Business segment overview: Regional Brands
| 2021 R'million | 2020 (CER) R’million |
Change % | ||
|---|---|---|---|---|
| Revenue | 17 183 | 16 919 | 2 | |
| Gross profit percentage | 54,3% | 53,2% |
| Key brands | |||
| Brand | Therapeutic category | ||
| Circadin | Sleeping aid | ||
| Foxair | Respiratory | ||
| Maltofer | Iron supplement | ||
| Mybulen | Analgesic | ||
| Zyloric | Uric acid production inhibitor |
Performance
The Regional Brands segment displayed respectable revenue growth of 2% to R17 183 million in the current financial year, showing resilience in the face of depressed demand, impacted by a COVID-19-induced reduction in demand for medicines treating certain infectious diseases, especially in respect of the South African and Australian portfolios. Further sales pressure was caused by the mandated price cuts in the European oncology portfolio in the second half of the year. Excluding the impact of the mandated European oncology pricing cuts, Regional Brands grew 4%.
Regional revenue growth was led by the Americas (+9%) and Australasia (+6%), with Asia (+4%) and Africa Middle East (+2%) delivering decent growth. A strong performance in Latin America, despite an extremely challenging environment brought about by COVID-19 factors, supported the gains across the Americas. Stronger second-half performances in South Africa and Australia were supported by excellent advances from OTC brands.
Savings gains made across the segment outweighed the negative impact of the mandated oncology price cuts in the second half of the financial year and the segment delivered a gross profit percentage of 54,3% as compared to 53,2% in the prior year.
Prospects
During the second half of the financial year, the performance across the Regional Brands portfolio broadly improved across the Group’s key regions, supported by specific efforts from the in-country teams who adapted to the social distancing practices, school closures and work-from-home measures instituted in most countries. In the coming financial year, we expect the recovery in growth momentum in the segment to continue, alongside improved performances in South Africa and Australia, with a reduced impact from mandated oncology pricing cuts in Europe. Additionally, we expect the Americas to continue to contribute to the overall positive growth momentum.
We will continue to refine our products to ensure that our portfolio remains relevant to dynamic market conditions and patient needs. We will evaluate bolt-on opportunities in line with capital allocation and portfolio management models, which could benefit this segment. South Africa, specifically, continues to actively refine its portfolio with two recent disposals and further anticipated transactions.
This is demonstrated by the announcement on 22 October 2021 of the disposal of six products to Acino Pharma AG for a consideration of approximately R1,8 billion, plus the cost of related inventory. This transaction, which is conditional upon the fulfilment of customary conditions precedent, is anticipated to complete by 31 December 2021.
The impact of mandated European oncology price cuts have adversely impacted the portfolio in the second half of the 2021 financial year. We expect some remaining adverse impact to follow into the next financial year.
