Adcock Ingram reports full-year profit bump

Pharmaceutical manufacturer Adcock Ingram has reported a 24% rise in headline earnings per share (Heps) to 502 cents for the year ended June 2022, boosted by an improved demand for its over-the-counter (OTC) and consumer healthcare products.

The JSE-listed group which owns the Panado, Allergex, Citro-Soda, Corenza C and Bioplus brands saw 11.9% growth in revenue during the period to R8.7 billion, while its gross margins improved to 35.1% from 34.5% in the previous period.

Profit growth during the period was supported by price increases in line with inflation for its OTC and consumer business.

However, the price deflation it experienced in the Renal segment as well as in the ARV segment of its prescription business dampened these gains. This saw the group reporting an overall price realisation of just 1.5%.

Headline earnings increased by 21% to R812 million, while trading profit for the period went up 21.6% to R1.1 billion, up from R915 million in the previous period.

“The group achieved healthy growth in turnover, with our flagship brand, Panado, reaching a new milestone, with annual sales in excess of R500 million. With some benefit from the exchange rate, we have seen an exceptional increase in trading profit and excellent cash generation,” CEO Andy Hall says in a statement on Thursday.

However higher selling and distribution expenses related to its improved turnover, as well as increased spend on marketing, drove the group’s operating expenses up by an extra 10% during the period.

Adcock Ingram declared a final dividend of 105 cents per share, 25% higher than what was declared in the previous year.

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Segmented review

The group consumer business – which competes in the healthcare, personal care and home care market – reported a 23.3% increase in turnover to R1.56 billion. This segment’s growth was largely boosted by the inclusion of sensitive skin care brand Epi-max (which was previously counted in the prescription business) in the consumer segment, as well as its acquisition of various brands from Peppina in December 2021.

“On a like-for-like basis, excluding Epi-max, sales improved 14.3%, with key brands posting healthy growth, most notably Panado, which reached a landmark annual sales value in excess of R500 million, as well as Compral and ProbiFlora.” 

The OTC segment of the business saw a turnover improvement of 18.7% to R2.06 billion. This, the group says, was supported by the relaxation of Covid-19 related restrictions, which saw an uptick in demand for cough and cold products.

“Citro-Soda, Allergex, Corenza-C, Alcophyllex and Dilinct all posted double digit ex-factory growth.”

“Gross profit improved 15.2%, but the gross margin is lower than the prior year, mainly due to the rate of acceleration in the cost of raw materials, utilities and wages.”

In comparison with the performance of the OTC and consumer segments, the group’s Prescription and Hospital segments reported relatively modest growth. The prescription and hospital segments reported a 6.8% and 5.9% rise in turnover for the period to R3.2 billion and R1.88 billion respectively.

“This set of results is proof of our people’s ability to adapt to changing market conditions and is underpinned by a huge sales, marketing, and operational effort from all our employees during the year. Adcock Ingram remains confident in the resilience of its affordable and balanced portfolio of healthcare products,”  Hall says.

“Given the ongoing weakness in the local economy, high fuel prices and the significant deterioration of the rand, much of our focus for 2023 will be on management of margins.” Hall adds.

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