Aspen Pharmacare Holdings Limited · JSE:APN

Aspen Pharmacare — Aspen Pharmacare Hldgs — H1 2023 Earnings Presentation

38 slides from Aspen Pharmacare's earnings presentation, Mar 2, 2023

  1. Slide 1: H1 2023 Interim Results

    H1 2023 INTERIM RESULTS 2 MARCH 2023 Healthcare.

  2. Slide 2: Disclaimer

    DISCLAIMER CAUTIONARY REGARDING FORWARD-LOOKING STATEMENTS We may make statements that are not historical facts and relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These are forward looking statements as defined in the U.S.

  3. Slide 3: Disclosure Note: Restatement of the Group Segmental Analysis

     DISCLOSURE NOTE RESTATEMENT OF THE GROUP SEGMENTAL ANALYSIS The Group has revised its reportable segments to reflect the newly updated operating model, which aligns to the way in which the business is managed and reported on by the Chief Operating Decision Maker (“CODM”). The business segments tha

  4. Slide 4: Performance Review

    PERFORMANCE REVIEW

  5. Slide 5: Trading Environment

     TRADING Commitment ENVIRONMENT to Africa-based pharmaceuticals for African requirements TESTING ENVIRONMENTAL FACTORS PERSISTED H1 2022 H2 2022 H1 2023 Business interruption Russia/ Ukraine War Spiralling inflation COVID lockdowns China Headwinds Volume based procurement J&J production ended COVID

  6. Slide 6: Performance Overview

     PERFORMANCE OVERVIEW H1 2023  H1 2023 in line with guidance  Resilient Commercial Pharma performance in spite of China, Russia and product divestments  Commercial Pharma gross margin expansion is a major achievement considering headwinds » Strong brand equity  Carried significant costs in Manu

  7. Slide 7: Group Revenue

     GROUP REVENUE % change R'million H1 2023 H1 2022 Reported CER * Commercial Pharma 14 547 14 261 2% -4% Regional Brands 9 355 8 727 7% 2% Sterile Focus Brands 5 192 5 534 -6% -13% Manufacturing 4 603 5 120 -10% -12% Group Revenue 19 150 19 381 -1% -6%  Adjusting for SA divestment, Reported Group r

  8. Slide 8: Commercial Pharma | Regional Brands

     COMMERCIAL PHARMA | REGIONAL BRANDS REVENUE % change R’million H1 2023 H1 2022 Reported CERǂ Africa Middle East 3 885 3 961 -2% -3% Australasia 2 588 2 303 12% 7% Americas 1 673 1 361 23% 7% Europe CIS 858 803 7% 4% Asia 351 299 17% 8% Regional Brands 9 355 8 727 7% 2%  Regional Brands maintained

  9. Slide 9: Commercial Pharma | Steriles

     COMMERCIAL PHARMA | STERILES REVENUE % change R’million H1 2023 H1 2022 Reported CERǂ Asia 2 277 2 426 -6% -12% Europe CIS 1 585 1 795 -12% -18% Americas 760 718 6% -6% Australasia 363 353 3% -2% Africa Middle East 207 242 -14% -17% Sterile Focus Brands 5 192 5 534 -6% -13%  China & Russia impact

  10. Slide 10: Manufacturing

     MANUFACTURING REVENUE % change R’million H1 2023 H1 2022 Reported CERǂ API 2 034 2 222 -8% -10% Heparin 1 107 1 087 2% 1% FDF - Steriles 809 1 277 -37% -38% FDF - Other 653 534 22% 16% Manufacturing 4 603 5 120 -10% -12%  API – Lost one month of production due to strategic maintenance programme »

  11. Slide 11: Financial Review

    FINANCIAL REVIEW Healthcare. We Care. U aspen

  12. Slide 12: Creditable Half Year Performance in Light of Guided Headwinds

    CREDITABLE HALF YEAR PERFORMANCE IN LIGHT OF GUIDED HEADWINDS FINANCIAL HIGHLIGHTS -6% CERⱡ -15% CERⱡ -21% CERⱡ -1% -1.7* -11% -17% 0% 0.4* -4% -16% 19 381 19 225 19 150 48.5% 5 716 46.4% 46.8% 5 296 5 083 816 811 680 H1 2022 H2 2022 H1 2023 H1 2022 H2 2022 H1 2023 H1 2022 H2 2022 H1 2023 H1 2022 H

  13. Slide 13: Normalised EBITDA

    NORMALISED EBITDA R'million H1 2023 % of revenue H1 2022 % of revenue % change % change CERǂ Revenue 19 150 100.0% 19 381 100.0% -1% -6% Gross profit* 8 966 46.8% 9 395 48.5% -5% -9% Depreciation 594 3.1% 582 3.0% 2% -1% Operating expenses (4 621) 24.1% (4 287) 22.1% 8% 3% Net other operating income

