Release Date: February 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adcock Ingram Holdings Ltd (JSE:AIP, Financial) retained its status as the #1 pharmaceutical company in the South African private market.
- Turnover improved by 1% despite challenging macroeconomic conditions.
- The Consumer division saw a 2% increase in turnover, with standout brand performance from Epi-max.
- The Prescription division grew trading profit by an impressive 13%, driven by strong demand in the branded prescription portfolio.
- The Hospital division secured a 5-year marketing sales and distribution agreement with Convatec, a global wound care and ostomy products company.
Negative Points
- Organic volumes were down 5%, primarily due to difficult trading conditions and supply chain challenges.
- Gross margin declined from 35.1% to 34%, influenced by a weaker exchange rate and sales mix.
- The Over The Counter division's trading profit declined by 9% due to inventory supply chain challenges and higher transport costs.
- The Hospital division experienced operational challenges, including water supply interruptions and union activity, resulting in a 16% decline in trading profit.
- The company faced significant cost pushes from suppliers and the weaker exchange rate, impacting gross margins across divisions.
Q & A Highlights
Q: Your export and foreign revenues went up by 63% year-on-year. Can we please have a breakdown? Do you see any opportunity outside of South Africa?
A: (Andrew Hall, CEO) Export revenues are still relatively small, just over 2% of total revenue, up from 1% in the previous period. Most of this growth comes from Namibia and Botswana. We don't see a significant opportunity in the rest of Africa due to regulatory challenges and competition with Indian exporters.
Q: What is the current situation with regards to inventory supply? Has this alleviated?
A: (Andrew Hall, CEO) We faced delays due to port congestion and issues with codeine phosphate permits in India. Most containers have been unloaded, but post-importation testing is causing bottlenecks. We expect to resolve these issues in about four weeks. We are also gearing up our Wadeville facility to manufacture key products locally to mitigate future risks.
Q: Can you comment on the extent to which you feel you would be able to put through the SEP increase for 2024, particularly by division?
A: (Andrew Hall, CEO) We have taken the full price increase across our basket in both OTC and Prescription divisions. The SEP tends to stick in the branded portfolio but only about 50% in the generic portfolio. The total price realization in the OTC business was about 7%.
Q: Will the Level 2 B-BBEE status impact potential future ARV tender awards by the government?
A: (Andrew Hall, CEO) Our B-BBEE status is important for societal contributions, but it has a small impact on ARV tender awards, which are primarily price-driven. We don't expect it to make a significant difference in tender awards.
Q: Can you update us on the regulations and controls regarding codeine? Do you see any further impacts in the future?
A: (Andrew Hall, CEO) The scheduling status of codeine is under review by SAHPRA. We have submitted data supporting its safety and efficacy. If codeine-containing syrups are up-scheduled, it won't significantly impact us. We hope oral solid dosage forms like Adco-Dol and Myprodol remain at Schedule 2 to ensure access to painkillers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
