Adcock Ingram benefits from Panado and Adco-Hygiene sales in 2020 year-end results

CFO Dorette Neethling says that Adcock remains in a healthy financial position despite Covid-19.

As an essential service provider, no Covid-19 restrictions were imposed on Adcock Ingram’s operations during the lockdown. The group announced that it is in a healthy financial position and generated strong cash flows, with R317 million of cash for the year ended 30 June 2020. 

The group owns, produces and distributes an extensive range of affordable pharmaceutical, medical and consumer products, including many iconic South African brands like Panado, Corenza C, Allergex, Apimax and Bioplus.

“Albeit that the effects of the pandemic were evident across the business units in varying degrees with both the consumer and hospital divisions benefitting from buy-ins during March of products like Panado and Adco-Hygiene,” Adock Ingram CFO Dorette Neethling says. Consumer turnover improved by 13.4 percent to R892.4 million because of this increase in demand. 

She adds that the company’s prescription division was the hardest hit during Covid-19  and subsequent lockdown, with a turnover increase of only 0.7 percent to R2.759 billion, due to lower levels of patient activity at doctors and pharmacies. Postponement of elective surgeries also impacted the demand in the pain, dermatology, urology and ophthalmology segments in the last quarter. 

“Operating under the current depressed and unpredictable business environment, exacerbated by the global Covid-19 pandemic and consequential weak exchange rate, global supply chain disruptions, declines in demand for certain categories of medicine and products, and low levels of consumer discretionary spending, the group is pleased with the results delivered,” she says. 

In the company’s financial results, OTC, which focuses on products in the pain, coughs, colds and flu, and antihistamine therapeutic categories, increased turnover by 1.8 percent to R2.018 billion. “Growth was adversely impacted in the fourth quarter of the financial year by the virtual absence of a cold and flu season in South Africa, resulting in very few orders for replenishment of the winter basket,” Dorette explains. 

Despite this, a number of the group’s top brands, including Corenza C, Alcophyllex and Allergex, showed double-digit growth year on year. 

The group’s gross margin decreased from 39.4 percent to 37.3 percent, impacted by the exchange rate and unanticipated Covid-19 expenditure. According to their results, the group spent R31 million during the financial year on Covid-19 related costs, including the provision of meals and transport during lockdown level 5, and additional hygiene protocols.

Non-trading expenses include retrenchment costs of R33.5 million after the group had to reduce its non-bargaining unit employee count by 64 people towards the end of the financial year, in response to the weak economic environment. 

As a result of the slow performance of the pharmaceutical market after March 2020, as well as the extraordinary levels of uncertainty in the economy and operating environment brought about by Covid-19, the group resolved not to declare a final dividend, but to adopt a “prudent approach” and preserve cash until the full impact of Covid-19 is better understood.

The group said that it continues to examine its structures and operating model, taking into account customer and consumer behaviour during the lockdown period, to remain relevant in a post-Covid-19 economy and to protect the sustainability of the business.