It's an honor and privilege to stand in front of you. My name is Kuseni Dlamini. I am the Chairman of Aspen Pharmacare. We're really excited to have you all here. We thank you immensely for your interest in Aspen. We're very proud of the results that we'll be sharing with you, and also very, very pleased indeed with the very big announcement that we made yesterday of our partnership with Serum. Without further ado, I'd like to introduce Sean Capazorio, who's going to come and do the presentation, and Stephen will follow after him. Thank you very much indeed for your interest in Aspen and for your continued support.
Morning, everybody. It's great to be back in Joburg. I think the last time, if my memory serves me correctly, presented here was 2019, so it was pre-COVID. Really great to be back in Joburg. I always forget how cold Joburg is relative to Durban, but luckily my roots were still in Joburg, so my Joburg genes kicked in and I kept warm. Lovely to have all of you. Really proud to be presenting these set of results today. They've been achieved under very challenging trading conditions, a very volatile global landscape, and we've shown a really resilient performance. Really happy and proud to be presenting these results to all of you today. Just to draw your attention to the disclaimer slide and the disclosure notes.
Those are just for reading and for taking notes, and to bear in mind as we go through the presentation. I think really then to dive straight into it, I'm gonna start off with our financial highlights. It's been a really solid operational performance. We've driven good operating margins. We've really sweated our assets this year, and I'm very proud to say that we've shown improved return on invested capital, the way we calculate it. The trend is positive and really pleasing to see. I know that's something that we've been focusing on and we've been promising you, and this is the year we've delivered. Just to draw your attention to that, I think it's a very important metric. If I then skip to the highlights.
If we look at our revenue, we've grown 5% in constant exchange rate, 2% in reported rate. From an exchange rate perspective, around about ZAR 1 billion impact of the stronger rand on the currency relative to our constant exchange rate. A very pleasing revenue growth. If you look underneath that, it's a strong growth in manufacturing, particularly in the second half of the recovery from COVID in the first half. We did guide you that we'd have a much stronger second half. We've met our guidance there.
Secondly, on the commercial pharma, resilient performance in the second half, and we also guided you that we would have a lower second half commercial pharma, you know, driven by the impact of volume-based procurement hitting us in the second half, the lockdown in China in the last quarter, the geopolitical challenges that we faced in Russia, Ukraine, and we've also had some product divestments in South Africa, and Stephen will unpack that in a lot more detail in his section. If you throw all of that into the mix, I think we're quite proud of our revenue growth and it's in line with where we did guide at the interims. From a normalized EBITDA perspective, pleasing double-digit growth of 13% in constant exchange rate.
That's really driven predominantly by two factors. Our gross margins have been robust. I mean, despite all the challenges of inflation, we've managed to keep our gross margins ahead of last year. If you look at underlying segments, which I'll take you through a bit later, all the segments supporting the group gross margins have all shown improvement year on year. The real standout feature as well, driving the double-digit growth is our operational expense management, which has been very strong and focused this year. We really, we've shown resilience in keeping our costs in the right shape, and that gives you the leverage to drive a double-digit normalized EBITDA growth. The fruits of all of those labors then come out in the normalized EBITDA margin.
If you look to the third bar there or the third graph, we've grown our EBITDA margin percentage by 2.2 percentage points. A really big quantum jump for the current year and above, I think above where we originally guided in 2020. Also, we've managed our borrowings in a very strongly. Our borrowings have come down and I'll take you through that in a subsequent slide. As a consequence, we've had lower financing costs, and that combined with the double-digit EBITDA growth, has given you this 24% or 26% in constant exchange rate growth in our normalized headline earnings per share, which is a really pleasing result and one that we're very proud of. I also wanna just draw your attention.
I thought I'll just make you recall when we presented the numbers in March, we had this little triangle with sales at the top, EBITDA in the middle, and earnings at the bottom. I'm very pleased to announce we've kept the shape for the full year. We kept the shape at half time, and we managed to keep it in shape for the full year. Earnings growth ahead of EBITDA growth ahead of sales growth. A very proud and pleasing operational performance among challenging times. If we then look to the balance sheet, a very strong balance sheet which underpins our sustainable growth strategy. If you look at the metrics on a collective basis, they're really showing a positive performance. Giving us quite a good foundation for future growth.
