Okay, good. Good morning, everyone. Thank you very much for your attendance today. Very interesting sets of results, I think. You have very good picture on sort of a global stage. I mean, Aspen is probably South Africa's most global company. We have all the impacts, tailwinds, headwinds, whatever is happening in the global economy. As you guys always teach me, it's always good to have diversity and then, you know, you have some offsets and something knocks off this. If China doesn't work so well, well, then, you know, Russia might do better, et cetera, et cetera. There's always some geographic offsets because you have that diversity. However, I must tell you this last year has been one with no offsets at all.
There have been problems all around the world, which we're experiencing here in South Africa in our own way. It's amazing how one year can change things. I remember, I'm looking at some of you in the room today who we had really good results this time last year. We had a very bleak outlook, and we were really concerned about the macroeconomic environment. There was so much uncertainty. We were sure only of one thing, that a storm was coming. Just the extent of what storm was coming was what we were unsure of. I mean, I suppose it felt a bit like being a fly half stuck in a permanent scrum, but that's what the last year felt like.
That said, you know, I'm happy to report that contrary to expectations, the sun did come up every day. We did have solar, so it grafted a bit for us. Fortunately, we've got a much better sense of what the storm looks like and our ability to manage that storm. I'm happy to say that we have with that knowledge, which we were unsure of some time back, with that knowledge, we have a very strong guidance for the H2 and for the period ahead for Aspen. I think what you see now, unlike last year, you see the results reflect the effects of that storm and our ability to manage that storm and a very strong outlook. I'm hoping that when I sit and talk to you this time next year, we have the best of both worlds.
A good outlook with a continuation of very good prospects. With that, I'm gonna shoot into the presentation. I think just one thing that you should be looking at for Aspen, there's hundreds of things you're gonna see in here. If I were looking for one theme in Aspen, I would be looking to say, for those of you that follow our business, we're a commercial pharma business that's a bit of a cash card machine. If you buy a product, you get an immediate return. It's pretty simple, pretty simple business to understand. The manufacturing business is a different business in that. You've seen with COVID, you know, COVID, let's be candid about it, the COVID vaccine from a purely commercial point of view, was a lemon, from an Aspen perspective.
You we saw quite quickly how positively it can influence results. It's really about how you turn the lemon into lemonade. Filling that manufacturing business takes time, but your returns are much higher than you'll ever get in Commercial Pharma, and you have great cash flows that follow it. Very important for us is, I mean, it's like any business. It's about return. Take your capital. Where do I get a return? Some are quicker, some are longer. The longer ones, if you get them right, give you a much higher return in time. We poised at the moment there, and we'll talk a bit about that during the presentation. That's just the one takeaway out of here then, and in our model then, I think it would be...
I think it's a, it's a good takeaway to have. Let's talk about the trading environment that I've talked about earlier. Well, this time last year the results of last year, there was no war in Russia. You all knew the consequences of that war globally. You're seeing it everywhere. You know, we've had inflation, we'll speak a bit about inflation impacts on Aspen. We had business interruption. We had a big business in Russia that did at this stage last year, I think about ZAR 500 million for the half, and it's, it must be down at least 60%, Sean, in this period. What was unexpected was China, you know, complete lockdown for COVID. Remember, Aspen have a lot of hospital products.
You lock down into a hospital, you lock down hospitals, our products aren't sold. Our products are often in big cities, and people were scared to travel. A lot of people come from rural areas to hospitals. They were scared to travel because they could just be locked out on the day. I mean, literally, when you're in Disney, you got locked down in Disney. We had COVID revenue in last year's numbers, there was some uncertainty going forward, but it was in the numbers.
We made a divestment of some generic products, commodity generic products in South Africa, which of course, will affect turnover, revenues, profits, but also it's a reason your interest line is low is because you received cash for it. That's the environment that we faced. Positively, there were some very important movements in the global economy, which have been very strong for Aspen. The key ones are this big demand for prefilled syringe production to support innovative products. Aspen must have probably globally for third-party manufacturer, one of the biggest, if not the largest capacity available immediately for prefilled syringe production. I'll speak to you about that in a little more detail later. The COVID vaccine, for all its ills to the income statement, the commitment to African manufacturer.
Aspen put African vaccine manufacturing on the map. No one can ignore Africa or African manufacturing. I'll talk to you a little bit about how procurement policies are changing and have changed to accommodate African manufacture. The last two points are linked. It's really about what multinationals are doing. If you look at all Aspen businesses over the years, it's how we've worked well with multinationals. Many of the transactions for you that follow us will see that those transactions involve either buying a manufacturing plant and then buying plants. There's always a link to our manufacturer and sometimes our commercial footprint. We've got a resilient and effective sales footprint. In the geographies we're in, many people are pulling out. They're saying, "Look, we'll give you a distribution license. We don't want to be in those markets.
Our products are $100,000 a patient that only work in emerging markets. A lot of them oncology products, for example. As a result, they are also selling products and product ranges as well. All of those, when there's a bit of fluidity, assets moving around, represents opportunities for Aspen. Testing environment, but some positive developments. You know, out of every, out of every storm, there's something that comes out of it and, you know, there's some project, there were some good developments for us there. Normally, Sean speaks. I'm gonna talk about performance now and do up the performance review. Sean will talk to you about the financial numbers. At least I give some context, and then I'll come back and talk about outlook.
We did guide H1, and I think our H1's in line with guidance. We've had a pretty good Commercial Pharma performance in spite of China, Russia and the product divestments. A lot stronger than we guided. You might remember I said we had a strong H1 last year, a weaker H2 because a lot of those tailwinds came into that H2 and we hope to claw back a bit. We clawed back fairly high given the relative impacts that you've seen there. H2 will be going to continue that momentum. I think what you will see is a gross margin expansion in Aspen Commercial Pharma. Sean will take you through that.
Now, if there's one result that we're the most proud of in here, it's that. We didn't guide this. We guided a declining margin. We, we got that wrong, and I'm happy to have got that one wrong. It's not because we didn't have inflationary pressures. We've got massive inflationary pressures. We sit in many geographies that are used to a zero inflation rate, and now they've got inflation. It's not easy in healthcare to get price increases. Many instances, these are government controlled and regulated. That, that commercial margin, gross margin expansion is something that came on with the inflationary pressures. I think it shows you the brand equity we have and a lot of the work that we've done around our manufacture to drive costs down and to move from third parties to our own.
It was part of the synergies we had seen in shifting to our own manufacture. The manufacturing business carries significant cost. It's. Unless you're shutting it down, you don't get rid of the costs, particularly in sterile. What are your costs? Your costs are building. You've paid for it. You've got your machines in there. You've got something called an HVAC. It's like air conditioning. You've got your air conditioning, you can't switch it off. You've got people on the lines, and they work in there, and there's no use letting them go because you're busy trying to bring other products on the line. We have a very high fixed cost base in manufacture. Don't get carried away by gross margin percentages that go up or go down very sharply.
It's because the incremental revenue is often just additive, or subtractive, whatever the word is. It comes off or it comes down. It has a very big impact. Volume has a massive impact on gross margins there. We introduced a number of product trials across our facilities, and this is very important for future revenue. We did tell you we were gonna do this, the last set of results. Here's the dilemma you've got. You've got a line, You've got a product that can do 100. You say, "Gee, I'd really wanna make that because I'm gonna sit here now and talk about my manufacturing revenue.
