Hikma Pharma counts cost of Middle East upheaval

Reuters, Wednesday 14 Mar 2012

Drugmaker sees a dip in full-year profits but chief executive says Egypt and other regional markets are still seeing steady growth

Weighing the costs of a turbulent 2011, drugmaker sees hope (Photo: Reuters)

The London-listed group, Hikma Pharma reported a dip in full-year profit, reflecting political upheaval in some of its main markets in the Middle East and North Africa where costs rose and adverse foreign exchange movements hit.

Hikma, which sells branded drugs and also has an injectable drugs business in the United States and a generics division, said on Wednesday it made an adjusted profit attributable to shareholders of $100.9 million last year, down 2.2 per cent, on revenue 25.6 per cent higher at $918 million.

Adjusted earnings per share dipped 2.6 per cent to 51 cents, it said, broadly in line with analysts' forecasts.

Hikma's generics business was also a drag, with a 36 per cent fall in gross profit reflecting lost sales of colchicine after U.S. regulators restricted the sale of the gout medicine to a single supplier, and stronger price competition for generic drugs in the second half.

Chief Executive Said Darwazah told Reuters the impact of the Arab Spring uprisings had been less severe and shorter in duration than the group had forecast.

"Egypt is still showing growth, both for us and the (Middle East and North Africa) market itself is still growing," he said in an interview on Wednesday.

"We guided 7 per cent growth for the whole MENA, while our actual growth was 9.6 per cent driven by strong growth in the second half of the year."

He said that despite the upheaval and the rise in labour costs the political changes would create opportunities.

"[The new governments] will be spending a lot more money on social issues such as healthcare," he said. "Healthcare will definitely benefit, so we are very optimistic about the region."

Hikma moved into Morocco, a market it had long targeted, with a $111 million acquisition in October that will also provide a springboard to extend into West Africa.

The group is now eyeing expansion further north, and Darwazah said Turkey was an interesting longer term opportunity.

"Turkey is strategic for us in the future because it is a market of the size of MENA," he said. "But we really haven't honed in on anything right now."

Darwazah said he was expecting a strong performance in 2012, with revenue growth expected to be about 20 per cent, driven by opportunities in MENA and in the global injectable drugs market.

Shares in Hikma, which were at an eight-month high on Tuesday, dipped 0.3 per cent to 770 pence by 0938 GMT, valuing the group at 1.51 billion pounds.

Peel Hunt analyst Paul Cuddon said the strong second half performance in MENA was likely to reassure the market and help the company retain its premium rating relative to global peers.

The group maintained its dividend at 13 cents a share.

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