Just going from left to right, our cash conversion rate, we came in below 100%. If you look at historical performance, we've always achieved over 100%. This year has been a really challenging year. I think most companies have faced the same challenges we have, the global supply disruptions, the impact of inflation. We've had to make sure that we stock up on all the right strategic inventory to make sure we don't run out of stock and meet our patient needs. We're comfortable that going forward as things normalize, assuming that they do, which we hope, the new normal is always tricky, that we will go above 100% in 2023. I'll unpack a bit of that in some later slides.
Looking at the borrowings, a really pleasing trend. You can see in 2020, we're sitting with borrowings at ZAR 35.2 billion, right down to ZAR 16 billion. Our leverage ratio is below 2 and comfortably below our targeted position of 3, giving us a lot of headroom to take advantage of investment opportunities, both within the business in terms of capital investment and any potential M&A, attractive M&A opportunities. All of that has culminated in a dividend declaration of 24%, which is in line with our normalized headline earnings growth. I think that's a really good accolade for us to drive that. It's the second year in a row we've declared dividends, so a really important demonstration of our ability to drive strong cash flows.
In addition, we've also been able to take advantage and invest in our own shares. We've invested ZAR 1.8 billion in a share buyback this year, just around 210.2 million shares, 2.2% of issued share capital. We've put our money where our mouth is, and we've also invested in our own shares. We're really very proud of that. This next slide is probably my favorite slide. We thought we'd just take you on a history, a path through history. This graph, this page is really showing you the NHEPS from 2018 to 2022, warts and all. All the businesses that were included in those particular years are embedded in those NHEPS numbers.
The debt number, and we've also got the EBITDA numbers in the green there and the EBITDA margin percentages. If you sort of just scroll from left to right, you can see that in 2018, we had debt of just over ZAR 46 billion, just under ZAR 47 billion, in fact, an EBITDA of around ZAR 12 billion and a margin of 28.2%. If you then fast-forward to 2022, our EBITDA now is at ZAR 11 billion, so slightly below that. Bearing in mind, the EBITDA in 2022 doesn't have Thrombosis, and it doesn't have Nutritionals, doesn't have the Japanese business, and we've managed to come very close to the EBITDA in 2018 with all of those businesses being disposed. From a debt perspective, a 30-31 billion drop in debt with the same level of EBITDA.
The real standout feature is our NHEPS coming in at 1627, which is a record high for the Aspen Group. Among all of this, we've also managed to do the share buyback, which has elevated the borrowings by ZAR 1.8 billion. As a takeaway, it's our highest NHEPS in history, and it's the lowest net borrowings in the last five years. Really, a nice thing to just bear in mind. What we then did, if you recall, we started benchmarking ourselves against our 2020 results. In terms of that, we just did a CAGR, warts and all. We took the last two-year CAGRs from using 2020 as a base.
You can see our revenue over the two-year CAGR is at 7%. Our normalized EBITDA also at 7%, so matching turnover growth, and NHEPS coming in at a double digit of 16%. A really nice overall trend from 2020. Right. Then just getting on to the income statement. I know it's a lot to absorb, so I thought I'd just quickly just explain the chart. This is our normalized EBITDA income statement, sort of taking you down the rows from revenue, gross profit, down to normalized EBITDA. The columns at the top are the numbers for 2022. The percentage of revenue ratios, followed by the 2021 reported numbers. That next column there is the reported percentage growth.
We've got the in the last column on the right, we've got the constant exchange rate growth to which is how we measure ourselves in constant exchange rate. Just to unpack it, if we look at revenue, which I've already covered, we've shown a good solid growth year of 5% driven by the manufacturing. As I mentioned earlier on, really strong underlying growth in commercial pharma, despite the volume-based procurement, the lockdown in China, which we didn't anticipate, product divestments, which we did guide, and the Russian geopolitical situation, which also reduced our second half sales. The standout feature for us is the gross profit. If you look at the blue circles, we've grown our gross profit by 0.3 percentage points.