I want it as high as possible." You've got a product that you need to trial for a third party or whatever, and it'll do 300 in a year or two years from now. You say to yourself, "Well, what do I do?" We decided that, you know, with a lot of delays during COVID, we decided that we needed to bring these products on now because we needed the future revenue and income. A lot of our turnover is compromised by bringing non-revenue generating products on the market now, but it will be incremental to future revenues. You will see from our discussions that we've advanced numerous contracts and we've really gone a long way down the road on many of those, and that's only achieved by running those trials successfully.
Then we got grants from the Gates Foundation and CEPI, which were really great because, you know, there's cost in bringing, there's a big cost in bringing products into your line, not just downtime. There's trials that are run and you take stuff, you throw it away, and you keep running stuff. They did a great job in negating some of the costs that relate to bringing the Serum vaccines into our South African facility. I think given the environment, I thought our operating expenses are kept well under control. It's not easy. You know, people in those environments are not asking for.
Their turnover might not be going up, but they're certainly not asking for a 0% salary increase. Probably the area that if an analyst might look at and you might look at, the one area that it's hard for us to call probably impacted our results more than we ever would have thought or hoped is the earnings knock from Forex losses. Sean will take you through in detail where those came from. Happy to say, you know, I think all of you who followed us know we've got a particularly competent team in manufacture in South Africa, and they demonstrated not just with COVID, they're now demonstrating it too with the Serum vaccines. We're really hoping to have, they're subject to the regulatory approvals.
We expect sales of those products in the H2 of 2024, so the H1 of calendar year next year. We've got some transactions to build up on our commercial pharma, which I'll talk to you a little bit about later, and I'll talk to you also about the capacity for contracting. Which, from an Aspen perspective, was the most critical internal KPI. In fact, I mentioned at our last presentation, I said, really, we now need to deliver contracts. That's sort of been the byword or the byline within Aspen. Show us the contracts. We need the contracts here. As I've told you earlier, it's a material sustainable and predictable earnings generator.
If we go into the numbers, the numbers are actually very easy to understand, I think, because you've got here a manufacturing business which is down 10%, and that manufacturing business is down effectively because you don't have COVID vaccine revenue. We've made a conscious effort to not bring product, to bring non-revenue generating product in this half. So you'll see our H2 is much higher, driven by manufacturing, where we bring those products back on because we've done the trials that we need to do. We've had a very strong delivery out of Regional Brands, a very important part of our business. Obviously, it's nearly 1/2 our turnover. A good performance, and we'll go into a little bit into that performance. The Sterile brand is very simple what's happened there.
We've had the Russian business impact the sterile brands, as did the lockdowns in China. The other area to think about is the. You look at the reported, we're down 1% in reported revenue, we're down 6% in constant exchange. That's really all about the positive exchange rate tailwinds that benefited revenue in this period. We had an. I told you, we spoke about the divestment we had out of the South African business. Had we not, if we adjust for that too, which we do internally to look at our operating performance, our group revenue would have been flat, the commercial pharma would have been up 4%. It did have a group-wide impact.
As I said, a particularly strong performance out of Commercial Pharmaceuticals, given that the headwinds that it faced in the period, and that is largely because of what happened here, which is our Regional Brands. Our Regional Brands had grew 7% and 2% in reported earnings. If you have a look in constant currency, which is where we look as a business in constant exchange rate. You'll see that almost every area has grown between 4%-8% except Africa, Middle East. That's because we had the divestment in that region. If we extract that divestment to see our operating performance, which is largely the South African business, sub-Sahara and what we do in the Middle East, you will see that the turnover grew by 6% for the region, of which 5% in constant currency.
Across the board, a very good performance. Our Regional Brands, as I said, is our biggest section and would have grown at 11% making that adjustment in reported. For those of you that have been following, we've really done well in Australia. We continue to face pricing pressures. They're a very good team, and they keep performing. Probably the most outstanding region in the Aspen business over the last five years or six years has been our Latin American business. Really good team, and they've got all their metrics work very well, and they keep growing. Another very strong performance from that region again. Here is the Sterile Brands and the Sterile Brand impact. We've really got two regions of consequence here, Asia and Europe CIS.
The Europe CIS business, you will see, it's down by about ZAR 300 million in constant currency. That's Russia. You can work that out. That is all Russia. We're down by a similar absolute amount in China. That is lockdowns. The lockdowns have now been lifted. You might ask how it's going. They have a Chinese New Year in February, it's hard to tell, we're really hoping for some uptick in this period, March to June. We'll see how that goes. At least we now have a more normal environment in China. Manufacturing is the last area that I touch on here. We've got a very good API business. It's a very profitable business.
We lost one month this year because we had to do strategic maintenance in this period, but we'll catch it up in the second, in the H2. We'll be able to produce enough in the H2. It's really gonna be a tale of two halves. The new product initiation impacted production downtime and that, the revenue for heparin, although up, it was very heavily constrained. The finished dosage form, of course, we've got a termination of COVID production, which we've spoken about, but we've had some offset as some of our sites start bringing some sterile products online. We're going to expect a much stronger H2 driven by API and the heparin business. It's pretty significant, that increase. With that, I'll come back and talk about guidance.
Sean, I think we'll bring you on here and you can. You know, there's people that make the money, and there's people that gotta keep the money. Look at Sean carefully, make sure that he's keeping it. Here we go, Sean.
Thank you.
Thanks, Stephen, for those. Can you all hear me? Thank you for those valuable performance insights. I said to Stephen beforehand, I don't have to present much because Stephen's done everything, so I'm gonna pay him a royalty afterwards. Thank you, Stephen, for that. Really good. I think, it's painted the picture and shows you the sort of robust growth that underpins the revenue. You know, if you take the headwinds out of the picture, we've actually had a really strong commercial pharma performance in the first six months. Onto the financial review. Going through the highlights on the left, you can see our revenue is down 1% relative to the prior year and 6% in constant exchange.
Interestingly enough, you look at H2, we're pretty flat on the H2 of the prior. As we've guided, we, you know, with the strong growth that we see coming out of our manufacturing business in the H2, we see that uplifting quite significantly above H2 and H1, in the H2 of this year, and that's what we've guided. From a gross profit percentage, the next block, you can see that our gross profit percentage has dropped from 48.5- 46.8, a 1.7 percentage point drop. That is heavily influenced by the loss of the vaccine contribution. We also had the benefit of the VBP pricing in China before the VBP cuts.
Interestingly enough, if you look at the H2 of 2022 and compare that to our H1, we've actually ticked up by 0.4 percentage points. Quite a nice trend, and that's driven by what we spoke about earlier on about the improved Commercial Pharma margin performance, which I'll unpack a little bit later. Going on to the normalized EBITDA. From a normalized EBITDA perspective, we're down 11% on the prior year in reported terms and 15% in constant exchange. Again, relative to H2 , we're only down 4%. Given the strong growth we see in the manufacturing business, we anticipate to outperform both H2 and H1 in reported terms in the H2 of the year.
