JSE-listed pharmaceuticals manufacturer Aspen has warned that its normalised headline earnings a share are likely to drop by 27% to 32% to between R10.15 and R10.89 a share for the financial year ended June 30, and for headline earnings a share to drop by 40% to 45% to between R7.46 and R8.14 a share.

In a trading statement on August 22, the group said it expects earnings a share to drop by 128% to 228% to a loss of R2.28 to R2.77 a share.

Further, finance costs benefited from interest rate cuts across the group's euro, rand and Australian dollar debt pools in the second half of the year.

Despite this, 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, it says.

Its commercial pharmaceuticals division, which is Aspen's core business segment comprising more than 70% of its revenue, has delivered double digit revenue and normalised earnings before interest, taxes, depreciation, and amortisation growth in constant exchange rate, underpinned by organic revenue growth in all three segments, including injectables, over-the-counter and prescription.

This has been supplemented by the launch and rollout of Mounjaro in South Africa, while also benefiting from the acquired product portfolio in Latin America.

Reported performance has been diluted by the strength of the rand average exchange rates against Aspen's major trading currencies, it says.

Further, Aspen is pleased to report that the validation stage of the insulin contract has been successfully completed in our South African sterile facility with commercial production commencing in the 2026 financial year, pending final regulatory approval.

“The restructure of Aspen China and its integration with the acquired Sandoz business has been completed. Consequently, significant restructuring costs of about R500-million were incurred in second half of the 2025 financial year as well as one-off inventory rationalisation and write-offs,” the company says.

Aspen is focused on optimisation strategies for its manufacturing business and building on the gains made in commercial pharmaceuticals, it states.

Specifically, the Finished Dose Form segment of the Manufacturing business is focused on recovering lost profitability by the 2027 financial year.

Key to achieving this objective is commercialising the insulin contract after an intensive technical transfer process. This is an exciting opportunity for both Aspen and patients. Resultant revenue of R300-million is forecast for the 2026 financial, ramping up to more than R1-billion for the 2027 financial year.

Additionally, it will aim to reshape both Aspen's French and South African sterile facilities to match resources with the existing contracts on hand. The group aims that most of the restructuring will be addressed in this calendar year, it adds.

Additionally, the benefits of both increased revenue and cost reductions will positively impact the second half of the 2026 financial year and are expected to be fully realised in 2027 financial year.

Further, 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 3.15-times and 3.2-times.

Net debt is expected to be marginally higher than the R30-billion in the first half of the 2025 financial year and was negatively affected by the weaker rand year-end closing rates partly offset by the stronger second half constant exchange rate operating cash flows and lower inventory levels.

Aspen is well positioned to execute on its strategic opportunities that will further enhance Manufacturing profitability which include, including procuring regulatory approval from the South African Health Products Regulatory Authority and World Health Organisation for the Serum paediatric vaccines.

Regulatory approvals will be followed by commercialisation with potential sales in calendar year 2026 and increased volumes subsequently.

It also aims to secure further contracts in the South African and French sterile facilities.

For 2026 financial year, the commercial pharmaceuticals segment is expected to record mid-single digit organic revenue and stronger earnings before interest, taxes, depreciation and amortisation growth, supported by a higher profit contribution from the reshaped business in China and further incremental growth from Mounjaro in South Africa following the recent regulatory approval of the Kwikpen delivery system indicated for type 2 diabetes management and pending approval of the chronic weight management indication.

Aspen has also recently concluded a long-term distribution and promotional agreement with Boehringer Ingelheim for its product portfolio in South Africa effective from September 1, 2025.

Meanwhile, considerable progress has been made in executing on Aspen's generic semaglutide GLP-1 strategy, which is a sterile injectable product for the treatment of type 2 diabetes and obesity.

This has required extensive investment in both intellectual property and infrastructure. Aspen has followed a strategy of both developing its own IP and licensing/partnering on IP with licensors.

It is anticipated that the first revenue from this initiative could be as early as the latter part of 2026 financial year.

“The continued strong focus on working capital, underpinned by enhanced manufacturing efficiencies, and coupled with an expected lower investment in capital expenditure, following higher GLP-1 and sterile related investments in 2025 financial year, should assist Aspen in reducing net debt levels and achieving an operating cash conversion rate target of greater than 100% in 2026 financial year”.