In terms of growth, year-over-year growth, 5%. We've matched the gross profit growth to the turnover growth of 5%. Underlying that, the segmental margins have all shown improvement, so that's a very pleasing thing for us. If we look at our commercial pharma business, they've shown really, really good margin improvement this with portfolio optimization initiatives that we've undertaken, cost saving initiatives, which include some of the site transfers of our anesthetic business. That's provided us with a lot of protection against inflation and very abnormal freight costs. We incurred over ZAR 200 million of freight costs just in the second half alone, incremental freight costs.
We managed to absorb all of that and still come good on the margins. The only other big ticket thing to mention is that our mix of manufacturing sales has increased year-on-year from 25% to 28%. That obviously because the manufacturing margins are slightly lower than the commercial pharma margins, that mix of sales would dilute your overall gross margin percentages. If you look at the underlying segments, all showing improvement, and I'll take you through some detail on that in a moment. The operating expenses. You can see in the green, we've managed to reduce our operating expenses by 4% from a constant exchange rate perspective. You can see the leverage that's given us on our EBITDA growth.
Growing your gross profit of 5% leverages your EBITDA growth to 13%. On the margin side, growing your EBITDA margin up to 28.5% from 26.3% in the prior year. We're very proud of that achievement. Just to unpack the gross profit trends in a little bit more detail. I'll start off here with the regional brands. Perhaps just to explain the chart, because I know it is a lot to absorb. Starting from the left, we've got our full year 2021 gross margin percentage. We've then shown you the half one and half two margins, and then the full year margin for FY 2022.
If you look at our regional brands, you can see a good 1.9 percentage point improvement year-on-year on the regional brands. That's really the benefit of all of our portfolio optimization strategies despite all the inflationary and freight cost pressures that we've had to endure in the current year. Looking to sterile, which had a lot of headwinds in it. You can see sterile last year we had a gross margin of 60%. This year we've ended at 60.7%. You can see in the second half we had a drop in the margin from the first half, and that was driven by the volume-based procurement.
Notwithstanding that, with the site transfer savings and other initiatives, and also the freight costs, which burdened the anesthetics more than the regional brands, we've managed to still grow our Sterile Focus Brands by seven percentage points from 60.7 to versus 60 in the prior year. On the manufacturing side, if you recall, our manufacturing has got our base manufacturing business, and it's also got what we call our finished dose form transaction-related revenue, which is at low or no gross margin. If you look at the shaded bars, those are the bars which exclude the impact of the finished dose supplier-related revenue, which is at low or no gross margin.
You look at the trend there, you can see our manufacturing margin has jumped up from 25.3% up to 27.3% year-on-year. The two big factors there are the contribution from our J&J vaccines and coupled with a strong improvement in our API chemicals margin, following a lot of transformational activity to improve the margins in our chemical business. Chemicals is a big driver of manufacturing gross margin. We're very pleased with that performance. If you look at it warts and all, because of the mix of the transactional service revenue and we've had a full twelve months of that, you can see overall we've kept our margins flat on the manufacturing, but that's because of the mix.
Underlying that, you can see the improvement. At a group level, you can see the same trends. If you look at the shaded bars, 49.8% last year, up to 51.1% in FY 2022. Overall a good improvement under very challenging conditions in gross margin. Stephen will unpack some of the challenges in his presentation. I think then just flicking onto our normalized headline earnings. This bridge serves to reconcile our or bridge the reported earnings from last year to the reported earnings for this year. If we start from the left, you've got your reported earnings last year ZAR 559.78. You can see the impact of Forex has not been massive this year, so at round about ZAR 60 million.
If you look at the top, that gives you a 23% growth in your reported normalized earnings and a 25% growth from a constant exchange rate, so 2% delta because of constant exchange rate. Looking at the key drivers of our 25% growth in normalized headline earnings. We've covered this already, but we've got the benefit of the double-digit EBITDA growth of 13%. We've also, if you look to the interest bar there, we've had an interest saving of ZAR 355 million, and that's come with the lower borrowing levels. I do guide that we will face upward pressure, as I think all companies will in FY 2023, and I'll unpack some detail on that a bit later.
On the Forex gains slide, we were also on the right side of the Forex gains this year. We anticipate that a lot of that will potentially come into our revenue numbers next year. Overall, a benefit from foreign exchange. We'll, again, not sure where that will be in FY 2023 given the volatility of Forex in the market and global conditions. I think just to draw your attention, the last bullet that I've just put up, our normalized headline earnings per share growth is actually 1% higher than the 25% that you see there, or the 23%, and that's because of the benefit of the share buyback giving you an accretive 1% benefit.
