Abbott Pakistan trotting along

Its interesting how a firm in the price-controlled pharma sector is able to increase its profitability over the years. Abbott Pakistan--whose 77 percent revenues come from the pharma segment--yesterday announced 21 percent growth in net profits for the year ended December 2013.
This growth in net profits comes on account of three factors. One, there was a 13 percent growth in top line which reached a record high of Rs17.2 billion in CY13. Two, there is nearly 50 percent hike in operating income, of which--if historical numbers are any guide--interest earnings are likely to be the biggest factor.
And three, the gross margins increased by 100 basis points over CY12, which is a feat given the constraints of price control the whole pharma sector has been facing for many years to reach 38.5 percent. It appears that the firm is gradually inching back to the gross margins of 40 percent it enjoyed before 2008-2009.
Effective cost management is visible in the fact that operating expenditures on sales and distribution, administration and other operating charges remained almost unchanged as a percentage of sales.
Going forward, any improvements in the firms profit margins greatly depend on rupee depreciation and government action on a rational drug pricing mechanism.

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ABBOTT PAKISTAN LIMITED - FINANCIAL HIGHLIGHTS

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Rs (mn)                               2012       2013      Chg

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Sales                               15,216     17,217      13%

Cost of goods sold                  (9,513)   (10,595)     11%

Gross profit                         5,703      6,622      16%

Selling & distribution expenses     (2,212)    (2,471)     12%

Administrative expenses               (344)      (367)      7%

Other operating income                 183        273      49%

Other operating charges               (313)      (367)     17%

Operating profit                     3,017      3,690      22%

Profit after tax                     2,091      2,530      21%

EPS (Rs)                             21.35         26

Gross margin                          37.5%      38.5%

Net margin                            13.7%      14.7%

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Source: KSE notice

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