Obviously, as we've said, our target is to try and achieve our reported EBITDA from FY22 by the end of this year. On the right, our normalised earnings, Headline Earnings, there we've dropped 17% on a reported basis, 21% CER. You'll ask, why the gap? Why is there a gap between that, such a big gap between that and the normalised EBITDA gap? That is driven by the foreign exchange losses, which I'll unpack a little bit later. A ZAR 284 million swing, which has impacted our normalised Headline Earnings growth relative to the EBITDA growth. Yeah. Our normalised EBITDA income statement. Perhaps just to walk you through the format before we dive into some detail.
On the left, we take you down from revenue, gross profit, all the way down to normalised EBITDA. The columns across the page, the first column is our H1 performance this year. The next numerical column is the performance last year in reported terms. Then we have a percentage change in reported and then a constant exchange reported percentage there. It gives you all the metrics that you compare reported and constant exchange.
Sorry, Shaun. Can we just hang on? We seem to be having a technical issue.
Oh. Oh, my goodness. Sorry. I wondered why you were all looking perplexed. I could see it on my screen. Did it only disappear now for this slide?
Just go back a few slides.
Okay. You saw the headline earnings at peace. Well, there's a lot to absorb in what we've told you so far, so nice to have a little bit of a break. Can't blame load shedding there. It's not on the hour yet.
I think we're almost there.
There we go. Right. Perhaps to talk the format again so that you can see what I'm explaining to you. On the left, we've got the income statement from revenue, gross profit, all the way down to normalised EBITDA. The first column there is our half, our current half performance, followed by the mix or percentage of revenue. Within our next column is the reported numbers and our percentage of revenue. The column on the right of that is the percentage growth relative on a reported basis. The last column is our percentage growth on a constant exchange rate basis. I'm not gonna dwell a lot on revenue. We've taken you through that, -1 on reported and -6, and we know what the elements are there.
I think we've covered that in a lot of detail with the headwinds. If you look then to the, to the gross profit and the normalised EBITDA, collectively, you can see our gross profit. As you saw from the first slide, we're down 1.7 percentage points and also down in absolute terms because of the flat or the slightly declining turnover. That had an impact both at gross profit level and on our normalised EBITDA and has led us to an EBITDA percentage for the 1/2 of 26.5 relative to last year's 1/2 of 29.5% and a reduction of 11% on reported and 15% in constant exchange.
Perhaps just to highlight that the prior 29.5%, which I proudly presented last year, that was at a peak. We had the COVID vaccine contribution, we had the VBP pricing benefits in there, we had Russia cooking, so that really was probably the highest ever EBITDA margin we've seen in our business. If you go to the H2, we were actually at 27.5%, which is only a percent higher than what we've come in this half.
I think you've got to look at it on a balanced basis, but certainly we're comparing ourselves to a very strong H1 last year. Also very pleasing on the expenses we've contained, from a constant exchange rate perspective, we contained our expense growth to 3%, which I think is a commendable performance given the inflation environment and expectations on payroll increases. This is my favorite slide. I'm gonna talk about the gross profit percentages of all the segments in the business. These are all in constant exchange rates, so the gross margin percentage are slightly adjusted in the comparables for constant exchange rate, not significantly. First of all, I'm gonna start with our Regional Brands. As you know, Regional Brands makes up just under 50% of our total revenue.
This is the heartbeat of Aspen. You know, if this segment performs, gives us a real good foundation for performance across the group. If you look from left to right, you can see from FY21, we were at 55% gross margin. We ended this off at just under 60%. That has come with a lot of hard work in terms of cost of goods savings initiatives, a lot of factory efficiency improvements. We've also had a very positive sales mix, particularly in our emerging markets, South Africa and Latin America. That more than offset, if you recall, we did guide, there were some pricing pressures in Australasia. We more than offset that with the favorable mix in the emerging markets. A really positive performance on our Regional Brands gross margin percentages.
On our Sterile Focus Brands, again, if you look from left to right, we've come from a 60% margin in 2021 and ended this off at 60.5%. You can see in the H1 of last year, we did have a high margin, but that had the benefit of the higher pricing in China. Obviously some of the other benefits in terms of sales into Russia at that point. You can see in the H2, we dropped down to 59%. That was impacted, if you remember, we had a heavy freight cost, which particularly impacted our sterile business last year.
With improved freight cost profiles and our site transfer savings and our favorable mix in terms of obviously trying to increase exposure to OTC anaesthetics, our segment within the anaesthetics, to increase that segment. All of those have contributed to a positive trajectory in our sterile brand. Collectively, when you look at Commercial Pharma as a collective, I haven't given you a collective number yet, but our Commercial Pharma margins ended at 60% across the collective portfolio relative to last year's number of, I think it was about 58.7%. Really good performance. On the manufacturing, you can see that historically, we've run very constantly at around 19%-20% margins.
You can see the impact that it, you know, with a fixed cost base that Stephen spoke about in detail, what the impact of losing the vaccine contribution has been, dropping us right down to 5%. We've also, we also had to sacrifice some sales in our API business in the H1 to do some maintenance. We lost a month of sales. I think Stephen took you through that in the first slide. We do we expect the API business to have a very strong H2 with a full six months worth of sales, and that's a very high-margin contributor.
I think Stephen's also taken you to the fact that we sacrificed revenue generating output in this H1 in our sterile facilities to bring in some of these new product introductions. On top of that, we've had inflationary pressure. I think inflation particularly has hit the factories. I mean, they've particularly in Europe, I mean, as you said, they're not used to inflation. It's been a really tough. We've tried to pass levies on. We've been successful in some areas, but not in others. It's been a really tough ride. I think all of those things have contributed to the drop in that margin.
On the positive side, I think if we look forward to H2 with our, with our bounce back that we see in the API sales and the heparin sales, we foresee that the margin in the H2 will be back to double digits, probably lower to mid double digits. You can see you know, the benefit of having that volume, how it, how it influences your gross margin. The 5% is, I think is a low point. I think going forward, I think we'll see we'll be back in double digits and big value accretion, you know, once we get into the medium term.
If you throw all of that into the group, margins, we ended this off at 46.8%. As you saw from the first slide, that's a nice uptick from H2 2022. Unfortunately, we are much lower than the H1 last year, but I've explained the reasons for that. Importantly, we're not far off our FY21 margin percentage. I think we've come back to quite constant margin trends, given the headwinds that we faced, and we look forward to some positive increments going forward. On to the financing cost slide.
There we've had, if you look at the overall, you can see our financing cost slide on a normalized basis has increased from ZAR 334 million- ZAR 586 million for the half. You can see the numbers that are blocked, in blocks there, the foreign exchange losses. We went from a gain last year of ZAR 50 million to a loss this half of ZAR 234 million. That's driven predominantly by the weaker emerging market currencies against the EUR and the USD in our business.
It's in the working capital space and based on timing of receipts and payments and it's, you know, it's outside of our control, and we're hoping that we don't have that level of volatility in the H2. The very pleasing part of this slide is if you look at the numbers just above those blocks, you can see our effective interest rate for the period is coming at 2.83%. Last year, we were at three, just under 3.5% . You would think, "Wow, you would expect interest rates to rise." Fortunately, we've managed to drop our effective interest rate in the half. That's come with a combination of two factors.
