South African pharma giant faces R2.7 billion hit

Aspen Pharmacare has warned shareholders of a potential R2 billion hit to the operating profit of its manufacturing business from a contractual dispute. 

The company is Africa’s largest pharmaceutical manufacturer and is valued at around R73 billion on the Johannesburg Stock Exchange. 

It owns and operates facilities in Gqeberha and in France, manufacturing finished dose products for third parties and utilises active pharmaceutical ingredients. 

Manufacturing makes up around 32%, or R14 billion, of Aspen’s revenue in 2024. It makes up R1.85 billion of its normalised earnings before interest, taxation, depreciation and amortisation (EBITDA). 

Late on 22 April, the company released a statement on the JSE’s SENS service warning that this part of its business faces a potential R2 billion hit to its EBITDA. 

“Aspen alerts shareholders that risks have recently arisen relating to Aspen’s Manufacturing business, including a material contractual dispute,” the company’s statement said.

“As a consequence, shareholders are advised that normalised EBITDA from the Manufacturing business for FY 2025 in constant exchange rate will potentially be R2 billion lower than last guided.” 

This could result in the EBITDA from the Manufacturing business for the 2025 financial year being less than 50% of that reported in the previous year, dependent on the outcome of the dispute. 

Aspen said that it is too early to estimate the full financial effects on the 2026 financial year and future years due to possible variable outcomes of the dispute and mitigating activities that will be undertaken. 

The company will update shareholders with any related developments as and when appropriate.

The dispute, the details of which are subject to contractual confidentiality, relates to a manufacturing and technology agreement with a contract manufacturing customer for mRNA products. 

In addition to the R2 billion hit, an impairment of R770 million in respect of related technology could also arise in the 2025 financial year.

Aspen also warned of the potential impact of tariffs on goods imported into the United States, saying that many companies in the world’s largest economy will look to source products locally. 

“The pharmaceutical industry has been, and we expect it will continue to be, affected by the current turbulent and unpredictable world trading environment,” it said.  

“Furthermore, those who sell products in the USA are likely to look to source these products from manufacturing sites within the USA.”