UPDATE 2-S.Africa's Adcock profit falls on loss of drugs

Tue Nov 27, 2012 9:13am EST

Related Topics

* Diluted headline EPS 422 cents vs consensus for 430 cents

* Sales flat at 4.6 billion rand

* Shares fall almost 3 percent (Adds analyst comment, shares)

By Tiisetso Motsoeneng

JOHANNESBURG, Nov 27 (Reuters) - South African drugmaker Adcock Ingram reported a worse-than-expected 9 percent fall in annual earnings, hit by the loss of high-margin drugs.

The country's second-largest drugmaker has struggled in recent months after losing three drugs that contributed as much as 200 million rand ($22.60 million) in sales due to safety reasons. Its failure to win a bigger share in the government HIV/AIDS drugs supply contract added to the headwinds.

Adcock said diluted headline earnings per share - the main profit gauge in South Africa - totalled 422 cents in the year to end-September, from 465 cents a year earlier.

The results fell short of the 430 cents forecast by StarMine's SmartEstimate, which gives more weight to forecasts from top rated analysts.

"Disappointing set of results that reflect a weak pricing power," Jean Pierre Verster, an analyst at 360ne Asset Management. "It also continues to show the impact of the loss of key drugs and lower anti-retroviral drugs volumes."

South African health authorities granted drug manufacturers a 2.14 percent drug price increase for certain prescription drugs in March this year, a hike analysts say did not keep up with the rising cost of imported raw materials due to a weaker rand.

Shares in the company dropped 2.9 percent to 53.15 rand by 1357 GMT, on course for the biggest daily percentage decline in more than five months and underperforming a slightly higher JSE All-share index.

The company said sales were largely flat at 4.6 billion rand, but it raised its final dividend by 8 percent to 115 cents per share.

Shares in Adcock are down nearly 12 percent so far this year, far behind its closest rival Aspen Pharmacare, which has surged more than 60 percent.

The Midrand-based company, which aims to earn more than 30 percent of its sales outside South Africa in three years, has been dwarfed by Aspen, which has made an aggressive push in overseas markets such as Australia.

Adcock recently agreed to pay $86 million to buy a portfolio of drugs and a distribution network from India's Cosme Farma to bulk up its presence in that country's $16 billion pharmaceutical market.

Adcock's small operations in Ghana and Kenya reported no growth in sales over the period, hit by safety recalls due to illegal distribution of fake products and factory upgrades. ($1 = 8.8511 South African rand) (Reporting by Tiisetso Motsoeneng; Editing by Louise Heavens)

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