The one is our average debt levelsOr lower than they were in the previous year. Also, we managed the mix of our currency. A lot of our mix is more euro-facing, where our real interest rate costs are much lower than our ZAR costs, that's also helped to bring the interest rate down. I guess the next question is where are we going in the next half on interest? Everyone knows that we're in a rising interest cycle. Fortunately, we've got just under 12 billion ZAR of debt funded through the IFC term loans, that's at a 0% fixed base rate. That gives us quite a lot of protection against base rate increases. We see that our interest rates for the H2 will grow between 60 basis points and 80 basis points.
Without the IFC protection, would have gone up as much as 170 basis points. It's a significant benefit, and that benefit is obviously locked in for the period of that loan, which I think is only fully paid up by 2028. On to working capital. If you look to the bottom right block, our working capital has grown from ZAR 17.3 billion to just under ZAR 19.6 billion for the half. There has been an impact of foreign exchange. This is just under ZAR 800 million of exchange, weaker rand that's increased the level of working capital balances. The balance of the increase is driven predominantly by increased inventory investment. We still...
We've obviously still had a period where of investment in our manufacturing segment in inventory, and this has followed all the supply chain change disruptions that came from COVID and some of the other logistical issues. We do, however, have started to see a normalization of logistics and supply chain, and we do anticipate that the position will improve in the H2. This improvement, together with the heavy weighting of API and heparin sales in the H2, you put all of those into the pot. We should be seeing quite a significant reduction in our inventory in the H2, which will then lead. We're still targeting to get an operating cash conversion rate of above 100% by the financial year end.
If you cast your eyes to the left and the little chart there, the blue line is our rolling 12-month operating cash conversion rate. You can see in H2 2021, which is the financial year ending 2021, we were above 100%. If I had to track that back, we've been above 100% for the last couple of years. It's only in this last financial year and this half that that rolling number has come below 100%. We're confident that we will be above 100% by the financial year end, underpinned by the unwind of inventory and the heavy weighting of manufacturing sales in the H2. On to net borrowings.
This is just a bridge of our borrowings from FY22 to this half. If you look to the left, our borrowings ended at June 2022 at ZAR 16.1 billion, and we've ended this half at ZAR 18.8 billion. The two main drivers for that increase in the borrowings are the FX. The weaker ZAR's, given, increased our borrowings just by translation by just about ZAR 1 billion there. That purple little block. If you look at the dividend payout, which is always coming in this half, it's just under ZAR 1.5 billion. Collectively, ZAR 2.6 billion between Forex and dividends have pushed up the level of borrowings. In the H2, we don't obviously we don't have a payment, dividend payment in our H2.
We also got very strong cash flows in our H2, which I've taken you through in the working capital slide. We see that borrowings coming down quite a lot from the H1 level. From a leverage ratio perspective, we're well below our targeted level of 3x . We're sitting at 2x , which gives us a lot of opportunity for CapEx allocation optionality and the opportunity to take advantage of investment opportunities. I think Stephen will unpack some of that in his subsequent slides. Overall, I think we're in a very comfortable space for, on borrowings. On to ESG, which is a very important part of Aspen's focus. It's a key driver and underpins everything that we do.
From an Aspen credo, I mean, our credo is healthcare, we care. We continue to demonstrate that across a number of initiatives that we've implemented to strengthen healthcare systems, provide social upliftment, and also to provide access to medicines to all patients. In terms of our main pillar of focus, our main pillar is to promote access to medicines. If you look at our portfolio of products, now we've got a broad geography that we supply products to. Out of that broad geography, it's over 60 countries that we supply are low- and middle-income countries. It underpins our access credo.
From a support for Africa, we, as you know, we've done the agreement with Serum and underpinned with endorsements from the CEPI and the Gates Foundation. We've got a commitment to supply Africa with those four vaccines that we've done with Serum. That's an important underpinning, provides us with the content with healthcare security for those key pediatric vaccines. We've also been very active, as we always are, in responding to health and humanitarian crises, that's an ongoing thing that we do. The most recent example, we supplied life-saving anesthetic products to both Turkey and Syria to help people that were in need of emergency operations. We're very proud that we were part of that initiative.
I think, if you recall, I think when we had the explosion in Lebanon, we were there first as well to provide life-saving anaesthetics. It's certainly part of our DNA to always be front of queue in those situations. Coming closer to home, I think something close to all of our hearts. On the energy and water supply, initiatives that and challenges that face us in South Africa, I just wanted to sort of unpack what we're doing in terms of our electricity and water supply within South Africa, and then perhaps just to talk a little bit about Europe.
If we look at KwaDabeka, which is our main, our main manufacturing facility in South Africa, at the moment, we've got 8% of our power has been generated by solar. From a load shedding perspective, we're exempt up until stage IV. We are an essential service, classified as an essential service. We are only load shed from stage V, but that's in a very controlled manner, in working in collaboration with the municipality. We, we do it in a controlled basis, and when we do go into load shed mode, we're able to have full backup power to ensure that there's uninterrupted supply of product to the market.
Notwithstanding that, we understand that, you know, these challenges are gonna be with us for the medium term, we've taken very strong initiatives to move off the grid, and we've got a plan. We're working with a partner to provide power from a recycled plastic. I'm gonna try and say the word pyrolysis, which converts plastic waste to synthetic gas and is able to drive electricity. That initiative should put us in a position to be off the grid within two years in the KwaDabeka facility, and at a cost lower than Eskom's current tariffs. Obviously, that saving will grow as Eskom increases their tariffs over time. From a water scarcity perspective, KwaDabeka is an area that's in a very, very tight water spot, and we've taken strong...
We've got no reliance on the municipal water there. We've got full groundwater extraction and treatment and re-reticulation, and we've got similar strategies in our other facilities, you know, depending on what the challenges are in the other facilities. From a European perspective, I don't know if you recall from, I think, maybe the last set of results or maybe. No, it actually was the last year's interims. I mean, we were all worried the gas is gonna be turned off in Europe, and our factories would be left high and dry. They were all agile, and all of our factories have managed to divert their reliance on gas from that supply.
We've got alternative suppliers of gas and other energy sources, we've made a lot of progress in diverting our reliance on one single source of power and gas. From a pricing perspective, prices in Europe of electricity and gas were all over the place, but our team were very, very flexible and able to negotiate fixed cost contracts and lock in prices over periods of time to be able to contain those electricity and gas costs. A very successful process there.
All in all, from an ESG water, electricity, and all of those, we've got ongoing initiatives in many areas to drive or reduce our reliance on water and reduce our usage and reliance on them, and looking at more and more alternative ways of renewable energy and alternative bases of operation. It's a real focus point for Aspen and underpins a lot of what we do. Thank you for that, and on that note, I'm gonna hand back to Stephen.
Thank you so much, Sean. Well done. Thank you. Just a few points on what Sean covered. Just some things to consider. A lot of the headwinds we faced, we talked about now and we face now, we faced in the H2 of last year as well, our financial year. To give you a sense of our Commercial Pharmaceuticals performance, which Sean sort of alluded to there, which to put it into numbers. Relative to that H2 versus this half now, our Commercial Pharmaceuticals is up 9% and in reported and 4% in constant currency. That's a pretty good achievement, considering the only difference really was the lockdown in China that we didn't anticipate. A lot of people speak to me about Russia, and what it is and will it bounce back and that.
