Pharmaceutical group Cipla Medpro South Africa (CMP) advised on Monday that it expects earnings per share (EPS) and headline earnings per share (HEPS) for the twelve months ended 31 December 2010 to be between 18% and 23% higher than the EPS and HEPS for the prior corresponding period.
On a normalised basis, after adjusting for the fair value of interest rate swaps, interest rate swap settlements and the foreign exchange contract (FEC) losses, normalised earnings per share will increase between 22% and 32%, it said.
“These 2010 annual results have been achieved despite significant non-cash IFRS adjustments with regard to FECs. As a result of the strong Rand / weak US Dollar on 31 December 2010, an unrealised loss on FECs of R44,7 million was debited to the income statement (due to the mark to market revaluation required) despite a gain being recorded in the accounts at 30 June 2010 of R22.4 million and an unrealised loss of R24.7 million at 31 December 2009.
“Although this has resulted in a significant non-cash adjustment to the income statement, we have enjoyed the benefit of the stronger Rand throughout the year, and this can be seen in our gross profit margin which has increased significantly from 49.2% at 31 December 2009 to more than 58% at the end of 2010.
“To illustrate the significance that the strong Rand / weak US Dollar had on the results, which was at its lowest level in about seven years, we have re-valued the FECs using the spot rate at the end of January 2011 which was R7.20. At this rate the loss of R44.7 million would have reversed completely.
“In addition, these adjustments do not affect the Company's ability to generate cash and after paying its inaugural dividend in the second half of 2010 which amounted to R22.5 million, the Company generated in excess of R130.0 million cash in the 2010 financial year, compared to R10.2 million in 2009,” the group said.