  14. Slide 14: Gross Profit Percentage

    GROSS PROFIT PERCENTAGE CERⱡ AT H1 2023 RATES Regional Brands Sterile Focus Brands Favourable sales mix and cost Site transfer savings improve of goods initiatives increase margins above H2 2022. margins amidst inflationary Positive trajectory versus headwinds FY 2021 even after the China Naropin VB

  15. Slide 15: Net Financing Costs

     NET FINANCING COSTS FOREX LOSSES HAVE MORE THAN OFFSET REDUCTION IN NET INTEREST PAID R’million H1 2023 H1 2022 Net interest paid (253) (291) Effective interest rate for the period* 2.83% 3.47% Foreign exchange (losses)/gain (234) 50 Notional interest on financial instruments (99) (93) Normalised

  16. Slide 16: Working Capital

     WORKING CAPITAL MANUFACTURING INVENTORY LEVELS EXPECTED TO REDUCE IN H2 2023 250% 200%  Strategic inventory stock build following COVID led supply chain disruptions and inflation. Reductions expected from CY 2023 onwards following supply 150% chain normalisation 100%  API and Heparin segment rev

  17. Slide 17: Net Borrowings Bridge

     NET BORROWINGS BRIDGE | R’MILLION WEAKER ZAR AND DIVIDEND OUTFLOWS INCREASE H1 2023 DEBT LEVELS 19 310 19 310 18 751 17 106 1 120 289 16 064 1 042 1 459 -1 707 484 South Africa - ZAR 23% Leverage ratio well below targeted levels at 2.1x International - EUR 69% FY 2022 FX FY 2022 Cashflows Deferred

  18. Slide 18: ESG, Site Risk and Mitigation

    ESG, SITE RISK AND MITIGATION

  19. Slide 19: ESG: Delivering Value Through Purpose

    ESG: DELIVERING VALUE THROUGH PURPOSE HEALTHCARE. WE CARE Improving health Vaccines for Africa Responding to Emergency and quality of life Health and Donation for patients that use Humanitarian crises our medicines Access to affordable high- Technical projects underway to Several Socio-economic Medi

  20. Slide 20: Energy and Water Plans for Sustainable Strategic Growth

    ENERGY AND WATER PLANS FOR SUSTAINABLE STRATEGIC GROWTH ACTIONS TAKEN TO DRASTICALLY REDUCE EXPOSURE TO ENERGY AND WATER SUPPLY RISKS Continuity of electricity supply – Water Scarcity – Energy availability Gqeberha South African Sites and costs – European Manufacturing Sites Interim measures • Water

  21. Slide 21: Outlook & Guidance

    OUTLOOK & GUIDANCE Healthcare. We Care. OkeSjela)

  22. Slide 22: Prospects: Strategic Growth Objectives

    PROSPECTS 22 STRATEGIC GROWTH OBJECTIVES Commercial Pharma Sterile manufacturing expansion  Steady organic growth  Core growth investment initiative over last 5 years  Very strong cash generator  Successful allocation and utilisation of installed capacity  Funded the Manufacturing platform » De

  23. Slide 23: Prospects: Commercial Pharma Outlook

    PROSPECTS COMMERCIAL PHARMA OUTLOOK Sustained organic growth for China seen as country with Commercial Pharma portfolio will commercial brands portfolio greatest growth potential be expanded  Diverse product portfolio with  Numerous commercial discussions  Targeting to add products in Latin stron

  24. Slide 24: Prospects: Manufacturing Sterile Capacity Fill Positioning

    PROSPECTS MANUFACTURING: STERILE CAPACITY FILL POSITIONING COVID vaccine production Unique positioning for Significant capacity for Fulfillment of strategic demonstrated value and sterile vials, despite global pre-filled syringes (“PFS”) goal will be delivery of competence of Aspen’s over capacity i

  25. Slide 25: Prospects: Manufacturing Capacity Fill Progress

    PROSPECTS MANUFACTURING: CAPACITY FILL PROGRESS Previous estimate of capacity fill was R3 billion in contribution Proven Revised upwards to at least R8 billion capability as  Crystalized view of capacity value and market dynamics world class sterile Significant progress made in contract advancement

  26. Slide 26: Group Guidance

    GROUP GUIDANCE H2 2023 Guidance on stronger H2 relative to H1 is maintained Improved H2 revenue outcome compared to H2 2022 from both Commercial Pharma and Manufacturing • Significant H2 Manufacturing growth expected to even overcome loss of COVID vaccine Targeting Reported EBITDA for FY 2023 on par