I mean, I can only tell you what we're seeing on the ground. One of our products is a critical product. We're not losing market share, so please take this in context. The market call from the state was 50,000 packs a month. During COVID, it went up to 100,000 packs. Now we're only seeing 7,000 packs of demand from the state. Clearly, the state money that was in healthcare has now been redirected to the war effort. I would not be assuming any major positives coming out of Russia in terms of turnover. The other point I'd like to make, if you have a look at Sean's margins and the margin impacts, we've got real potential to increase those margins.
We fix manufacture, we get manufacture driving up, and we've got real opportunities to change the margins. Forget about historics. Going forward, that is what will change margins and take us to levels that we haven't seen before historically, is to change manufacture. The working capital, I think the unwind is in our hands. I'd spoken to you earlier about having so much uncertainty. It's horrible. The supply chains in every industry, not only ours, are really impacted. We've been really cautious, but I think we've got a much better insight now, and we've got confidence to be able to unwind that working capital. The last, just a comment on ESG. Really happy to be doing something with plastic. It's something we learned from the Northern Europeans.
You know, in South Africa, we pick up lots of the aluminum cans because they get recycled. Really hopeful we'll have a whole lot of people wanting to pick up plastic now. Something's got a value, you know, you're going to pick it up. Hopefully we create that value, and hopefully you don't see too much plastic lying around the Eastern Cape region. With that, onto outlook and guidance. The Commercial Pharmaceuticals has got very steady organic growth. It's a very strong cash generator, and it's what's funded the manufacturing platform. In fact, we sort of starved our Commercial Pharmaceuticals of cashCapital because we put it into manufacture.
The gross margins we've spoken about at length. Really the most pleasing aspect of these results are that we have grown that margin rather than the decline we had initially guided you towards. We have opportunities from acquisitions to enhance some of that growth, and we'll talk about that now. The sterile manufacturing expansion has been a core investment initiative over the last five years. This is all about successful allocation and utilization of that installed capacity. Delivery on the manufacturing contracts is absolutely fundamental to that. You might remember in a previous presentation, I've told you we are not concerned about filling the capacity. It's a case of not if we fill it, but when we fill it. That's always been the sort of open question for us.
Incremental growth opportunity given the limited fixed costs, Sean and I have covered that ad nauseam. Our CapEx is largely complete to get to that end state with both OpEx and personnel costs deployed. Really, the increasing contribution will not just drive profitability, but also drives free cash flow. We're a business, you might remember, we never come to you ask the shareholders in all the years for any money. We've never issued any shares. Our business growth and future depends on our ability to raise cash. Aspen is very focused on cash, and when you start your own business and you run it from small and you take that mentality forward, you realize that all the fancy ratios don't work. At the end of the day, you've got to pay the bills, and cash pays the bills.
Aspen is a company very focused on conversion and cash flows. All of that, and if you get all of that right, then all the accounting metrics work, you know. We can argue what ROIC means and ROE means and all those fancy formulas. Let me tell you, if you make more profit on the same assets, all those ratios go in the right direction. Really, it's about strong free cash flows, and we've got a lot of optionality about how we allocate capital. When you say, what is Aspen working on? What are the key areas? It's really about delivery of these manufacturing contracts and now quite a big focus on enhancement of our Commercial Pharmaceuticals growth. We look at the Commercial Pharmaceuticals outlook, we've had sustained organic growth from our Commercial Pharmaceuticals brands, and that's without any investment.
We've got a diverse portfolio. They've got really strong brand equity, and they're supported by in-market sales teams. Those teams are very important commercially in emerging markets. It's quite interesting to watch where our head count in sales force is very heavily weighted towards emerging markets and a lot less in developed markets, although they might be producing the same relative turnover. You need more headcount there. I think I don't have to tell you an incredibly resilient performance from the, particularly our Regional Brands business. From an Aspen perspective, you know, you have those, that fear and greed mentality that all you investors fully understand. China, for us, we see as a country with the greatest growth potential. It just... when you get a new product, we want to launch it.
You might need five countries to band together to do the development. Without fail, if China wants it, you do it because of the returns. What we've got there is a risk on volume of VBP, which is a pricing mechanism that unilaterally decreases price. It's effectively a way of getting products post-patent, because what happens in China, different to other markets, people don't gravitate towards generics. A lot of it is a lack of trust. They have sort of almost an enforced generic exposure there. Once that happens, it's like the rest of our market's post-patent. The only thing it does grow a lot quicker, even post-patent. For us, there's a short-term risk of VBP, but, you know, it's actually impacted a lot of people, not just us.
We're in numerous commercial discussions, and those discussions are really about how we can get products from others who are saying, "Look, we are out of here. We exiting. Our sales costs are too high." We in discussions around that, it's really about how we leverage our sales force that have done incredibly well there and well-respected. While we bring in our next phase of pipeline, and we've got a great pipeline of anaesthetics, of existing anaesthetics, as you know, globally, that we can bring into China. Very interesting, a lot of the Chinese companies have a pipeline in anaesthetics, and they particularly want Aspen not only for China, they want us because they'd like to use our platform globally. If we've got the... we under a lot of...
there's a lot of rods in the water, irons in the fire, whatever the terminology is. We are having a full go to make sure we have a in a post-VBP environment, we may or may not be impacted. Sorry, I should say that. There's no telling you when you will or won't. We may or may not be impacted by VBP. Our working assumption is we will be impacted across the board and that is what we work towards, and we try to keep our sales force together in the short term for what we see as a longer term opportunity. Our Commercial Pharmaceuticals portfolio will be expanded. I think we spoke about this in the previous presentation. We will be adding products in Latin America and South Africa within the next six months.
Between now and next six months. We expect to there'll be revenues of around $100 million out of what we do there. Latin America, for those that follow, you realize it makes logical sense. We do really well. We've got a good team. Also builds critical mass in some of the other territories. A lot of gross-to-net, hopefully in that area as well. Our South African team very highly rated by multinationals, and they're looking to use Aspen much more broadly to on new chemical entities, biosimilars. You should just watch to see what we do in that space. There's some pretty exciting developments for our South African business as well. These are two slides that follow, probably the two slides that maybe need a little bit of concentration.
We've got a COVID vaccine. It's around our manufacture and what we do in steriles. The COVID vaccine production, I think did demonstrate the value and competence of Aspen sterile manufacture. For those people that understand the bush, you might think that this was a little bit of a mock charge. And that's how we felt it at a point. Albeit a couple of years, you know, if we our working model was to, you know, we expected COVID to last a little longer and, you know, the others would kick in. Didn't quite work out as seamlessly as we had planned. What I must say about it was one of the key catalysts in driving these contracts.
The contracts that we assigned have been driven by some things, our capabilities in Africa, the ability to access Africa and just put us on the stage as a world-class sterile manufacturer. We were the seventh or the eighth company brought on of 11 in the J&J network. They brought on the Americans and the Europeans because they had the R&D. We're the first out the blocks, and we produced the most. That is now known in every multinational circle. These guys are great manufacturers. That. There has been very positive spin-off around what we did around COVID. We've got a unique position for sterile vials. What are vials and prefilled syringes?
