API expects earnings to lift in 2013
Pharmacy retailer API, which owns the Priceline and Soul Pattinson chains, expects its underlying earnings to lift this financial year despite challenging trading conditions.
API chairman Peter Robinson told the company's annual general meeting that while retail conditions were tough over Christmas, API managed to post sales growth of 2.8 per cent on the previous year.
However, like-for-like sales were marginally lower.
"It is clear that consumers were clearly affected by the current uncertain economic conditions including the prospect of higher unemployment, an increase in the cost of living driven by higher utility costs, the desire to reduce debt and the confidence of lower interest rates yet to be sustained," he told Tuesday's meeting.
Despite the tough trading conditions, API's chief executive Stephen Roche expressed confidence about a lift in full year earnings.
He told shareholders API planned to become the dominant mass market health and beauty retailer in Australia and extend its leadership in pharmacy distribution in 2013.
API's strategic plan included the continued growth of the number its Priceline stores, increasing the flexibility and range offered to its Soul Pattinson and Pharmacist Advice customers and managing the impacts of PBS reform.
"Absent of any major external environmental or economic impacts, we anticipate a continued lift in underlying earnings this financial year," Mr Roche said.
API made a net profit after tax of $30.3 million for the 2012 fiscal year up from a $23.3 million loss the previous year.
After adjusting for non regular items in 2011, such as the Queensland floods, API's net profit was up 12.8 per cent in 2012.
Mr Robinson said the largest set of price reductions in the history of the PBS came into effect in 2012 and more would be expected in coming years.
"It should be noted that the patents on up to $1.5 billion of molecules will expire between now and 2015, which will have a significant impact on pharmacy," he told shareholders.
"It is essential, therefore, that we continue to work closely with our customers to ensure we are managing the effect of these changes on our business.
"We are doing so by reducing operating costs where we can and by reducing the discounts we offer our customers."
API shares closed half a cent lower at 46.5 cents.
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