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Aspen pushes its earnings higher

Johannesburg - Africa's largest pharmaceutical manufacturer Aspen Pharmacare Holdings [JSE:APN] saw headline earnings from continuing operations increase by 35% to R1.147bn for the half-year ended December 2010.

Headline earnings per share (Heps) from continuing operations were up 15% to 265.3 cents from 230.8c for the comparable six-month period in 2009, while the operating profit from continuing operations improved by 28% to R1.614bn.

This was achieved on the back of a 33% increase in revenue from continuing operations to R5.990bn.

The rise in Heps was diluted by an increase in the weighted average number of shares in issue. This resulted from the issue of shares on December 1 2009 in settlement of the transaction with GlaxoSmithKline (GSK) concluded on that date.

Aspen group CEO Stephen Saad said: "The South African pharmaceutical division's consistently good performance ensured that Aspen retained its position as the leader in the South African pharmaceutical market.

"The successful integration of the GSK business has further contributed and Aspen is now also ranked first in the branded product segment. Aspen's international and sub-Saharan Africa businesses also performed well, delivering increased revenue and operating profit across the group."

The South African business increased revenue by 29% to R3.3bn, and improved operating profit by 23% to R996m. The pharmaceutical division led the growth in revenue-raising sales by 36% to R2.682b.

Consumer division sales were up 8% to R618m. Profit margins benefited from production efficiencies, procurement savings and rand strength. The higher insurance compensation received in the prior period inflated the comparative profit margin for that period.

The pharmaceutical business grew ahead of the market in the private sector, increasing Aspen's share as measured by IMS to 16.7%. Sales of the GSK products for the six months to December 31 2010 were R463m against R53m from one month of sales in the prior period.

In the recently adjudicated antiretroviral (ARV) tender, Aspen was awarded 41% by value of the anticipated ARV requirements of the South African government over a two-year period. This validates the cost competitiveness of the group's production capabilities.

"There has been ongoing investment in the manufacturing capabilities of the group in South Africa. Most capital projects are well advanced. The focus of these projects has been adding capacity, enhancing technical standards and improving efficiency," Aspen said.

Revenue in the sub-Saharan Africa business more than doubled from R279m to R666m, due to the full period contribution from the GSK Aspen Healthcare for Africa collaboration. Operating profit followed a similar trend, growing from R41m to R119m.

Performance at Shelys, Aspen's 60% -wned subsidiary in East Africa, improved on the unsatisfactory showing in the second half of the 2010 financial year.

The international business increased revenue by 39% to R2.423bn. Revenue benefited by R600m (2009: R108m) from the inclusion of the brands and the German-based Bad Oldesloe production facility acquired from GSK in December 2009 for the full period.

Asia Pacific revenue was up 28% to R957m, Latin American revenue increased 20% to R599m and revenue in the rest of the world region rose 76% to R867m. Operating profit before amortisation and once-off items was up 27% to R551m.

The AUD$900m (approximately R6.3bn) acquisition of the pharmaceutical business of Sigma, Australia's largest listed pharmaceutical company,was completed on January 31 2011. Integration of this business with Aspen Australia is well under way and is progressing to plan, according to Aspen.

Looking ahead, Aspen said the South African pharmaceutical business had strengthened its position as the market leader over the past period. Performance in the second half of the year would, however, be affected by the reduced value of the recent ARV tender award.



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