Adcock suspends its dividend as purchase talks with CFR go on

The price of importing medical products has taken its toll on Adcock's bottom line. (Gallo)

The price of importing medical products has taken its toll on Adcock's bottom line. (Gallo)

Adcock Ingram Holdings Ltd., the South African drugmaker subject to a $1.2-billion takeover bid from Chile’s CFR Pharmaceuticals SA, suspended its dividend after full-year profit and margins fell as import costs rose.

Net income declined 17% to R587.8-million in the 12 months ended September 30 from a year earlier, the Johannesburg-based company said in a statement today. The gross profit margin as a percentage of revenue declined to 41% from 46% a year earlier. Adcock paid a final dividend of 115 cents in 2012.
It was a precondition to CFR making a firm offer that Adcock agree not to make a final payout, the company said in a separate emailed statement.

"Trading margins came under pressure as a result of competitive market conditions and the weaker rand," Adcock said in the statement. "Also, the board-led process to respond to expressions of interest for control of the company necessitated very significant effort and resources and also required that certain other strategic growth initiatives be suspended."

CFR, Chile’s biggest drugmaker, has made a R12.6 billion cash and shares offer to buy Adcock as it seeks to expand in other emerging markets. Combining the companies would generate cost savings of at least $440-million, while Adcock would generate as much as 46% of combined sales, CFR said on November 15. Shareholders will vote on the takeover proposal on December 18.

The rand slumped 16% against the dollar in the year through September. This year, it’s the worst performer among 24 emerging-market currencies after Argentina’s peso and Indonesia’s rupiah, according to data compiled by Bloomberg. – Bloomberg

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