Abbott is a multinational healthcare company engaged in providing efficient and life-changing medical technologies and services across the globe. Abbott Laboratories Pakistan Limited (PSX: ABOT) was set up as a public listed company in Pakistan in 1948. The company manufactures imports and markets pharmaceutical, diagnostic, nutritional, diabetic care hospital and consumer products.

Pattern of Shareholding

As of December 31, 2024, ABOT has a total of 97.900 million shares outstanding, which are held by 3015shareholders. Associated Companies, Undertakings, and Related parties form the largest shareholder category of ABOT with 78.85 percent shares. Under this category, M/S Abbott Asia Investments Limited dominates with 76.26 million shares. Local General Public grabs the next spot with an ownership of 9.22 percent of ABOT’s shares followed by Modarbas & Mutual Funds with a stake of 3.32 percent in ABOT. Banks, DFIs, and NBFIs hold 3.06 percent of the company’s shares, while insurance companies hold 1.17 percent of the shares. The rest is held by other categories of shareholders.

Historical Performance (2019-24)

ABOT’s topline has followed an upward trajectory over the period under consideration. Conversely, its bottom line registered a decline in 2019, 2022, and 2023. The company’s margins, which eroded considerably in 2019, bounced back in 2020 and 2021. In the subsequent two years, ABOT’s margins witnessed a substantial plunge, hitting their lowest level in 2023. This was followed by a recovery witnessed in margins in 2024. The detailed performance review of the period under consideration is given below.

In 2019, ABOT’s net sales grew by a meager 1.47 percent year-on-year to clock in at Rs.30,155.88 million. Pharmaceutical sales, which constituted the major chunk of ABOT’s sales mix, dropped by 3.5 percent in 2019 on account of an unfavorable economic and regulatory environment. Conversely, nutritional sales grew by 16 percent while General Health Care (GHC), diagnostics, and Diabetic care cumulatively grew by 10.4 percent during the year. A 13 percent year-on-year decline in gross profit was the effect of Pak Rupee depreciation and high inflation. This also culminated in a GP margin of 28.28 percent in 2019 versus a GP margin of 32.98 percent registered in the yesteryear. Selling & distribution expenses surged by 12.39 percent in 2019, owing to greater advertising &promotional activities, higher payroll expenses, and elevated traveling charges. Administrative expenses also escalated by 19.76 percent in 2019 on the back of higher payroll expenses as ABOT expanded its workforce from 1465 employees in 2018 to 1540 employees in 2019. Higher computer expenses also contributed to driving up the administrative expenses in 2019. Other expenses showed some respite, mainly due to better management of exchange loss and lower profit-related provisioning done in 2019. Other income also dropped by 23.25 percent in 2019 due to a decline in income from savings and deposit accounts and lesser scrap sales. Operating profit dwindled by 41.19 percent in 2019, with OP margin sliding down from 14.67 percent in 2018 to 8.5 percent in 2019. Finance cost also hit the bottom line hard as it enlarged by 240.19 percent in 2019 due to an increase in discount rate during the year, coupled with a sizeable increase in lease liabilities. The bottom line shrank by 51.75 percent year-on-year in 2019 to clock in at Rs.1,299.89 million with EPS of Rs.13.28 versus EPS of Rs.27.52 posted in 2018. NP margin also slipped from 9.07 percent in 2018 to 4.31 percent in 2019.

