Aspen Pharmacare Profit Gains as International Units Grow

Aspen Pharmacare Holdings Ltd., Africa’s largest generic-drugs maker, posted a gain in first-half profit as the expansion of its international business outpaced sales growth in South Africa.

Net income climbed 14 percent to 1.93 billion rand ($181 million) for the six months through December, the Durban, South Africa-based company said today in a statement. Financing costs included 143 million rand, relating to recent overseas acquisitions.

Aspen, which supplies medicines in more than 150 countries, said sales climbed 33 percent to 12 billion rand, including 4.3 billion rand from the Asia-Pacific region and 3.8 billion rand from South Africa. Operating profit from units outside its home market climbed to 71 percent of the total, compared with 63 percent a year earlier.

“That Aspen has built such a strong South African business has facilitated its merger and acquisition growth elsewhere,” Mathew Menezes, an analyst at Avior Research in Johannesburg, said by a phone.

The company said in September it would buy injectable thrombosis brands, a manufacturing site and inventory, from London-based GlaxoSmithKline Plc for 700 million pounds ($1.12 billion). The company also agreed to buy pharmaceutical assets from Merck & Co Inc for $1 billion in June. This acquisition follows offers for GSK’s heart medicines and licenses to sell Nestle SA’s infant formula earlier in the year.

Second-Half Kick

“I wouldn’t want to do deals like this in such close succession again if I don’t have to,” Chief Executive Officer Stephen Saad said by phone. Even so, the benefit of the deals concluded will “really kick in for us in the second half.” Revenue in the the second half may be 40 percent higher than in the first half, Saad said.

Price cuts of HIV/Aids drugs sold to South Africa’s government, a smaller share of government antiretroviral contracts and a weakening of the rand put “huge pressure” on profit from public sector sales, Saad said.

“We are losing money on ARV sales,” he said.

Aspen is looking to cut costs in Australia as it “faces challenges” through mandated price reductions and little market growth, it said. Growth in Latin America is “pumping” and Saad said he expects further growth in the second half. In Africa, outside of its home market, revenue rose 41 percent to 1.4 billion rand as a growing middle class boosted sales, Saad said.

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