limitations,” Aspen’s deputy chief executive, Gus Attridge, said.

Aspen’s global footprint includes Africa, the Asia Pacific, Latin America, Germany and the Netherlands.

The international business portfolio, which excludes Africa and Asia Pacific, has been the largest beneficiary of Aspen’s acquisitions. These include manufacturing facilities for active pharmaceutical ingredients and specialised sterile production, a portfolio of branded finished drugs from MSD and GlaxoSmithKline (GSK), as well as an infant food business from Nestlé.

Aspen’s traditional core markets, South Africa and Australia, both face challenging times with ongoing mandated price cuts in Australia and low economic growth at home.

“But we believe that South Africa is still going to be a good market. There are dynamics in the market that point to growth, such as population growth and increased health-care coverage,” Attridge said. “Australia is more challenging. The market is fairly static and price regulations add to that.”

Aspen has moved some production for the Australian market to South Africa and more will be transferred this year.

South Africa has become the company’s manufacturing centre and this was why it remained more important than Australia, although both markets had growth limitations.

Having reached its goal to become a multinational player without an international acquisition, speculations that GSK was positioning itself to take over Aspen are likely to have been laid to rest.

GSK, which had bought a 19 percent stake in Aspen in 2009, reduced it to 12.4 percent in November last year.

Attridge said it had never been Aspen management’s plan to move in the direction of a takeover in the first place, and even though there were suggestions about it, they would not entertain them.

But Aspen’s relationship with GSK remained intact, with several transactions concluded in the past two years.

In the six months to December last year, Aspen recorded a 33 percent rise in revenue generated to R12bn. Its operating profit increased 16 percent to R2.9bn, after acquisition costs of R143m were recorded.

The company’s normalised headline earnings grew 23 percent to R2.1bn and normalised diluted headline earnings a share were also up 23 percent to R4.674.

The shares rose 0.81 percent to close at R281.26 yesterday.


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