While other sectors of the economy would have definitely given a moan of despair in 2020 when the global pandemic hit the economies, it was the other way round for the Pharmaceutical sector. The phenomenal performance portrayed by ABOT speaks volumes of the merry times it enjoyed in 2020. The margins of the company, which had been shrinking since 2018, rebounded in 2020. In 2020, the company bagged a hefty topline growth of 17 percent year-on-year, with net sales clocking in at Rs.35,283.38 million. The growth was mainly supported by the nutritional segment of the company, which majorly comprised adult nutritional supplements and attained a massive 37.5 percent year-on-year growth. The sustained performance of ABOT’s established brands drove up pharmaceutical sales by 12.6 percent in 2020. Diagnostic sales inched up by 4.1 percent, whereas GHC and diabetic care cumulatively rose by 5.6 percent in 2020. Export sales couldn’t gain momentum during the year, which might be due to supply chain bottlenecks amidst lockdown and restrictions on the movement of people and goods. Local sales attained massive growth during the year. Gross profit heightened by 38.91 percent in 2020, resulting in GP margin flying up to 33.57 percent in 2020, mainly on the back of improved prices as well as elevated sales volumes in the nutritional segment, followed by the pharmaceutical segment. Selling & Distribution expense took a nosedive of 2.48 percent in 202,0 owing to less travel cost and promotional activities on account of COVID-19. Administrative expense slumped by 12.23 percent in 2020 on account of significantly less computer expense. Other expenses increased by 35.50 percent in 2020 on the heels of increased provisioning for WWF, WPPF, and CRF, but to set this off, other income exponentially grew mainly on account of liabilities pertaining to PC support and other infrastructure-related services written back by Abbott B.V. Netherlands. Hence, operating profit grew by 146.52 percent in 2020, with OP margin climbing up to 17.91 percent. It is to be noted that the Finance cost multiplied by 44.86 percent in 2020 despite the low discount rate backdrop. While the company is sufficiently liquid, finance cost grew on account of markup on lease liabilities recognized for business and vehicles. The bottom line burgeoned by 248.90 percent in 2020 to clock in at Rs.4,535.25 million with EPS of Rs.46.33 and NP margin of 12.85 percent.

ABOT continued to follow the growth trajectory in 2021, whereby its topline boasted a year-on-year growth of 20.65 percent to clock in at Rs. 42,569.86 million. This was mainly on account of diagnostic sales, which multiplied by 75.9 percent due to COVID-related testing and increased OPD activities. The General Health Care and Diabetic Care segment also shored up the topline by attaining a growth of 60.8 percent. These two segments were followed by the nutritional and pharmaceutical sectors, bagging a year-on-year growth of 17.7 percent and 15.5 percent, respectively, in 2021. Better products mix and upward price adjustments played their due role in keeping the margins buoyant during 2021. Gross profit mounted by 35.7 percent in 2021. The GP margin touched its highest level of 37.76 percent in 2020. Distribution expenses, which were muted during 2020, mounted by 33.10 percent in 2021 on account of increased promotional drives, particularly by the Nutritional segment, and increased travel charges as COVID-related restrictions began to ease off. Higher warehousing and freight charges on account of increased volume also contributed to higher distribution expenses in 2021. Administrative expense surged by 12.43 percent in 2021 on account of higher depreciation charges and elevated payroll expenses as a number of employees rose to 1469 in 2021. Pak Rupee Depreciation and ABOT’s dependence on imported raw materials and finished goods pushed up its exchange loss, which, along with increased provisioning for WWF, WPPF, and CRF, drove other expenses up by 43.69 percent in 2021. Other income slid by 3.66 percent in 2021 due to a high-base effect as the company wrote back of liabilities in the previous year. All these factors translated into a 34.47 percent bigger operating profit in 2021, with OP margin clocking in at 19.96 percent. Finance cost ticked up by 14.9 percent despite monetary easing. This was on account of the unwinding of GIDC. Net profit grew by 31.57 percent in 2021 to clock in at Rs.5967.06 million with EPS of Rs. 60.95 and NP margin of 14.02 percent.

ABOT’s net sales grew by 15.71 percent in 2022 to clock in at Rs.49,257.72 million. The nutritional segment registered the highest year-on-year sales growth of 23.1 percent in 2022, followed by pharmaceuticals at 14.2 percent, diagnostics at 9.4 percent, and GHC and diabetic care at 8.9 percent. High commodity prices, Pak Rupee depreciation, elevating energy tariff, exorbitant fuel prices, as soaring inflation, took its toll on the gross profit of ABOT, which dwindled by 9.64 percent in 2022. The GP margin leveled down to 29.49 percent in 2022, falling from its peak of 37.76 percent in 2021. Distribution expense grew by a paltry 7.14 percent in 2022 on account of higher payroll and traveling expenses as promotional drives by the nutritional segment. Increased salaries to comply with the minimum wage rate, coupled with a hike in utility expenses and depreciation, drove up administrative expenses by 22.7 percent in 2022. Other income was magnified by 44.39 percent in 2022 due to high-interest income and income from Abbott GmbH as scrap sales. However, the growth in other income was counterbalanced by 43.9 percent higher other expenses registered in 2022 due to exorbitant net exchange loss. As a result, operating profit contracted by 27.11 percent in 2022, with OP margin dropping to 12.58 percent. Despite the onset of monetary tightening, finance cost contracted by 46.36 percent in 2022 on account of a lesser amount incurred under the unwinding of GIDC as well as lower lease liabilities. Net profit fell by 49.65 percent in 2022 to clock in at Rs.3004.19 million with EPS of Rs.30.69 and NP margin of 6.10 percent.

