Abbott Pakistan

Being part of the global healthcare corporation of Abbott Laboratories, Chicago, USA, the company maintains presence in over 130 countries world-wide. It started operating as a marketing affiliate in 1948. The company runs two manufacturing facilities, one at Landhi and other at Korangi in Karachi. Abbott Pakistan enjoys leadership in areas of pain management, anesthesia, medical nutrition and anti-infective where the marketing of its diverse range of portfolio is marketed through three marketing arms.
The company is listed on all three stock exchanges of the country. Currently, its market capitalisation stands at Rs 66 billion. With a diversified portfolio of over 196 pharmaceutical and general healthcare products, it is catering to domestic as well as international demand. Its nutritional range offers a variety of products for infants, children, mothers and adults. From nutritional products to laboratory diagnostics to medical devices and therapies, the company addresses health issues from infancy to the older years.
9MCY14: Financial Performance Growth trajectory of Abbott continued its upward momentum during nine months ended September 2014 with its bottom line featuring a profitability growth of 15 percent. Top line grew by 13 percent, whereby exports surged at a pace of 20 percent year-on-year and domestic sales increased by 13 percent. However, rise in cost of sales led to hamper the gross margin which deteriorated by 100bps to 38 percent during the period ended September 2014.
One reason behind dampened margin could be the rise in share of pharmaceutical segment during the period. Pharmaceutical business contributed 74 percent to the gross sales versus 73 percent in the corresponding period last year. This reflects that the margins of the company are directly correlated with its portfolio of composition especially with the pharmaceutical segment. Rise in the share of pharmaceutical segment weakens margins while a decline in the segment's share bodes well for its profitability.
Mind you, pricing conundrum has been the biggest concern for pharmaceutical manufacturers in Pakistan. The industry has been subsisting with price freeze since 2001; it was the last time the government granted price raise on drugs. Ever since then, companies have been lamenting about their depressed margins. However, with little to no hopes for any change for the better, many pharmaceutical companies have adopted the strategy of expanding their nutritional segment to stay profitable.
Abbott in 2013: Reviewing the financial performance Boasting double-digit profitability growth year-after-year has become more like a norm for Abbott Laboratories. 2013 was just another great year for the pharmaceutical giant with its bottom line surging by 21 percent year-on-year. This is despite of the pricing woes hampering the profitability growth of the pharmaceutical industry. That said, Abbott Pakistan has managed to sustain its profitability even in the most difficult times and that too in an efficient way.
Top line grew by 13 percent year-on-year. Exports surged by 14 percent, while domestic sales grew by 13 percent year-on-year. Backed by effective cost controls coupled with burgeoning top line, gross margin rose by 100bps to 38 percent. This improvement is attributable to its product portfolio where nutritional and other products represented 26 percent of the revenues (as of December 2013) and the share of pharmaceutical segment stood at 74 percent.
By gradually shitting focus from pharmaceutical segment to the nutritional segment, Abbott has managed to sustain its profitability growth. During the year, Abbott slashed its pharmaceutical sales with its share declining by 100bps to 74 percent, from 75 percent in 2012, whereby the share of nutritional and other segment climbed up to 26 percent from 25 percent in the preceding year.
Besides better product composition and hence improved margins, further support to the bottom line came from constrained expenditures on selling and distribution expenses. Selling and distribution expenses as to sales dropped by 100bps to 14 percent during the period.
Going forward: Things seem to be moving ahead. There are hopes that some of the concerns of industry stakeholders will be addressed in the upcoming pricing policy. Reportedly, industry stakeholders have dropped their objections on the draft pricing policy and the policy is likely to be forwarded to ECC for approval. One hopes that a level playing field is provided to the industry and this is not achievable without a transparent and rational pricing policy.

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Abbott Pakistan Limited - Financial Highlights

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Rs (mn)                               CY11      CY12       CY13    9MCY14

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Sales                                12947     15216      17217     14042

Cost of goods sold                  (8280)    (9513)    (10595)    (8753)

Gross profit                          4667      5703       6622      5289

Selling & distribution expenses     (1894)    (2212)     (2471)    (2026)

Administrative Expenses              (296)     (344)      (367)     (294)

Other Operating Income                 142       183        273       343

Other Operating Charges              (241)     (313)      (367)     (259)

Operating Profit                      2378      3017       3690      3053

Profit after tax                      1645      2091       2530      2009

EPS (Rs)                             16.80     21.35      25.83     20.52

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