Vial's a thing, you've got your COVID vaccine, they put it in, and they took out five doses or 10 doses out of there, and they take it. Whereas a prefilled syringe is one syringe like that, which you can go and get at a chemist, and they'll give you your flu shot or whatever you get. There was not enough vial capacity for COVID, the vial capacity has come on now globally. There is a global overcapacity, in my opinion, in vial manufacturing. You're seeing it, we're seeing it with sites across Europe that were built and are not being used, and they're not competitive. We're seeing it in Asia as well, particularly India, where people built up these capacities. I think our unique positioning in Africa is a massive... Well, I don't think.
I know it's a massive advantage. It's now given the pressure on the globe with Africa having received vaccines so slowly, there's the funders, there's pressure on the funders to support local manufacturing initiatives, and that's being entrenched by Gavi now. They're the largest buyer of vaccines, which have got pillars which include regional manufacturing. Watch those pillars carefully. There is a desire to buy 60% of all vaccines needed in Africa from Africa. I don't think there's a company better positioned anywhere than Aspen in doing that. I go so far as to say we're at least five years ahead of anyone else. While sentiment's with you, it's fine, but doesn't last forever.
What you have to be is price competitive, and that's where I think Aspen, relative to other manufacturers, we are a globally competitive site. In steriles, we can compete with Asian manufacturers, with European manufacturers. We don't need any special levies to be able to compete. If you, if you want to understand commercial dynamics, this is going to work. Have a look at how the Asians and the multinationals behave. You know, Asian companies that transact with Aspen are not transacting with Aspen because they like Aspen or they, you know, they focus, they're commercial companies. They see a commercial benefit in the incremental volumes that Aspen will bring. They might lose finished dose volume, which is what we do, but they'll get more of the chemical volume, the API. For multinationals, they also want to retain volumes.
What's your way of keeping your African volumes? How do you keep your ESG commitment? You've got to now say, "Oh, I'll make in Africa." Guess what? It's really nice making at Aspen because we can say we make in Africa and all of that, and they're competitively priced, and actually they can make for the U.S. and Europe as well. We're getting it all out of Africa. We bring a lot of positives in that area, and I think that positioning is very important for us. In time you will find out a little more about the partnering that we have there. The prefilled syringes is the best, the biggest value add here. It's an expensive technology, and it's an important technology brings significant profitability if you get your volumes right.
These are machines that are longer than a rugby field, from start to finish, you need to keep them moving. We invested in prefilled syringes because we knew multinational businesses were moving that way and they're our partners. They're, most of them moving into biologicals. We anticipated some shortages, we invested early. It takes years and years and years to put facilities like this, a lot longer than a vial facility. There is a massive global capacity shortage now as we speak. Why is there? It's because of portfolio shifts. COVID will move from vials to prefilled syringes in developed markets. What does that mean? Oh, no, COVID's gone away. Let's say 90% of COVID's gone away. There's still 10% available. In this vial that we had before, you had 10 doses here, one vial.
You now go to one prefilled syringe, which you've lost 90% of your volume. The chemical ingredient goes from 10 to one, so that's lost 90%. Your manufacturing conversion of one vial, one prefilled syringe, you haven't lost finished dosage form volumes. We're in that area of the business. In fact, that value goes up because a vial is a lot cheaper to make than a prefilled syringe. You might have noticed or might be aware, there is massive focus on diabetes and weight loss products. They are finding diabetes products that are assisting with weight loss. There are massive products out there. You know, people like Eli Lilly are talking having a $30 billion brand in a product called Mounjaro. All of these are in prefilled syringes.
That, you might have read about all the shortages even in South Africa, but they're global. There's a massive switch in the market there. Even in HIV portfolios, they're now moving to prefilled and vial manufacturing as well. Simply put, the COVID vaccine, yes, we've got all the naysayers around vaccines, but there's a far bigger majority that know the value that vaccines bring and the new technologies in vaccines. There's definitely increased development. You just have to have a look at all the biotech companies, all the mRNA companies. There's big developments going, and there is increased usage of vaccines. You know, for us, the fulfillment of our strategic goal will be a delivery of returns on these investments. That once again, it goes to filling capacity and optimizing capacity.
When we look at, you know, what the financial impacts might be here, we had a capacity for when we last spoke to you, I think three years ago, about a value of our capacity. We spoke about ZAR 1.5 billion for half. Extrapolating that, it was worth about ZAR 3 billion. We've revised upwards there to say we think it'll definitely be no less than ZAR 8 billion, the value of that capacity. That's really a view that we've got a much better view now on what we can get. We're a bit like a, like a hotel business, I suppose. You've got fancy building, and it's all about the occupancies and what you get per, and what you, what rate you get per customer. We've got a much better idea now of the fill.
We've, we're comfortable enough to tell you that, if we were to fill all our capacity, it would be no less than ZAR 8 billion of contribution. We've made significant progress with the contracts, I'll talk to you about that in a little bit more detail now. We've got ZAR 4 billion in agreements advanced or completed. The type of products we're looking at are both in vaccines and biologicals that aren't vaccines. We are with full contracts and Serum you're aware of. I mean, we'll make public comments in due course, since we've got to just align that with the whole comms process, with the multinationals as well. There are a number of additional contracts under discussion.
I've got to tell you that this process of bringing contracts is not a simple process. I wish I could tell you it was a switch on and off. The commercial part of the contract is one page, and you can do that in one minute. It's bringing that on. There is an entire due diligence. It's a due diligence in every respect. I mean, they can go into your IT systems. It goes to that level. Really, it's a lot around your abilities and your capabilities. Have you got the right analysis? Can your labs do the work? Does your pump pressure work against this? Can a Luer lock on a syringe fit into this thing without affecting this very expensive machine? How do you adjust for that? Can you adjust the shape of the glass?
These are just some of the issues that we live on a daily basis. I'm happy to tell you that we've been through that successfully. That's your biggest hoop. It's not will you or won't you. Once you're sitting talking on these things, it's a long process, and it's all about can you or can't you do this? That's what we. When we say we sacrifice revenue, that's where we sacrificed it. In all issues, these tech transfer activities have been initiated. I don't want to bore you with lots of jargon, but you start effectively with trial batches, then you do validation batches. What does validation mean? You must do three batches that produce exactly the same result.
You can ask for what is a change of site or a new site to say, "Please put Aspen on this dossier." That whole process can take 12 months-24 months. Our contracts are in calendar years, so that's quite important because remember, our financial years are June. The contracts we look are on calendar years, and the guidance we give you is in calendar years. There is a seasonal bias in the contracts that we have. What does that mean? A lot of them would be, you know, sort of for winter, which means that your manufacturing, when we look at our load in manufacturing, in particularly our French site, it's you're looking at sort of a May to October manufacturing period.
We've got quite a, quite a load over that period just because of the nature of the contracts and the products that we have. We expect contribution from that. Contribution isn't revenue. Contribution is after you've paid for your, you've paid for your raw materials. Very hard to give you guidance because sometimes you pay for raw materials, sometimes you don't. I just say, here is the sales, here's whatever you've got to pay in materials. Once you've taken that off, you've got contribution to your labor and overhead. That's what this number is. This really goes towards paying for our fixed and variable costs in our facilities. We expect in calendar year 2024 to have ZAR 2 billion of contribution and ZAR 4 billion of contribution from the contracts we have in 2025.
