ii view: Hikma reiterates 2025 profit growth hope despite tariffs

First-half results to 30 June

• Revenue up 6% to $1.66 billion (£1.25 billion)
• Core operating profit down 7% to $373 million (£280 million)
• Net debt up 18% to $1.32 billion
• Interim dividend up 12% to 36 US cents per share

Guidance:

• Continues to expect full-year 2025 revenue growth of between 4% to 6%
• Continues to expect full-year 2025 core operating profit of between $730 million to $770 million

Chief executive Riad Mishlawi said: “Demand across our portfolio remains robust, we are successfully launching new products, strengthening our manufacturing capabilities, and securing key strategic partnerships. We are also making significant strides in advancing our pipeline and increasing our investment in R&D. 

“With this foundation, we are well-positioned for the future and I look forward to sharing more updates on our continued growth.”

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ii round-up:

Hikma Pharmaceuticals (LSE:HIK) detailed a retreating adjusted profits given a tough 2024 comparative, but the supplier of generic and branded drugs reiterated hopes for growth in both sales and profits over the full year.

Sales for the first half to late June rose 6% to $1.66 billion (£1.2 billion) but with changes in the product mix and currency headwinds taking core operating profit down 7% to $373 million. Hikma, which generates around 60% of sales in North America, continues to expect full-year sales growth of up to 6% with core operating profit of between $730 million to $770 million. That’s potentially up from 2024’s $719 million. 

Shares for the FTSE 100 company fell 7% in post-results trading leaving them down around 12% so far in 2025. The FTSE 100 index is up 10% year-to-date. Shares for fellow drug companies AstraZeneca (LSE:AZN) and GSK (LSE:GSK) are each up around 4% during 2025.

Hikma operates across the three divisions of Injectables, Generics and Branded drugs, highlighting itself as a top-three provider of generic sterile injectables by volume and a key supplier of non-injectable generic medicines in the US. 

Accompanying management comments flagged US government trade tariffs and its monitoring of them, although with current full-year estimates taking account of the administration’s current position.  

Hikma is investing $1 billion by 2030 to further expand the group’s US manufacturing and R&D capabilities. 

The group’s therapeutic categories include anti-infectives, pain management and oncology. Management continues to target 2030 revenues of $5 billion, up from 2024’s $3.2 billion.

An interim dividend of 36 US cents per share is up 12% from a year ago and payable to eligible shareholders on 18 September. 

A third-quarter trading update is scheduled for 6 November. 

ii view:

Started in Jordan in 1978, Hikma today employs around 9,500 people. Injectables generated its biggest slug of revenues during 2024 at 42%. That was followed by Generic drugs at 33% and Branded drugs most of the 25% balance. Geographically, North American sales dominated during 2024 at 61%, followed by the Middle East and North Africa at 32%, and Europe and the Rest of the World at 7%.

For investors, uncertainty regarding potential changes in US trade tariffs and government pressures to reduce drug sale prices cannot be ignored. Legal proceedings are considered typical for the pharmaceutical business, including litigation and government investigations. Generic drugs come with lower profit margins and with competition to supply intense, while Hikma’s estimated future dividend yield of around 3.6% sits below that of other pharma companies such as GSK and Sanofi SA (EURONEXT:SAN), each at over 4.5%.

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To the upside, acquisitions, such as Hikma’s 2024 purchase of parts of Xellia Pharmaceuticals, continue to expand operations and potential future earnings. A 20% increase in product R&D was made during this latest period compared to H1 2024. Management initiatives include increased partnerships with other pharma companies, while a progressive dividend policy continues to be pursued. 

In all, and while pressure to perform over the second half has increased, a consensus analyst estimate of fair value sat at over £25 per share suggests continued long-term optimism in the City. 

Positives: 

• Diversity of products
• Relative defensiveness given exposure to healthcare

Negatives:

• Currency translation can hinder performance
• Key Middle Eastern markets can suffer political instability

The average rating of stock market analysts:

Buy