Again, going through to FY 2022, you're gonna get the annualized benefit of the share buyback in your earnings per share growth next year. You'll there will be the delta between headline earnings and headline earnings per share. You'll see some positive delta next year, more than the 1% that we've picked up this year. Right. On to working capital. I'll just wanted to guide you through the slides. I think if you could cast your eyes to the top right of the presentation slide. We've got our net working capital there as a percentage of revenue, and we've trended it from FY 2020 through to FY 2022.
You can see that in FY 2021, we had quite a low ratio relative to H1 of this year. We came in at 45%, and if you exclude Aspen, was 38%. We were hoping that in H2, we would show you some benefit in the working capital. Unfortunately, with global conditions and wanting to, you know, wanting to protect our customer service levels and make sure that we've got all the right strategic stock in our manufacturing, we've had to continue to invest. We couldn't unwind that in the second half, and you'll see that ratio has held firm from the first half through to the full year.
If you look down to the bottom right, that just gives you the mix of our working capital investment, and you can see our mix is heavily weighted towards manufacturing, and they've taken the most strain in this challenging period that we've come through in terms of global disruption. I think from an overall perspective, we've come in at around about 81%, if you go back to the first highlights from a cash conversion perspective. As I said, we did sacrifice that to protect customer service levels. We do expect our net working capital and our cash conversion ratios to improve in the new year if, you know, on the assumption that global volatility and the supply chain landscape starts to normalize, which we are seeing.
We are starting to see some shoots. I think we are starting to see that freight costs are starting to stabilize in the near term. We're hoping that under normal trading conditions, we will go back to an over 100% cash conversion rate, and that this year, as you saw from the trend, is the first year out of many that we've gone below 100%, and we'll target to go above 100% next year. Financing costs, just to take you quickly through this table. We've had a significant reduction here, which you saw in the previous bridge, has augmented our normalized headline earnings growth.
If you look at the overall financing costs, if you cast your eye down to the first brown, I mean, the gray row there, our financing costs, we ended this year on a normalized basis, ZAR 476 million versus ZAR 1.1 billion in the previous. As you can see, a massive drop in financing costs. We've also just put the reported numbers there for the benefit of tying it up to our published accounts. Some of the standard features there, the reduction in our net borrowings. You can see from the table, we've also had a benefit of lower interest rates this year. Our effective rate for this year ended at 2.9% relative to 3.4% in the prior.
We've had the benefit in lower interest of ZAR 386 million. Forex gains, we've had a material movement there, but as I said, that's something that we can't predict going forward, so it is what it is. I think just to guide you on interest, as you know, our first half of the year is always more cyclically a higher investment cycle in the first half, and then we unwind in the second half. Just to guide you that our debt levels in the first half will be higher than what they are now because we've got to fund dividends, et cetera, and some of our capital projects. That coupled with the expected...
Not expected, I think we've seen base interest rates climbing. We do see interest expenses jumping up in the first half, but you will then see that flattening down or coming down in the second half as our cash cycle improves in the second half. Overall, there will be an increase in interest over the period, but more so, I think, weighted to the first half. I just wanted to guide you there so that you've got that in your radar. We do expect. We've had a look at our overall business. We expect our average effective base rate to increase between 50 and 100 basis points in FY 2023. Just to alert you, we do have the benefit of the funding.
If you recall, we did the funding with the IFC last year, EUR 600 million. In terms of that funding, we were able to fix our base rate at 0%. That gives us quite a nice portfolio protection against our overall effective interest rates going forward. From a capital allocation perspective, obviously this is always subject to being below three, which we are. If you go to the first block, we've invested ZAR 2.7 billion in CapEx in this financial year. We haven't put the detail in here, but it is in the appendix. That includes a half a billion already that we've expended on the vaccine, the sterile, and vaccine expansion project that we'll cover later. That includes the startup investment in that.