These contracts are, have longer durations than prior. I'll talk a little bit about that, I suppose now on our last slide. Going to H2, our guidance is on a stronger H2 relative to H1, and that's, you know, that's been a guidance, and that's maintained. Our improved revenue outcome is really from both commercial and manufacturing, but the manufacturing is a big jump for us. Even the turnover we expect now will be higher than the previous year, even though the prior period, even though we had a vaccine revenue in the prior period. We more than compensate for that loss of revenue in this period. We're targeting for our reported EBITDA to be on a par in line.
We're really trying hard to make sure it gets to the levels of 2023. To remind you, those levels are about ZAR 11 billion. We're at ZAR 5.1 billion now, so I don't think it takes incredible mathematics to say we're gonna try and come as close as we can to ZAR 5.9 billion for the period. Of course, you know, it depends where the ZAR ends up, but there should be an uptick in our reported results from that. Bear in mind, quite a lot of revenue coming in from Europe, where we had 17.5%, and I think it's like 19.5%. Rising interest rates, Sean's taken you through that. It will impact finance charges.
I think you should be modeling a cash flow conversion of greater than 100%. The Commercial Pharmaceuticals transactions that we hope to announce and implement over the next six months will provide new growth stimulus in both Latin America and South Africa, and there's some other opportunities we're looking at. The manufacturing agreements, we'll be announcing them as we have agreement with the multinationals and agreements are signed. Those contracts, as I said earlier, will be of a longer duration and value. Because, you know, if we take COVID, people when we first signed, people didn't know if the vaccine would pass or not pass. No one's gonna commit to a long term saying, "Have I or haven't I got a product?" We care, we know that the people know they've got a product.
They know it takes a couple of years to bring it in, it's very difficult to get in, also very sticky to get out. These things tend to be almost lifelong commitments. You know, that is where all our focus is. I think our story is understandable, I hope. Very big challenges that we face. Challenges that we will continue to face, but, you know, as I said, it's been a scrum, but I think we've come out on the right side of it. Thank you everyone, and thank you for your attendance. Appreciate it. Simanga, are we gonna do Q&A now?
Yes. I'm gonna do the online questions first. I'm gonna ask Paula to just assist me with the questions in the room. We have two questions from Byron Foss from ResCo. I'm gonna deal with the first one, Stephen. Assuming over the next three years that interest rates remain roughly at these levels, can you talk to the expected trajectory of interest costs?
Go ahead, Sean.
I don't need to stand 'cause I'm answering online, huh? That's quite a broad question. Can I stand up, yeah?
Yeah, you can just...
Okay.
Stand next to Stephen, please.
Thank you. I mean, I think, I know in the U.S. that they're still anticipating 225 basis points.
I think they said assume they stay where they are, Sean.
Assuming they stay where they are.
Yeah. Assuming over the next three years that interest rates remain roughly at these levels, can you talk to the expected trajectory of interest costs?
Sorry. I understand the question now. I think obviously as our debt levels come down, interest costs will drop. I think, you know, you've seen the free cash flow coming out of the medium-term prospects out of manufacturing. We'll see our interest costs reduce over that period.
I think the rate Sean's guided in the H2.
Yeah.
You know, with a change of that rate could be, I think you said about 80 basis points, hey?
Mm-hmm.
Perfect. The next question from Byron Foss. What factors, in your view, make Aspen more likely to be the dominant manufacturer of African vaccines for Africa versus other players on the continent?
Well, you sort of haven't got a great. There's not a big field out there to start with. That's. We're the only company that demonstrated this capability. It's not a big field, and it's a very expensive field to get into. Personally, if you gave me all the cash in the world and asked me to start this from a zero base, I really wouldn't do it. It's about the fact that we have capabilities in place. We are able to leverage off an infrastructure here, and we have a capability. It's fine to have fancy buildings, but like anything in life, any sport business, you're as good as your human capital. We've got good, well-trained human capital in the business. I think it's. To compete with us, you should have an existing infrastructure.
There aren't people who have existing infrastructures across Africa that I see. I mean, when I say that we have a five-year advantage over anyone, sorry, it wasn't, it wasn't just an idle comment. It was the type of comment that, the funders and donors have pointed towards and said, "This Aspen has this advantage.
Perfect. Thanks.
We had everyone at our facility, we've had them all. They're incredibly positive about what they've seen. You know, some of the best facilities. Not only the facility, the way we run it, the sequencing. With experts there, that no one's come up and given us a really great new idea. They're very pleased with what they've seen.
Great. Thanks, Stephen. The next question is from Letlotlo Lenake from Investec. Hi, Stephen, Sean. Please elaborate on the key drivers of the upward guidance from ZAR 3 billion- ZAR 8 billion. Is that purely from a pricing bargaining perspective for your capabilities, or is that mainly due to the nature or the products that will be manufactured?
I think it's a little bit of both, but I think it's quite hard to give you guidance of ZAR 3 billion for total capacity when we're bank full. We got that wrong initially and maybe a little bit conservative. We're looking at ZAR 4 billion and saying, you know, that's probably a little less than 1/2 our capacity that we've got to give. That's why we are able to guide to at least ZAR 8 billion. It's based on what we've achieved. It's based on what we're seeing in the market, and there have been some really big shifts, particularly in prefilled syringe areas, which have given us some confidence.
Okay, great. The next question is from Grant Morris from Clucas Gray. Good morning and thank you. Could you please clarify that when you talk about the contribution from new contracts, are you talking about gross profit?
Yeah. Contribution is. The way we see contribution is this: you take a sale. Let's just say we're doing a contract, this contract with Serum. We'll book the full sales. We will have the cost of buying the API, so all the ingredients, all the components, and then you'll have what we call a contribution. If we have another contract with some of the multinationals, for example, they insist on paying everything, and they just pay us a tolling fee, effectively, a conversion fee. All of that then goes. We just have that, and there's no material cost, and that becomes a contribution. In our manufacturing environment, because our costs are so high already and embedded, a lot of that contribution, most of that contribution will fall straight through. Logically, you're not going to be up.
There's no space to add a whole lot more people. We might have to add a shift and things like that. The air conditioner still runs the way it always ran. The building and environment created will carry the same depreciation, amortization, whatever other expenses on there. It's, that's what we refer to by the term contribution.
Okay. The next question is from Roy Campbell from RMB. Can you please talk around the MSD interest-free loan due in September 2023? Is this rolled forward or settled? Is there a reciprocal of buying back safety stock?
Yeah, it's I think it's a little bit. It's we under discussion, Roy, so it's a good thing. It is a discussion around stock, who holds stock, and, you know, whether this is pushed out or pushed forward. We have made provision for full payment, but I tell you there is a discussion around that, and as soon as we have that clear, we'll let you know. That will be clear in the next couple of months.
Great. Thanks. The next question is from Andrea Phillis from Risk Insights. The question is not too fierce, but I'll give it a go. Given the RI rates Aspen on ESG, and your disclosure has been quite good over the years. However, given the current energy crisis, what is your strategy regarding renewables?
I hope Sean covered that in the presentation.
Yeah.