ABOT posted 12.62 percent higher sales to the tune of Rs. 55,475.27 million in 2023. During the period under consideration, pharmaceutical segment sales posted a 20 percent rise due to the superior performance of ABOT’s established brands. This was followed by 18.1 percent growth posted by the General Health Care and Diabetic care segment. A 15.5 percent year-on-year growth was registered by the diagnostic segment in 2023 due to price revisions done in 3QCY23. The exorbitant rise in raw material prices coupled with Pak Rupee depreciation, high indigenous inflation, heightened energy tariff, and increased provision for slow-moving and obsolete stores & spares in compliance with provisioning policy and high inventory levels trimmed down gross profit by 18.65 percent in 2023. The GP margin recorded its lowest level of 21.30 percent in 2023. Distribution expenses escalated by 14.23 percent in 2023 due to higher salaries for the sales force, sales commissions, and an increase in promotional activities undertaken during the year. Administrative expenses grew by 17.12 percent in 2023 due to higher payroll expenses on account of inflation as well as higher depreciation expenses on account of capitalization. The 10.15 percent higher other expense incurred in 2023 was due to exchange loss, which was partially offset by lower provisioning done for WWF and WPPF. Other income improved by 41.12 percent in 2023 due to the write-back of liabilities, which was partially offset by lower interest income as the company squeezed its bank balances. ABOT recorded a 57.71 percent thinner operating profit in 2023, with the OP margin sinking to 4.72 percent. Finance cost slid by 36.10 percent in 2023 despite monetary tightening. This was due to lesser outstanding lease liabilities and no unwinding of GIDC recorded in 2023. Net profit eroded by 91.29 percent to clock in at Rs.261.78 million with EPS of Rs.2.67 and NP margin of 0.47 percent.

In 2024, ABOT recorded a 22.90 percent improvement in its net sales, which clocked in at Rs.68,177.20 million. During the year, the pharmaceutical segment posted 22.1 percent growth in revenues on the back of higher volumes as well as price revision following the deregulation of non-essential drugs. The diagnostic segment registered 36.9 percent growth on account of an increased customer base. A 20.8 percent growth was registered by the nutritional segment on the back of price adjustments. General and diabetic care revenues grew by 14.4 percent in 2024. The cost of sales surged by 10.95 percent in 2024 due to higher raw material prices as well as heightened energy tariffs. However, it was absorbed by price revision and superior volumes registered in 2024. This culminated in a 67 percent higher gross profit posted in 2024, with GP margin bouncing to 28.95 percent. Selling & distribution expenses surged by 15.70 percent in 2024 due to higher promotional activities as well as increased salaries and sales commissions. Administrative expenses escalated by 12.68 percent in 2024 due to higher payroll expenses in line with inflation as well as elevated utilities expenses and travel charges incurred during the year. The 51.57 percent decline in other income in 2024 was due to the high-base effect as the company wrote back liabilities in the previous year. Other expenses also dropped by 48 percent in 2024 due to lower exchange loss, which was partially offset by increased profit-related provisioning done during the year. ABOT recorded a 249.28 percent bigger operating profit in 2024, with the OP margin jumping up to 13.42 percent. Finance cost plunged by 22 percent in 2024 due to considerably lower lease liabilities outstanding during the year. Net profit posted a staggering 1899.50 percent year-on-year growth to clock in at Rs.5,234.23 million with EPS of Rs.53.46 and NP margin of 7.68 percent.

Future Outlook

With the local pharmaceutical industry depending on around 90 percent imported raw materials, the stability of the Pak Rupee and easing of global commodity prices is a good omen. Deregulation of the prices of non-essential medicines also allowed the company to pass on the onus of the cost hike to its customers and record stronger margins and profitability. The company is also making concerted efforts to diversify its product offerings, attain cost optimization, and maintain a stronger balance sheet.