However, unlike its biggest rival Aspen Pharmacare, which started out as a local business and now sells products in 150 countries, Adcock Ingram has failed to grow its business outside SA in any significant way. In addition to Cosme, it has loss-making operations in Zimbabwe, Ghana and Kenya.
Releasing its financial results for the year to June 30, Adcock Ingram said it had failed to make a significant inroad into the Indian pharmaceutical market with Cosme. "Management has recognised the difficulties of operating an enterprise in such a competitive pharmaceutical market, which in relative terms is subscale, requiring significant further investment. While management has a good understanding of the operational demands of the business and has introduced strategies for improvement and remedial direction, the overhead to sales ratios remain the principal challenge," it said in a statement.
"While there is no certainty on the short-term sale prospects, nor the extent of any sale proceeds likely to be received, management will continue to manage the business as before," the company said.
Cosme made a R56.8m loss in the period under review, slightly worse than the R54.7m loss the year before. Given its losses, the Cosme investment was impaired by R278m in the 2014 financial year, and then written down by a further R74.4m for the year to June 30. Adcock Ingram reported headline earnings per share of 160.1c for the year to June 30, a turnaround on the 100.8c per share loss reported for the corresponding period last year.
"The reorganisation of the South African business into divisions, each focused on a specific market segment and product range has proved the right strategy," said Adcock Ingram CEO Kevin Wakeford in a statement. "In order to realise improved business results, this change was essential to put a widely diversified company on the road to recovery and restore profitability," he said.
Revenue grew a modest 5.8% to R5.559bn, up from R5.235bn the year before. Operating profit rose to R198.8m, reversing the R828.8m loss reported last year.
While performance in Adcock Ingram's South African business improved, the rest of its African businesses posted losses. During the period under review, its businesses in Zimbabwe, Ghana and Kenya posted a collective loss of R13.2m, a slight improvement on the R29m loss reported for the corresponding period last year. Adcock Ingram declared a dividend of 81c per share.
The company said the board was cautiously optimistic about the company's prospects, but its view was tempered by the recent devaluation of the rand, which makes imported raw ingredients more expensive.
Source: BDpro
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