On the bolt-on acquisitions, we've had a net inflow there of ZAR 371 million. There is an appendix on that as well to give you the breakdown. The two big movers there, we've obviously, if you recall, we got cash inflows for the [Sino] disposal of ZAR 1.8 billion. Then we've also had to make some deferred payments on some of the earlier deals of around about ZAR 1.5 billion. I think that roughly gives you it. There are a lot of other moving parts. Included in that as well, we've also funded the acquisition called ENT in Australia. A nice niche portfolio of OTC products, which Stephen will again guide you through in the detail there.
Those have all been absorbed in that number, and we've still come out with ZAR 0.4 billion inflow. As we said, we've been able to fund just under ZAR 3 billion between share buybacks and dividends over this year. Four, yeah, we haven't had any big outflows there. That's M&A is always on the radar and Stephen will talk you through that in his section. What we thought we'd do is just from my perspective, give you the financial scorecard. This is, if you recall, we in December 2020, we gave you guidance on all the financial metrics. I thought we'd do a halfway scorecard match. I'm pleased to say that all the financial metrics are on track.
There's been successful implementation of our strategy. Return metrics have shown good improvement. I thought I'd just like to take you through the metrics that we promised you and where they've headed and give you some view. The first thing we promised. We said that we'd increase from an EBITDA margin, which we rebased in 2020 of 25.8%. We rebased it at that time because we knew we were gonna get this transaction flow of low margin manufacturing turnover coming in. We rebased it at 25.8, and we said we will better that. I'm proud to say that we came in at 28.5 on the EBITDA margin. A very strong outperformance there at the halfway mark.
From an EBITDA perspective, we said we'd grow EBITDA above revenue growth, and I'm proud to say our EBITDA growth is at 13%, well ahead of 5% revenue growth. These numbers, again, are all in constant exchange rate. On the NHEPS, we said NHEPS growth would be stronger than EBITDA growth, and we've met our promise there. We've come in at 26% NHEPS versus an EBITDA growth of 13%. On the leverage ratio, we said we'd be no greater than three times. As you saw from the highlights, we're at 1.9, which gives us significant revenue and provides us with capacity for value-enhancing investments, which I think you've seen, you've seen the fruits of some of those coming through in our return on investment.
On the cash flow side, we said we'd be driving improved free cash flow. I think up until 2021, we've kept to that guidance. This year, you can see I put the arrow in on orange. I think this year has been a bit of an abnormal year with the investment in inventory. That was to protect our customer service levels, and we're hoping that that'll normalize in FY 2023 as global supply chain starts to normalize and the landscape resumes to normality. On dividends, we promised that we'd recommence dividends, and we recommenced last year, and we've again declared a dividend this year 24% up on the prior year. On that note, I'd just like to thank you all for listening to me. It's really been a pleasure speaking to all of you.
I now wanna hand over to Stephen to take you through the performance, the strategic and the prospects review sections of the presentation. Thank you, Stephen.
Thanks, Sean. Well done, Sean.
Thank you.
Good morning, everyone. Listening to Sean talk about 2019, I sort of go back to 1999 and a really big meeting here where we. I always love coming to Investec because it's actually where we closed the deal with South African Druggists. It's hard sometimes you look and you work. I was making notes. I wrote some rough notes while you were talking, Sean. Sometimes you just gotta put these things into context. From a startup to doing ZAR 100 million of turnover a day, every day in medicine, somewhere around the world. Somebody, whether they're in the Philippines, São Paulo, Nairobi, Paris, somebody somewhere is getting an Aspen medicine as we speak. It looks a bit.
It's quite hard to comprehend sometimes, and just sit and look and think, "No, we can't possibly be doing that," but we are. That's great. It's been. I think really good businesses have a capacity to absorb shocks. I think that's a statement that I think most people would agree with. I'm not sure that many businesses are designed to go what feels like probably 15 rounds with Mike Tyson. We took so many knocks. So many knocks. The numbers look fine, and there's this great Aspen Group. We took so many knocks and really we stood firm, and we've come out on top. I think, Sean, the word you used was resilient. It is. I think we have been. We've really demonstrated incredible resilience. If I try and work out why we had...
Where our resilience comes from and why our business is grounded as it is, I think there's three things that one should bear in mind with Aspen. One is geographic spread. So yes, we've got a problem in Russia, and yes, we have a problem as in China perhaps, but LATAM or Australia have come through on the other side. I think the other area is currency mix. We've got so many different currencies in our basket. We don't feel, you know, if a currency moves, I'm never quite sure whether it's good or bad for us. It's. There's all sorts of knock-on effect somewhere, but it sort of evens out across the portfolio. I think the third area is product portfolio.
