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The company is Africa’s largest pharmaceutical manufacturer and is valued at just under R50 billion on the JSE.
It owns and operates facilities in Gqeberha and France, where it manufactures finished dose products for third parties.
In a trading statement released after market close on Thursday, 21 August, Aspen announced that it expects a significant drop in earnings for the year ended 30 June 2025.
Specifically, the company expects the following changes in its earnings for the 2025 financial year compared to 2024:
- Normalised headline earnings per share down between 27% and 32%
- Headline earnings per share (HEPS) down between 40% and 45%
- Earnings per share (EPS) down between 123% and 128%, swinging to a loss per share
Aspen explained that its HEPS for the year have been negatively impacted by high restructuring costs incurred in China.
The restructure of Aspen China and its integration with the acquired Sandoz business were completed in the 2025 financial year.
Consequently, significant restructuring costs of around R500 million were incurred, as well as one-off inventory rationalisation and write-offs.
These costs diluted the group’s Injectables gross profit margin percentage, although this is expected to revert to normal levels in the 2026 financial year.
The company said the restructured China business, supported by higher EBITDA margins, is now well positioned to contribute positively to earnings in 2026.
Aspen further explained that its EPS for the year were negatively impacted by higher intangible asset impairments.
This is largely due to an ongoing contract dispute related to a manufacturing and technology agreement with a contract manufacturing customer for mRNA products.
While the company cannot provide any further details due to confidentiality concerns, it warned that the impact could include a R2 billion EBITDA hit and an impairment of R770 million.
In the trading statement, Aspen said the normalised EBITDA from its Manufacturing business for 2025 is expected to be around 40% of that reported in 2024.
Hits keep coming
Aside from these major blows, Aspen also reported other drags on its 2025 results, including a stronger rand against Aspen’s major trading currencies.
In addition, the company highlighted the impact of the retrospective implementation of global minimum tax legislation in South Africa and the announcement by the Mauritian government of a 15% Qualified Domestic Minimum Top-up Tax (QDMTT).
The company said these tax changes negatively impacted both its Commercial Pharmaceuticals brand valuations and the group’s effective tax rates.
“The QDMTT has materially increased the tax rate used for Commercial Pharmaceuticals brand-related intangible asset valuations, increasing impairments by R1.7 billion,” the company said.
“These intangible assets are only impaired if their individual asset value is below carrying amount and are not revalued where their value exceeds carrying amount.”
“Despite the negative impact of the QDMTT, brand-related intangible assets still have a valuation of more than 50% greater than their carrying amount.”
Aspen said all of these impairments totalled R4.1 billion, which includes the QDMTT hit of R1.7 billion, the mRNA asset impairment of R0.8 billion and market-related impairments of R1.6 billion.
The company cited these impairments as the reason it expects to make a loss for its 2025 financial year.
In addition, Aspen said its operating cash conversion rate is expected to exceed the group’s target of 100% and the net debt leverage ratio is anticipated to end between 3.15x and 3.2x.
Aspen’s net debt is expected to be marginally higher than the R30 billion it recorded in the first half of its 2025 financial year.
The company’s debt was negatively affected by the weaker rand year-end closing rates, partly offset by stronger second-half operating cash flows and lower inventory levels.
In addition, the company said its finance costs benefited from interest rate cuts across the group’s EUR, ZAR and AUD debt pools in the second half of the year.
Despite this, Aspen’s year-on-year finance costs have risen, influenced by higher net debt levels and increased foreign exchange losses driven by US tariff-led global volatility in exchange rates.
The table below shows Aspen’s expected earnings ranges for its 2025 financial year.
Issued on Daily Investor by Blanke Neethling | https://dailyinvestor.com/business/98898/south-african-pharma-giant-swings-to-a-loss-after-r4-billion-hit/
