August 29, 2018 / 6:31 AM / a month ago

UPDATE 2-South Africa's Adcock calls for medicine price hike as weaker rand bites

* Some medicine prices capped by government

* Share price rises 2 percent

* Headline earnings per share up 25.5 percent (Adds CEO quotes, details)

By Nomvelo Chalumbira

JOHANNESBURG, Aug 29 (Reuters) - Drugmaker Adcock Ingram is lobbying South Africa’s health authorities to increase the cap on price-regulated prescription medicine by 1.7 percent as the company grapples with a weaker rand, its CEO said.

The company reported on Wednesday a 25.5 percent increase in profit for the year ended June 30, boosted by a higher demand for antiretroviral drugs used to treat HIV. However, CEO Andrew Hall told Reuters that in the past six to eight weeks it had started to see the impact of a sharp weakening of the rand this year.

South Africa introduced a Single Exit Price (SEP) in 2004, which is the price at which manufacturers must sell their products to ensure consumers can afford essential medication.

South African Health Minister Aaron Motsoaledi increased the SEP on some medicines by 1.26 percent for the 2018 financial year, but Adcock wants him to go further.

The company told Reuters that an SEP increase of 2 to 3 percent, rather than the 1.26 percent, would have been more beneficial to the industry as the recent decline in the value of the rand has pushed up the costs of imported ingredients to manufacture certain medications.

The South African rand has lost 16 percent against the dollar since January.

Adcock Ingram, which competes with larger rival Aspen Pharmacare, makes about a third of its revenue from prescription medicine.

“Our view is that anything that we can recover on CPI (inflation), that would be a good outcome. There have been discussions with the minister of health and members of the pricing committee. Those discussions are still ongoing,” Hall said in a phone interview.

“What we’re hoping for as an industry is that there will be some price relief in this second half of 2018 and effectively counter the devaluation of the rand. We got a 1.26 percent price increase in the beginning of the year and that simply can’t mitigate the cost input that we are seeing in the factories.”

Adcock reported headline earnings per share (HEPS) - the main profit gauge in South Africa that strips out certain one-off items - for the year ended June 30 of 387.7 cents, up from 308.9 cents a year earlier.

Sales increased 10.2 percent to 6.5 billion rand ($444 million), helped by an acquisition and strong performances by its units in Zimbabwe and Kenya.

Adcock declared a dividend of 172 cents per share, up 24 percent. Its shares climbed 2.1 percent to 70.99 rand by 1118 GMT. (Editing by James Macharia and Susan Fenton)

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