Some detail there. I don't think that's... I think maybe that question came before that slide. Yeah-
Yeah. Our commitment is there, and we've demonstrated that.
You showed it, Sean. You showed it
...with the renewables, yeah.
I mean, we... You know, I'm hoping to make plastic valuable. That's what we're trying to do. That's just from an energy perspective.
Okay, great. I think those are all the questions online. Are there any questions in the room?
Thanks, Stephen, Sean. Ken Osei from the IFC. Congratulations on good results. Question around prefilled syringes. Given your capability in sterile and prefilled syringes, is there an opportunity to do more insulin on a contract manufacturing basis for the African continent, given the limited supply? I mean, is that something that's a bridge too far?
No, that is not a bridge too far. Absolutely not. Well, firstly, thank you for your support. You've seen how you've helped assist us here and so thank you. Thank you to the IFC. Appreciate it. I think that's probably the starting point. Absolute commitment to insulins, and just watch that space. It's not a bridge too far for us. It's not a vaccine, but it's a biological. It's Hope I'm not giving too many clues there, but there we go. Are there any other questions?
Thanks, Stephen. You've guided for the contribution of ZAR 2 billion in 2023. What sort of capacity utilization of the you have a view to arrive at this number?
Yeah. 2024?
Sorry.
2024. I think if you want to work it out, because, you know, when you talk about, say, we used to speak doses to you, and there was five J&J doses into one vial. We'd make... It just... You know, there's vials and doses. I think what I've tried to do is guide you to value. When you say ZAR 2 billion, I'd go ZAR 2 billion, and I divide it by ZAR 8 billion, and I'd say with at least ZAR 8 billion, I'd say it's about 25% of the capacity. I should say less than 25% of the capacity. I think that's how I would look at it from that point of view.
Thank you.
Hi, Stephen. Hi, Sean.
Hi, Larisha.
You've made a comment here that the seasonal bias is toward EU winter manufacturing. Would that suggest that a lot of work has been agreed to already is sitting in European sites?
Are you really asking questions? I thought you knew Aspen inside out. Huh? You lost touch, Larisha. Larisha, what we're telling you is For example, you get things like flu vaccines, they're very seasonal. You know? The anticipation is COVID vaccines will be seasonal as well. You get respiratory vaccines, which will also be seasonal. There are a lot of seasonal. What we see in our manufacture, particularly out of our European site, as opposed to Quebec site. We're seeing people asking us. It's all very well saying I can make 100, but if they ask you to make 100 over six months, you can't you know, you've only got 50.
A lot of the demand has come in between May and October, September, October, because of the type, the nature of what they're trying to deal with.
Okay, thank you.
Thank you.
Morning. thanks for your presentation. Nancy from Exotic Capital. Just with regard to filling capacity, I know you mentioned that it's more about the when, not the whether you can, right? I just wanted to find out, like, in terms of timelines, I think you mentioned that it's a bit hard to say, like, when you can fill it, but in terms of timelines, how do you see yourselves reaching that full capacity and I guess reaching that eighth filling contribution?
Yeah. It's, you know, it's obviously core to us to fill all the capacity we'd really like to. It's been... If I go back two year, a year and a half ago, I sort of drew a little chess piece once, and I said, "Look, this is not about feeling me. Fill it, people say, 'Fill it now, ZAR 0.10, just fill the capacity.'" I said, "No, it's got to be a little bit more strategic about how we think about this." We have opportunities. It's so binary. You either get it or you don't get it. What I think you should take heart from is what we've achieved so far, you know, given, you know, given that we, you know, we've knocked cold, we get back up, you know, COVID.
You'll I think you should take heart from the fact that we have a capability. Those multinationals that use us now and are happy are likely to use us further. There are many of them that have products in development, where they will come to us, hopefully as a first stop. You know, for me, the risk is when you up here and say, "Stephen, what keeps you awake at night?" That's what keeps me awake at night. You can have the contract, but it's about execution. Everything's about execution. Yes, you've got a contract, but will your team deliver or won't they deliver on that execution? For me, it's we can sit and we will find additional contracts. I'm sure of that. There will be incremental contracts, of course.
I really want for us right now, the focus is about delivering the contracts we've got to deliver that revenue. They've done so well, our team, brilliantly in doing these tech transfer initiatives. Our focus is about delivering those. There's another whole team that are looking at extra ones, but there's only so much you can put into the factory with the... It's there, and it will be used. I think for us, we as a team had a belief that a sterile, a global sterile manufacturing platform was a place to be. People could take a view on it whether they liked it or didn't like it. I think what you're seeing is that we are in the right place. Now we need to execute on it, and we'll be in a fantastic place.
I have no doubt that all that capacity will be filled. I'm not gonna tell you it's one year or two years later. You know, we'll announce it as we go along. Prize one from manufacturing point of view is a bit more of the same product from the existing manufacturer. You know, you don't have all the tech transfers, hopefully we get a bit of that as well. Is that it? Renaat.
Thanks, Stephen and Sean. Renaat here from Laurium Capital. Maybe just on the technology transfer costs. Were there any costs and on these trials that is included in this period?
Yeah. We had the... It's a good question because there's two types of technology transfer fees. When you take, say, for example, serum, we pick up the fees because it's our product, our sales, we've licensed the product, we pick up those fees, and we were fortunate to have backing from both Gates and CEPI on that. When it comes to multinational transfers, they pay for the cost of a technology transfer. You will see some costs, but you should see some offset of those costs around those technology transfers. They shouldn't be... They won't be income statement negative, except to the extent they interrupt your revenue flow. 'Cause you can't have somebody say, "Hey, would you cover this cost for us over here?" The costs of technology transfers are very expensive.
Very. It's a very expensive cost to shift. That's why I say it's sticky coming in and very sticky going out.
Thanks. COVID vaccines, look, it's a story of the past, but I assume there's no COVID vaccine revenue in this period.
There's nothing coming up, Renaat. The earliest you're going to see any COVID, and really, I... You know, COVID is something I've had to psychologically, mentally move forward from. It hasn't been easy because we got promised billions of doses at all levels. The Gavi... The next demand that's likely to be needed is in calendar year 2024. I'm really not hanging our hats on any of that. You know, in life, you know, first time you get caught, you say, shame on you. If you get caught a second time, you gotta look at yourself. Right now, we've gotta move forward, and we've got a strategy. We bounced back. You know, we pivoted. I mean, if you take anything out of this, we're pretty agile.
You don't just sit and cry on the floor. Get up, stand up. We're in for another fight. We've pivoted, and we've put ourselves into a better position than we were before COVID. Quite honestly, if we get COVID revenue, that would be great, but it's not coming before 2024. They've got so much stock still due to them. You might have read very publicly, they, you know, the people that they've promised doses to, there's all sorts of fights around what will and won't happen there because they don't even wanna take those committed doses. I think let's wait. I think if there are doses to be had in 2024, we might be in with a shot. I'm really, I've got zero in any of those ZAR 4 billion for you or ZAR whatever billion.
Thanks, Stephen.
Okay. Sorry about being so emphatic. Okay. Well, thank you. I really appreciate your time and effort, and thank you for your interest and hopefully we'll be talking to you again soon. Thank you.
Appreciate it. Thank you.