Abbot Laboratories Pakistan (PSX: ABOT) ranks second in the pharmaceutical company of Pakistan by market share. The company started its operations in Pakistan in 1948 and is listed on the Pakistan Stock Exchange. Abbott is involved in the manufacturing of a diversified range of more than 200 pharmaceutical and general healthcare products to meet the demands of local as well as international market.
Globally the company was founded more than 125 years ago by Dr Wallace C. Abbott out of Chicago, USA. The global health giant has presence in over 150 countries and employs more than 74,000 people. Abbott's range of product includes generic pharmaceuticals, medical devices, laboratory diagnostics and nutrition. The pharmaceutical segment contributes about 75 percent to the company's revenue and includes products such as Brufen, Entamizole, Klaricid and Duphaston.
Nutrition segment is the most profitable segment of the company and has 30 percent market share. It includes products like Ensure and Pediasure. The company has two plants in Karachi located at Korangi and Landhi. Abbott Pakistan employs more than 2400 people across the country.
Historical performance Over the past five years, Abbott has managed to almost double its revenues while earnings per share have gone from Rs 6.8 per share in 2011 to Rs 41 per share in 2016. The profitability margins have witnessed an upward trajectory with gross margins increasing by 4 percent mainly due to lower cost of raw material and a better product mix over a five-year period. The nutrition segment has been instrumental in driving up the gross margins of the company.
Abbott continues to diversify its product range and has been launching on average 6 to 8 products each year which has resulted in overall growth of the company. In addition to product launches, the company has increased its branding activities and expenditure on advertisement. The aggressive marketing strategy has paid off and market penetration has increased as a result.
1HFY17 snapshot The first quarter of 2017 saw Abbott increase its revenue by 10 percent while gross margins only decreased marginally. Even though exports increased 18 percent their contribution to the top line was small. The EPS dropped by a marginal 2 percent. Coming to 1HFY17 performance Abbott Pakistan saw its domestic sales rise by 10 percent while the gross profit margin picked up by 5 percent. The major increase in revenue came from pharmaceutical sales. The PAT showed negligible change and the EPS clocked in at Rs 17.14 down from Rs 17.37 in the corresponding period last year.
Share price performance vs. KSE-100 The share price of Abbott Pakistan has had a mix run over the last twelve months. Last year initially the share price underperformed the benchmark KSE-100 index until its second quarter result after which it saw a decent rally. The big surge in the price came at the end of 2016 when local investors bought significant quantity of shares from a foreign fund. This led to an almost 30 percent increase in the stock price.
However, due to an unexpected drop in earnings during the first quarter, the stock took a hit is down almost 30 percent from its highs. The past two months have proved especially difficult for the script with limited investor interest on account of the prevailing political uncertainty.
Pattern of shareholding Abbott Pakistan being a multi-national company has majority of its shareholding outside Pakistan. The parent company holds about 78 percent of the total outstanding shares. Mutual funds and general public as compared to last year have increased their holding in the company and now have 5.7 percent and 10.1 percent shares respectively. They were able to increase their holding as one of the foreign funds decreased its position during 2016.
Future outlook Pakistan is a key market for Abbott going forward and the company is intent on improving its product mix. The healthcare sector has a positive future with penetration on the rise. Abbott is well-positioned to take advantage of the growth in the healthcare sector and the company's pharmaceutical and nutritional segments will both benefit in the years to come.
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Abbott Laboratories (Pakistan) Limited
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Rs (mn) 1HFY17 1HFY16 YoY change
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Sales
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Domestic 11377 10364 10%
Export 680 603 13%
COGS 7511 6640 13%
Gross profit 4546 4327 5%
Selling and distribution 1844 1632 13%
Admin expenses 207 211 -2%
Other charges 276 213 30%
Other income 231 222 4%
Finance cost 5 3 67%
PAT 1678 1701 -1%
EPS 17.14 17.37 -1%
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Source: Company accounts
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Pattern of Shareholding (As of Dec 31, 2016)
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Directors, CEO, and their Spouces and minor children 41,641 0.04%
Associated Companies, Undertakings and related parties 77,189,066 78.84%
M/S. Abbott Asia Investments Limited 76,259,451
Trustees Abbott Pakistan Staff Provident Fund 490,926
Trustees Abbott Pakistan Staff Pension Fund 438,689
Mutual Funds 5,585,001 5.70%
Executives 6,280 0.01%
Public Sector Companies & Corporations 830,624 0.85%
Banks, DFI, NBFC, Insurance Co, Takaful, Modaraba & Pension Funds 1,902,736 1.94%
Individuals 9,891,482 10.10%
Others 2,453,472 2.52%
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Source: Company accounts
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