  27. Slide 27: Appendices

  28. Slide 28: Abridged Statement of Comprehensive Income

    APPENDIX 1 | ABRIDGED STATEMENT OF COMPREHENSIVE INCOME R’million H1 2023 H1 2022 % change FY 2022 Net revenue 19 150 19 381 -1% 38 606 Cost of sales (10 184) (9 986) (20 300) Gross profit 8 966 9 395 -5% 18 306 Gross profit margin 46.8% 48.5% 47.4% Operating expenses (4 621) (4 287) (8 539) Net oth

  29. Slide 29: Abridged Statement of Normalised Comprehensive Income

     APPENDIX 2 | ABRIDGED STATEMENT OF NORMALISED COMPREHENSIVE INCOME R’million H1 2023 H1 2022 % change H1 2022 (CERǂ) % change (CERǂ) FY 2022 Net revenue 19 150 19 381 -1% 20 323 -6% 38 606 Cost of sales (10 184) (9 986) 2% (10 456) -3% (20 300) Gross profit 8 966 9 395 -5% 9 867 -9% 18 306 Gross p

  30. Slide 30: Reconciliation of NHEPS

    APPENDIX 3 | RECONCILIATION OF NHEPS Cents H1 2023 H1 2022 % change H1 2022 (CERǂ) % change (CERǂ) FY 2022 Basic earnings per share (EPS) 602.0 736.2 -18% 782.1 -23% 1 432.3 Impairment of property, plant and equipment - 0.3 0.3 1.9 Impairment of intangible assets 59.3 77.2 77.8 327.3 Impairment of r

  31. Slide 31: Normalised Headline Earnings Bridge

    APPENDIX 4 | NORMALISED HEADLINE EARNINGS BRIDGE R’MILLION -19% -23% 3 935 3 728 207 NHEPS = 680 cents NHEPS growth (Reported) = -17% -914 NHEPS growth (CER) = -21% Share buy-back benefited NHEPS by +2% 3 019 -289 230 8 14 35 H1 2022 Fx impact H1 2022 Normalised Forex Depreciation Amortisation Net i

  32. Slide 32: Currency Mix

    APPENDIX 5 | CURRENCY MIX H1 2023 H1 2022 Currency contribution Normalised Normalised H1 2023 H1 2022 Revenue Revenue % change EBITDA EBITDA average rate average rate EUR 27% 7% 29% 14% 17.57 17.44 1% ZAR 16% 11% 17% 10% AUD 16% 26% 14% 21% 11.61 10.99 6% CNY 9% 20% 10% 22% 2.48 2.34 6% USD 7% (14%)

  33. Slide 33: Effective Tax Rates

    APPENDIX 6 | EFFECTIVE TAX RATES 20.2% 19.9% 19.9% 18.9% 17.7% 16.9% 17.0% 16.4% FY 2021 H1 2022 FY 2022 H1 2023 Group effective tax rate Group Normalised effective tax rate  The year-on-year decrease in the Group effective tax rate is primarily due to a change in the mix of profits being generated

  34. Slide 34: Net Working Capital Bridge CER

     APPENDIX 7 | NET WORKING CAPITAL BRIDGE CER R’MILLION +8% +R1 529 +R2 168 1 790 Cash Outflow 420 639 73 31 19 558 585 Commercial Pharma 1 205 Manufacturing 18 029 767 17 262 FY 2022 Fx impact FY 2022 CERⱡ Inventory Trade Trade payables Receivables/ Non cash H1 2023 Reported receivables payables ⱡ

  35. Slide 35: Operating Cash Flow

    APPENDIX 8 | OPERATING CASH FLOW R’MILLION H1 2023 H1 2022 % change FY 2022 Cash operating profit 5 312 5 263 1% 10 023 Changes in working capital (2 168) (2 301) 6% (2 652) Cash generated from operations 3 144 2 962 6% 7 371 Net finance costs paid ( 500) ( 290) 72% ( 306) Tax paid ( 937) ( 911) 3%

  36. Slide 36: Capital Expenditure

     APPENDIX 9 | CAPITAL EXPENDITURE PPE Capexˠ in R’million 2 300 2 400 2 045 PPE CAPEXˠ 1 963 700 800  Steriles capacity expansion project progressing well and line 3 is expected to be operational by Sept 2023 with the completion dates of lines 4 and 5 scheduled for Dec 2023 and Sept 2024 836 respe

  37. Slide 37: Net Borrowings

     APPENDIX 10 | NET BORROWINGS  During November 2022, the Group entered into new EUR, ZAR and Net borrowings# in R’million AUD syndicated bank debt facilities (“New Facilities”) and settled an existing R8.4 billion syndicated bank debt which was included in 19 310 18 751 current borrowings in the J

  38. Slide 38: Prior Year Transactions

     APPENDIX 11 | PRIOR YEAR TRANSACTIONS DEFERRED CONSIDERATION PAYMENTS R'million H1 2023 Disposal of the European Thrombosis assets – volume incentive payments 370 and other transaction costs Disposal of Japanese business – supply rebate payments 73 Other 41 Total 484 38

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