Adcock Ingram Holdings’s interim operational and financial performance was below its management’s expectations due to constrained consumer spending and lower pharmaceutical stocks.

The share price for the leading South African pharmaceutical manufacturer that was founded in 1891 fell sharply by 5.56% to R59.90 on the JSE by late yesterday afternoon, indicating investors might also have been unhappy with the results. The price, however, is 13.3% above what it traded at a year ago.

“Although the results fell short of expectations, the company has retained its status as the Number 1 pharmaceutical player in the South African private market. In the prevailing economic climate, our teams are focused on growing market share, excelling at customer service and exercising strict cost control,” said CEO Andy Hall.

In the six months to December 31, revenue for the Bidvest Group controlled company fell 1% to R4.71 billion due to a slowdown in both the independent and pharmaceutical wholesale channels; the latter having reduced their average inventory holdings on several key brands.

Gross profit was lower by 5% to R1.54bn and headline earnings per share were down by 9% to 265.5 cents. A dividend of 115 cents a share was declared, 8% lower than the 125 cents a share interim dividend declared last year.

The gross margin declined from 34% to 33%, impacted by an unfavourable sales mix with a lower proportion of branded and generic prescription products and reduced factory throughput. Operating expenditure increased by just 3%, influenced by general inflation and salary increases.

The pharmaceutical wholesalers' channel sales into pharmacies were higher than orders placed on the company. Reduced demand adversely impacted the gross margin due to much-reduced production in the period, particularly at the Wadeville facility.

A SEP (single exit price) adjustment of 5.25% in February 2025 would assist in countering margin pressure, but the Wadeville facility was not expected to materially increase output in the next six months, its directors said in the results on Thursday.

The group expected that lower interest rates and reduced inflation should provide some relief to constrained consumers. However, high unemployment had an impact on a number of brands.

“We expect some recovery in the independent wholesale channel and envisage a movement towards normal inventory holdings at two of our large pharmaceutical wholesale customers,” the directors said.

Additional affordable brands would be sought to grow the non-price regulated portfolio, as would further partnerships with multinational pharmaceutical companies as they evaluated their front-end models in South Africa.

Consumer segment revenue was up 1% to R870.54m, OTC (over-the-counter) sales were lower by 4% to R1.1bn, prescription revenue was down 5% to R1.63bn while hospital revenue was up 10% to R1.12bn.

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