Now people say, "Yes, you've got this and." If you think about it's a really good position. People will fully understand now when I talk about it. During COVID, we had a sterile business that did well because a lot of people were going to hospitals, et cetera, et cetera. We had a portfolio that did well. Our regional brands battled because people weren't getting sick. No antibiotics, no cold and flu. When the reverse happened, we started to come out of COVID and COVID-related lockdowns, et cetera, our regional brands have performed and our sterile brands are a little bit lower. That gave us.
If you think about that geographic currency product mix, you know, hopefully you'll see that come through in our performance and our discussions around it. My second point on really good businesses. Our really good businesses react quickly to a fluid environment. I don't think I need to tell you any more than the demonstration of how we shifted into COVID and COVID vaccines from not even, for people not even being aware we had a vaccine capability. The outlook for COVID vaccines, I really can't call, and you don't wanna be in my position, because if you were in my position and you'd heard all the people that talk to me, the procurers, you could.
On one day, you could hear zero, and another day you could hear 1.2 billion vaccines is what we expect to buy from you. What I think we mustn't forget is that we had a plan pre-COVID. We didn't know about COVID, so we had a plan. This plan was to fill our capacity. People might say, "Oh, it was a real downside for you to have to have followed a strategy around COVID." I would say, yes, there was. It interrupted our plans, probably delayed our plans by anything from 12 to 18 months. Let's look at the upsides. I mean, the first and fundamentally the biggest upside is that we provided 225 million doses to Africa, to African patients. What more could one want to do in that period than do that?
Bear in mind, no one was supplying Africa. There were other things. There are commercial ramifications for what's happened and what's transpired. What COVID showed was it exposed the disparities. It showed the disparities in access to health, and it's forced a rethink. The African Union said, "Wow, we buy 99% of our vaccines. We import them. That's not a healthy situation to be in. We need to change that. We want 30%-40% as a minimum coming out of Africa." The multilateral procurers, remember, it's their job to manage global pandemics, were left. They found that their systems were flawed because people kept vaccines. Without that manufacturer, you had no control over your business.
Then the multinationals that we deal a lot with, and this is an important point, is in their ESG commitments for sustainability. What's critical for them to sustainability? It's access, creating access. Aspen has provided that. We've done a lot with multinationals historically. We understand access. We focus on access, and we can deliver for them. In order to get health security, how do you do that? You go, and you need regional manufacturer, and you want people that are dependable, capable, and committed. Those are the three words I wrote here, and I think Aspen is, has proven to be all three and more. We wanna be the flag bearers for the continent. What I think you should see is our relationship with Serum is the first step in transactions that will follow.
Understand for a company like Serum that already supplies many of these markets to have partnered Aspen, they too have seen this need for regional manufacture. And that commercially it is better to align with Aspen than to stand alone. Sorry, that was not quite part of the presentation, but let me get into that. That was just my sort of headline thoughts on where we are as an organization. Let's talk about the trading environment. It's been an absolutely challenging macro environment, and I'm not gonna go through everything that you all know, and I'm sure you hear from others. Through it all, we've also got to be grateful.
We've got to be grateful that we're in the industry we're in because your volumes are unimpacted or generally relatively unimpacted, regardless of the situation. We're basically in a defensive industry. But we're also in an industry where we aren't price makers generally, not across our whole portfolio, but government sets your prices, but there are OTC businesses where you don't have the same restrictions on pricing. If we then look at the sort of Aspen specific, we really achieved our stated targets to achieve an H2 in line with H1 and what we weren't.
The one thing we guided you on where we saw problems, we knew there was Russia, et cetera, but we didn't expect a full lockdown in China for at least half of that half. China's an important part of the business, but fortunately our other regions were there to offset it. You know, you look at us and say, "With all those costs in there, you know, you still managed to improve your margins." That's really the work we have been doing over the years to create efficiencies in our factories to insource our own production and to be really disciplined about OpEx. Actually, COVID taught us a little bit about OpEx, because sometimes we had to cut costs because you couldn't travel, you couldn't do this, and we didn't see an impact.
