ASPEN: 10,100 -553 (-5.19%)
Drugmaker Aspen's shares plunge more than 50 pct on debt worries
(Adds deputy CEO comment, context)
By Nqobile Dludla
JOHANNESBURG, March 8 (Reuters) - Shares in South
Africa-based drugmaker Aspen Pharmacare plunged more
than 50 percent on Friday in a sign that the market is worried
about the company's debts.
The fall in the shares followed Aspen's half-year results on
Thursday, where the company said it would split its South
African Commercial Pharmaceuticals business into two divisions
as it sells non-core assets to reduce its debt.
It said its borrowings, net of cash, had increased by 6.7
billion rand ($461 million) in the six months to end December to
53.5 billion rand as a result of weakness in the rand relative
to foreign currency denominated loans, payments relating to
acquisitions and capital expenditure.
Deputy Chief Executive Gus Attridge said: "I believe the
overriding reason would be that investors have re-rated the
Aspen stock and that they are concerned by the high levels of
debt we have."
Attridge told Reuters this prevented the company from making
new acquisitions to drive growth.
"So growth is fairly light or static at the moment and we
have this high level of debt which means that we're not in an
Aspen said on Thursday it would make de-leveraging its
balance sheet a priority.
The company also said it expected proceeds from its infant
milk business disposal and inflows from the divestment of its
non-core pharmaceutical portfolio in the Asia-Pacific region to
bring down its gearing ratio covenant measure.
Aspen, which operates in 56 countries, announced the sale of
its infant formula business to French company Lactalis in
The company's gearing ratio covenant measure will be within
the specified level of net debt/normalised EBITDA of 4.0 times
for the June and December 2019 periods, Attridge said at the
company's result presentation on Friday which followed
publication of the earnings on Thursday.
In December, Aspen said it had engaged with its creditors to
negotiate a conditional and temporary adjustment to its leverage
ratio covenant to allow for any delay in the infant milk
At 1041 GMT, shares in Aspen were down 30.23 percent. If
they close at this level, it will be the biggest daily fall in
over two decades.
Aspen's shares have fallen more than 65 percent since
($1 = 14.5421 rand)
(Reporting by Nqobile Dludla; Editing by Susan Fenton and Jane
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