Author: bpc

Johannesburg – JSE listed Aspen (Apn), Africa’s largest pharmaceutical manufacturer, has announced impressive results for the financial year ended June 30, 2006. These are the first set of annual results reported under International Financial Reporting Standards (IFRS). Headline earnings per share (HEPS) grew by 235 percent to 185.5 cents (144.7 cents). Revenue increased by 23 percent to R3.449 billion (R2.9 billion). Operating profit increased by 96% to R968 million (R493 million). Capital distribution of 62 cents (48 cents) per ordinary share was declared. This represents an increase of 29% over the previous year distribution and is covered 3 times by headline earnings per share. These results have however been effected by a number of once-off transactions in both the prior and current year, the most material of which are: A charge of R282,4 million in the prior year in respect of the Black Economic Empowerment (“BEE”) transaction concluded by Aspen in June 2005. The claiming of the Strategic Investment Project tax allowance under section 12G of the Income Tax Act relating to the investment by Aspen in its Oral Solid Dosage (“OSD”) facility. This has reduced the tax charge in the year under review by R31,9 million. Costs relating to Aspen’s unsuccessful bid to acquire PLIVA dd, a Croatian based generic pharmaceutical company, during the latter part of the year under review which amounted to R21,3 million. After adjusting for the once-offs, “normalised” headline earnings per share increased by 32% to 182.1 cents (144.7cents). Stephen Saad, Group Chief Executive said “Aspen’s impressive performance was driven by organic volume growth, new product launches, a strong performance from the consumer division led by infant milk formulations and an increased contribution from anti-retrovirals (ARVs). This is a highly credible performance despite the three year price freeze, an extremely competitive generic market, regulatory limitations placed on selected marketing activities and currency pressures.” SOUTH AFRICAN OPERATIONS The South African business continued to deliver solid results. Revenue grew by 24% to R2,849 billion and EBITA was up 21% at R913 million. These increases were achieved despite the disposal of 50% of Fine Chemicals Corporation (Pty) Ltd (FCC) to Matrix Laboratories Limited (“Matrix”) midway through the year. Pharmaceutical Division revenue increased by 24% to R2,054 billion. Finished dosage form pharmaceuticals raised revenue by 26% mainly through organic volume growth and new product launches. Aspen once again led the market in new product launches. Aspen increased volumes on award of the most recent South African public sector tender which commenced in October 2005. ARV sales for the year were R266 million of which more than R100 million was from exports to Africa with the balance coming from the South African private and public sectors. Aspen ARV’s presently cover the lives of an estimated 300 000 patients. The Consumer Division’s revenue increased by 24% to R795 million. This strong performance was led by Aspen’s infant milk formula brands which have increased market share over the year. The launch of Playgirl deodorants and line extensions to the Playboy and Vinolia brands further supported the good performance in the consumer market. Aspen’s Group Operations provided for continued high levels of production. Capacities were improved in the Port Elizabeth-based OSD facility with the addition of a second integrated granulation suite and the extension of packing capabilities. An investment in more efficient packing equipment was also made in the Port Elizabeth general facility. The additional capacity has allowed Aspen to manage increased demand more effectively and service levels are presently at an acceptable level. Construction of the sterile facility in Port Elizabeth is proceeding well. This R360 million rand facility will have production capabilities in injectables, eye drops and freeze-dried vials for multi-drug resistant tuberculosis products. The facility is planned to position Aspen at the highest international standards in an area of niche manufacture. Initial validation remains scheduled for the beginning of 2008. INTERNATIONAL OPERATIONS Aspen Australia recorded a 28% increase in revenue to R396 million whilst improving EBITA by 22% to R53 million. The decline in operating margin percentage is a consequence of the full year effect of a long term distribution contract with Novartis which is only expected to become profit generating in the 2008 financial year. The consumer offering in Australia was expanded by the distribution of a range of deodorant brands commencing in January 2006. UK-based Aspen Resources increased its intellectual property portfolio by the acquisition of the deodorant brands which are distributed by Aspen Australia. Aspen Resources increased EBITA by 12% to R41 million. The UK commodity generic market remained intensely competitive. Co-pharma reported a decline in revenue of 23% to R162 million and a reduction of 64% in EBITA to R3 million. Aspen USA was incorporated during the year. This operation is in its formative stage and is presently focused on developing strategic opportunities in the USA market for the Group. No material trade took place during the year. Aspen acquired 50% of Indian-based Astrix Laboratories Limited (“Astrix”) in January 2006 for R233 million. Astrix is jointly owned with Matrix and provides vertical integration into the manufacture of active pharmaceutical ingredients used in the production of ARVs. As such, revenue and profits generated by Astrix in its transactions with Aspen are eliminated on consolidation. INFECTIOUS DISEASES Aspen continues to commit substantial resources to the enhancement of its portfolio of generic ARVs. The development of ARVs, including combination products, are prioritised at the Group’s Pharmaceutical Research laboratories in Port Elizabeth. Aspen will also seek opportunities to further extend its influence in infectious diseases, particularly those afflicting Africa. PROSPECTS Growth prospects are likely to be most strongly influenced by the extent of additional generic substitution which takes place in the South African market, the market penetration achieved by new product launches which are driven by Aspen’s robust pipeline, the acceptance of price increases in the South African pharmaceutical market and demand patterns in the ARV markets serviced by Aspen. Aspen is investing in development and manufacturing capabilities in areas identified as potential future growth drivers. The Group is… Continue reading Once-offs results in 235% increase in HEPS

