DRUG wholesaler and pharmacy retailer Australian Pharmaceutical Industries has swung to a full-year profit and declared its outlook ''promising'', despite tipping another year of declining earnings.
API, one of Australia's three pharmaceutical wholesalers and owner of pharmacy brands Priceline and Soul Pattinson, yesterday reported a $30.28 million profit, compared with a $23.3 million loss the previous year.
The result was boosted by the settlement of an insurance claim for damage to its distribution centre during the Queensland floods.
API also pointed to the 3.3 per cent growth in sales at its 350-strong Priceline chain, excluding dispensary items, during the muted retail environment.
Shareholders liked the news, pushing API's shares up 5.6 per cent, or 2.5¢, to 50¢. After reaching as low as 20.5¢ last year, its rise through 2012 is 87 per cent.
But revenue for the year to August 31 fell 6.1 per cent to $3.22 billion, from $3.43 billion, and is expected to drop again this year.
The decline was mostly due to drug giant Pfizer directly distributing its products to chemists, rather than going through the wholesaler, cutting 15 per cent of API's revenue, and federal government measures to bring down the cost of the Pharmaceutical Benefits Scheme.
Forecasting an increase in underlying earnings from the $22.1 million recorded in 2012, Australian Pharmaceutical Industries CEO Stephen Roche said he would not back recent comments from supermarket giants Woolworths and Coles about improving consumer confidence.
''I won't be that brave,'' Mr Roche told BusinessDay. ''My view is that it's still quite fragile. We're competing in that same environment where discounting's been pretty intense.''
Whereas broker UBS said that wholesaling remained ''extremely challenging'' - noting independent analysis that the area will contract by 1.8 per cent in the 2013 financial year - Credit Suisse analysts Saul Hadassin and William Dunlop said there was value in API and rival Sigma, particularly given the PBS was spared in the government's mini-budget this week.
Mr Roche also flagged an aggressive approach to negotiations with the government on the next Community Services Agreement, which works out how much wholesalers are paid to supply PBS medicines to community pharmacies.