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Latin American market lures SA companies looking to pad out their bottom line

Latin American market lures SA companies looking to pad out their bottom line
(Photos: Unsplash / Lucas Hoang | Shane McLendon | Miriam Zille)

Allbusiness.com reported in May this year that Chile is one of the highest-income countries in Latin America, making it one of the safest places in the region to invest in.

Global pharmaceutical manufacturer Aspen is the latest in a line of South African-based companies exploring opportunities in South America. From pharmaceuticals to retailers to mining, the market seems to be issuing a siren call.

Part of the attraction lies in the fact that this region has been grappling with high inflation and political instability for decades, and the consumer market is flourishing compared to other geographic regions.

Although Aspen is currently in a closed period, with its annual results to be released at the end of the month, Aspen Global Incorporated (AGI), its Mauritius-based subsidiary, announced a R5.2-billion deal to buy the commercial rights and intellectual property related to a portfolio of popular products from Viatris in Latin America.

The purchase of key brands – Lipitor (lowers cholesterol), Viagra (libido drug), Lyrica (used to treat epilepsy and general anxiety), Zoloft (antidepressant), Norvasc (treatment of high blood pressure and blocked arteries) and Celebrex (anti-inflammatory) includes:

  • Intellectual property required for their commercialisation, and any related goodwill owned by Viatris and its subsidiaries;
  • Product registrations and marketing authorisations; and
  • The related inventory.

The transaction is conditional upon the approvals of the competition authorities in Ecuador and Colombia, and AGI expects that it will be finalised around the beginning of October. 

A number of employees engaged in the commercialisation of the products will transfer to the local subsidiaries of Aspen. AGI and Viatris will also conclude supply agreements under which AGI will be supplied with the products for at least seven years.

According to a statement Aspen published on the Stock Exchange News Service last week, the products generated sales of about $92-million during the year to the end of December 2022. However, management says it is not possible to single out the profit attributable to the product portfolio due to their integration into the Viatris business model.

AGI has indicated that it expects the gross margin from the new product portfolio to exceed Aspen’s commercial pharmaceutical segment gross profit (60%) for the six months to the end of December 2022.

“[This is] an attractive opportunity for Aspen to expand its presence in one of the group’s key regions. In doing so, Aspen will acquire a basket of well-established, post-patent brands that will complement its existing portfolio and add to the scale of its business in this region.  

“Furthermore, the acquisition of a dedicated and experienced sales team will materially enhance Aspen’s commercial capabilities, further strengthening its foundations for future growth in Latin America,” the company said. 

Avenidor exceeds expectations within first six months

Early last year, the Pepkor group sashayed into the Brazilian market via a R3.5-billion acquisition of Avenidor. The move seems to be paying off. 

For the six months to the end of March this year, Avenida showed a 15.8% growth in sales volumes, with concrete plans to open 21 new stores in the current financial year – more than double the number that was originally planned.

“Trading continues to exceed initial investment case plans, particularly in the opening of new stores. Good progress has been made regarding the repositioning of the business and store roll-out plans have been accelerated as a result. 

“Avenida represents a significant opportunity for growth and diversification outside of Africa for the group,” Pepkor said in its interim results statement.  

Six new Avenida stores were opened during the six months to the end of March and store rollout plans were increased based on new stores consistently exceeding projections.

David Lerche, chief investment officer at Sanlam Private Wealth, says although Pepkor’s move into Brazil in 2022 is still in its infancy, with the Avenida business contributing only around 4% of group revenue, the value fashion business is growing rapidly in a fragmented market. 

“We expect it to contribute more than 10% of group revenue within the next three years,” he says.

Gold Fields’ expansion in Chile moving forward slowly

Mining group Gold Fields has had interests in Chile and Peru for more than five years. However, the construction of the Salares Norte project in northern Chile has been plagued by a series of delays, not least severe weather disruptions and, more recently, the relocation of a group of endangered chinchillas.

Allbusiness.com reported in May this year that Chile is one of the highest-income countries in Latin America, making it one of the safest places in the region to invest in. 

The country has also negotiated 30 trade agreements that cover 70 markets and represent 88% of the world’s GDP – and one of its most important markets is mining. DM

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Comments - Please in order to comment.

  • Robert Pegg says:

    Political stability results in economic growth. It can happen in South Africa, but we must have a responsible government first.

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