Aspen records 45% increase in HEPS Johannesburg – JSE listed Aspen (Apn), Africa’s largest pharmaceutical manufacturer, has recorded impressive interim results for the period ended December 2005. Headline earnings per share (HEPS) increased 45 percent to 86.3 cents (59.4 cents). Revenue increased by 27 percent to R1,687 billion (R1.4 billion). Operating profit rose 34 percent from R355 million to R474 million. These results are reported under International Financial Reporting Standards for the first time. Stephen Saad, Aspen Group Chief Executive said “the pleasing results were underpinned by the good performance delivered by the South African Operations. This was achieved despite the ongoing legislated price freeze for the private market. The consumer division fared well primarily due to the excellent performance by infant nutritionals.” South African Operations The South African business delivered a strong performance. Revenue increased by 27% and earnings before interest, investment income, tax and amortization (“EBITA”) recorded growth of 25%. Revenue contribution from the Pharmaceutical Division increased by 24% with finished dosage forms (“FDFs”) up 25% and active pharmaceutical ingredients (“APIs”) up 23%. The growth in FDFs was achieved despite sustained downward pressure on prices. The growth in the API business was export driven at attractive margins. In the present deflationary environment growth has been achieved through increased volumes significantly bolstered by the contribution from new products. Twenty new molecules were launched by Aspen during the six months. Aspen has derived more revenue from new product launches in the private market than any other company over the previous one and two year periods, the most active new product launch period in the Group’s history. Revenue from anti-retroviral (“ARV”) products increased materially. Total sales from the South African private and public sectors together with exports into Africa exceeded R100 million. Revenue from the Consumer Division rose by 32% delivering an increased contribution to Group earnings. The primary driver was the excellent performance by infant nutritionals which also benefited from supply problems experienced by the market leader in this area. Infant nutritional margins widened as Aspen successfully took over production of the complete range, substituting more expensive imports with local production. Aspen’s manufacturing facilities continue to operate at high production levels. The oral solid dosage (“OSD”) facility is being used substantially for the manufacture of ARVs and is still in the process of building its capacity capabilities. Previously reported difficulties in maintaining optimum inventory levels and in service delivery are again being experienced as the escalating demand for ARVs is prioritised. The capacity of the OSD facility will be enhanced by approximately 40% with the commissioning of a second integrated granulation suite in the forthcoming months. The production capabilities of the sterile facility in the process of construction in Port Elizabeth have been expanded to cater for increased volumes. Consequently the project time frame has been extended with initial production scheduled for the beginning of 2008. The expected capital cost of the enlarged plant has increased to R295 million. International Operations Aspen Australia increased revenue by 50% to R208 million. However, R50 million of the increase in revenue is attributable to a distribution agreement with Novartis which will only begin to contribute to earnings in 2008. EBITA of R27 million was up 11%. In the UK, Aspen Resources increased EBITA by 19% to R21,8 million whilst Co-pharma’s EBITA declined from R3,1 million to R2,4 million on flat revenue. Prospects Growth in the use of generic medicines in the South African market as well as the performance of the new product launches are expected to be key drivers to Aspen’s growth over the remainder of the financial year. Greater legislative certainty may also emerge during this period. The strong increase in sales of ARV products should continue, particularly in export markets, albeit at significantly lower margins to the balance of the business. Unlocking production capacity to match demand growth will remain a focus. Investments completed and currently under negotiation are planned to strategically position Aspen for continued growth. The joint ventures with Matrix and Lupin will help place Aspen as a leader in fighting infectious disease. The construction of the sterile manufacturing facility and the development of sterile products will create a domestic and international presence for Aspen in a specialist product area. Opportunities in existing and new territories continue to be evaluated for strategic fit with the Group. It is anticipated that growth in HEPS for the full year will be significant, but the percentage growth for the second 6 months will not match that of the first 6 months.