Johannesburg - Despite significant non-cash IFRS adjustments relating to forward exchange contracts (FECs), pharmaceutical group Cipla Medpro South Africa
[JSE:CMP] lifted diluted headline earnings per share by 20% from 36.5 cents to 43.7 cents for the year ended December 2010.
Basic HEPS and EPS increased to 44.2 cents - increases of 21% and 22% respectively - while normalised HEPS and EPS increased to 52.3 cents - a 29% improvement on 2009.
This was achieved on the back of a 15% growth in revenue to R1.447bn.
The group declared a final dividend of six cents per share - bringing to 11 cents per share the total dividend for the year.
The group explained that as a result of the strong rand/weak US dollar at December 31 2010, an unrealised loss on FECs of R44.7m was debited to the income statement despite a gain being recorded in the accounts at June 30 2010 of R22.4m and an unrealised loss of R24.7m at December 31 2009.
But it pointed out: "Although this has resulted in a significant non-cash adjustment to the income statement, we have enjoyed the benefit of the stronger rand throughout the year, and this can be seen in our gross profit margin which has increased significantly from 49.2% at December 31 2009 to 62.1% at the end of 2010. To illustrate the significance that the strong rand/weak US dollar had on the results, which was at its lowest level in about seven years, we have re-valued the FECs using the spot rate at the end of January 2011, which was R7.20. At this rate the loss of R44.7m would have been reversed completely."
The group noted that these adjustments had not affected its ability to generate cash. After paying its inaugural interim dividend in the second half of 2010, which had amounted to R22.5m, and STC of R2.3m, the group's operations had generated R150.9m cash in the 2010 financial year, compared to R10.2m in 2009.
The group said its relationship with Cipla India Limited (Cipla India) continued to deliver research and development on newer generics, the launch of first to market patent expired molecules and over-the-counter (OTC) medicines.
"Dossiers regularly flow from Cipla India helping to bolster our already significant pipeline of products for the future. The top ten Cipla Medpro products by value, some as old as ten years, continue to grow in units, which is rewarding given our strategy of building brands."
2010 had seen a number of significant product launches, albeit late during the year, it added. First to market was Sereflo, a combination active ingredient inhaler for asthma; then there was Numoxx, a late generation quinolone antibiotic; and Atolip, a generic of the world's most popular anti-hypercholesterol agent.
"We believe that Sereflo, Numoxx and Atolip will deliver attractive revenues and margins for us during 2011. We are unhappy with the number of registrations we gained during the year, even though a vast number of dossiers were submitted and are awaiting evaluation and registration," the group said.
Cipla Medpro will add an oncology division to its already comprehensive medicines portfolio during 2011, commencing with 20 molecules targeting a host of cancers.
"We also continue to work on opportunities outside of South Africa and to launch more and more OTC medicines in our domestic market.
"Looking forward, we are optimistic that Cipla Medpro will realise its potential even further. Cipla India has taken a major stand in biotechnology and has set up factories in Goa to produce some of the world's leading anticancer drugs," the group said.