THE BOTTOM LINE
At last, the drugs appear to be working for Adcock Ingram
Hard graft put in since the Bidvest hostile takeover deal was struck is paying off, and the pain is just about gone
It has taken five years but Adcock Ingram shares are now finally back to the level at which Bidvest bought out the struggling pharmaceuticals company in one of SA’s most hostile takeover battles, between 2013 and 2014.
Bidvest, then still under the leadership of former CEO Brian Joffe, eventually stumped up R7bn in 2014 to wrest control of the company from Chilean group CFR. But it’s clear that the hard graft put in by Adcock since the deal was struck is paying off. After all, where do you read of a listed company that is “very pleased” with “excellent earnings growth” these days?
Trading profit grew 20% and turnover increased 10% – well ahead of average price increases allowed by the government, and due in part to a change in Adcock’s sales mix and better efficiencies at the Wadeville factory.
But Adcock, like all other local manufacturers will get no help from the state in the year ahead. Health Minister Aaron Motsoaledi’s department gazetted a single exit price increase of a laughable 1.26% – a quarter of official inflation which is now at 5.1%.
SA’s poor economic standing in an emerging markets arena that is already out of favour with international investors puts any local pharmaceutical company in something of a double-bind. The rand has a profound effect on the price at which active ingredients are imported to manufacture drugs, which are then sold at regulated prices.
No surprise that cost control is the mantra for the year ahead.