Covid-19 restrictions weigh on Adcock Ingram's earnings

South African pharmaceutical company Adcock Ingram faced a challenging financial year ended June 2021 as the prevalence of Covid-19 and subsequent restrictions impacted the demand for cold, cough, and flu medication. Despite this, the company's headline earnings per share dipped by 3%. Andy Hall, the CEO of Adcock Ingram, spoke with CNBC Africa to discuss the company's performance and future outlook. Hall acknowledged the operational challenges posed by the pandemic but highlighted the resilience of the company's staff and teams. Adcock Ingram managed to achieve a 6% revenue growth, thanks to the introduction of new products contributing 400 million rands to the business. Additionally, four business units showed growth in both revenue and trading profit. Hall attributed the company's ability to weather the challenges to its diverse product offerings across various segments of the pharmaceutical market. The economic environment in South Africa remains challenging, impacting consumer spending and vaccination progress. Hall emphasized the need for a conservative approach until a significant proportion of the population is vaccinated, as the effects of Covid-19 are expected to persist even post-vaccination. Despite the company's resilience, Hall expressed caution regarding future performance, expecting more of the same challenges in the coming year. Adcock Ingram's revenue growth was buoyed by its diversification strategy into the non-price-regulated consumer segment, allowing for increased prices. However, Hall expressed a desire for organic growth volumes to normalize, which he believes will occur once South Africa returns to a more unrestricted economy. This transition is contingent on a significant portion of the population being vaccinated, with experts predicting a potential resurgence in Covid-19 cases towards the end of the year. The company's expansion into the non-price regulated consumer segment has been beneficial, with notable brands like Benito and Conchral seeing a price increase of almost 10%. While Hall acknowledged the importance of a non-price regulated product basket, he stressed the balanced approach to growth across all divisions, regulated or not. Adcock Ingram recently completed two deals with Aspen and is exploring opportunities in the OTC space. Adcock Ingram's involvement in producing the substance that facilitates the Pfizer vaccine administration reflects its contribution to the country's vaccination efforts. Although the revenue generated from this product is not substantial, it underscores the company's commitment to supporting the vaccination program. The full approval of the Pfizer vaccine by the FDA is expected to have a positive impact on the company's bottom line, with projected sales of approximately six million units, equating to revenue between 20 and 30 million rands. Despite the challenges posed by Covid-19 restrictions, Adcock Ingram's diversified product portfolio, strategic growth initiatives, and contribution to the vaccination program position the company for resilience in the face of ongoing uncertainties. As the company navigates the complexities of the current economic landscape, maintaining a cautious approach and strategic expansion will be crucial for future success.