Adcock’s earnings suffer due to failed CFR deal

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“While there are several pharmaceutical sector specific reasons for the group’s weak trading performance, this was aggravated by a poor economic climate in South Africa as well as by Adcock Ingram’s executive leadership being  immersed in and substantially preoccupied with the CFR merger proposal,” said the South African based healthcare company [DATA AIP:Adcock Ingram Holdings Limited] in a statement.

CFR, a Chilean pharmaceutical company, had initially made an offer to purchase ordinary shares in healthcare company, Adcock Ingram, for 12.8 billion rand.

However, the deal was terminated after both parties had decided that they will not be able to attain the necessary 75 per cent majority vote to approve the deal.  

(READ MORE: CFR dumps Adcock Ingram bid

For the nine months ended 30 June 2014, a turnover of 3.6 billion rand was posted, with a weak performance from the group’s over-the-counter (OTC) segment in South Africa.

While price increases contributed 3.6 per cent to growth, volumes declined by 10.4 per cent.

Gross profits decreased by 24 per cent from 1.5 billion rand in 2013 to 1.1 billion rand. As a percentage of sales, gross profit declined by 32 per cent due to currency weakness.

Headline loss of 302.7 million rand was reported, compared to headline earnings in 2013 of 458.2 million rand. This resulted in a basic loss per share of 572.3 cents and a headline loss per share of 179.5 cents.

(READ MORE: Adcock Ingram posts 39 million rand headline loss)

In Adcock’s Southern African OTC, prescription and hospital segments, a 3.7 per cent decline in sales was posted to 3.2 billion rand, particularly in the OTC division  where revenue declined by 16.4 per cent below that of 2013.

Revenue in Adcock’s other African operations however rose by 43 per cent to 206.5 million rand.

In Ghana, sales increased by 6.3 per cent to 87 million rand as the introduction of a 17.5 per cent Value Added Tax on locally manufactured pharmaceuticals affected the Ghanaian market.

In East Africa, sales grew by 30.8 million rand while sales in Zimbabwe were impacted by the country’s liquidity crisis.  

Going forward, Adcock expects that reorganisation and corrective actions within its operating divisions should stabilise the company’s immediate affairs although it may be too early to provide shareholders with confirmation that the group will return to profitability in the short term.

(READ MORE: Adcock Ingram financial results expected to take a knock)

“Notwithstanding the unfortunate events and results recorded for the period under review, the group owns, produces and distributes an impressive range of pharmaceutical and medical products and given the group’s world-class production facilities, the board remains optimistic about the longer term prospects,” concluded the statement.