A lot of times you worked out, are those expenses we really need? Things that you would've been nervous to test in, say, advertising or promotion or whatever, or to go digitally instead of somewhere else, you were forced to test it and it worked. We were able to implement. When you think about taking, you know, ZAR 225 million of costs, I think, on freight, just incremental freight costs in the second half, against, say, 20-odd million turnover in that half, you know, it's like 1% just in one expense. I'm not gonna take you through the rest. I've told you what we've done, the 225 million doses we've made for Africa, and for me, that's the highlight of our year.
There's a pipeline of new opportunities that I'm gonna take you through some, but we really are seeing some new opportunities both in commercial pharma and our manufacturing division. If I look at our performance, and I do H2 versus H1, which we gave you guidance in H1 of where we thought we were gonna land. Our manufacturing recovered. We had quite a rough start in the first half with COVID, but we managed to keep our doors open. We had lower absenteeism. We saw a decrease in the demand for COVID vaccine.
Our commercial pharma business, between divestments in South Africa, volume-based procurement in China, we guided you to ZAR 500 million in the half, and it was of that order. The Russian sales in the first half were ZAR 500 million. They're down to ZAR 150 million. That's ZAR 150 million more than I thought we would do. I told you I thought we might do at the half, so it wasn't a complete write-off, and it is recovering a little bit further. Of course, we've spoken about the lockdown in China, but it was offset by the better relative performances from the other regions. In terms of our revenue, Sean's taken you through the difference between our reported revenue and constant exchange.
Just to point out that had we had the same relative exchange rates, our turnover would have been ZAR 1 billion more. You know, cost and everything else would also be more, but on revenue standalone, it's ZAR 1 billion more. That is just based on the relative strength. The manufacturing, as I showed you, recovered in the second half, and we've had a very strong, resilient performance, probably the right word again, to describe our commercial pharma business. When you look at our business, we've got regional brands, we've got sterile brands, and our manufacturer. The regional brands have recovered because of the less restrictive environment we're in, and very strong growth in Australia and Latin America. They had strong OTC growth as well.
I think you might be seeing that a bit globally. You would see OTC businesses have recovered, people are going around, people are breathing on each other, people making each other sick, and all the other things. Our African business was impacted by our product portfolio divestments in South Africa. Of course, it would be. But we also had a lot of supply pressure in the Middle East, in particular, and South Africa. Not least a fire in our Alphamed facility. We expect a lot of our volumes to come back in the second half out of that facility. We had our challenges in Europe over the past, some of you might remember.
Certainly with our reshaped portfolio and we've got our teams right, we've continued to get confidence in the team. If you take the impact of what's happened in the oncology space as the last period, if it's impacted by oncology. You take that out, it's grown 11% in regional brands. A really nice performance. It's good performance. A lot of confidence building in what we're doing and what we're trying to achieve in Europe. If you just make the adjustments for divestments, the oncology, et cetera, our regional brands showed a growth of +5%. When I talk, I always talk in constant exchange rate. The sterile business is down 2%. My comments here is it withstood some very big global challenges.
Because when you have a look at this business, it's very dependent on how we perform in China and how we perform in Europe CIS. The China business had volume-based procurement. Just to give you a sense, Asia's zero. I mean, we talk about lockdowns and all the other issues in China. It gives you a sense of the underlying growth in the rest of the products to offset it, to get it to zero. It was something I think I told you maybe at the half or certainly at the year, at the beginning of the year, to say, yes, we expect impact from volume-based procurement, but we, you know, we didn't. We still expected China to not go into negative.
A good performance out of China with the lockdown was really unfortunate. The lockdown, because our products are largely sold in big city environments, so the places that had the lockdowns, like Shanghai, we were particularly impacted. Interestingly, post-lockdown, those volumes have still not returned to 100%. They're probably between 60%-80%, with some of the 60% being in the bigger cities. The whole of Europe was impacted by Russia. Of course, you can see that clearly. It's not the European piece. The European piece has done very well. It was what happened in Russia. That is the comments around withstanding global challenges.
Bear in mind that performance is off last year's performance, which was +9%. It was a 9% growth in this business, a lot of it COVID induced. But actually, probably our best. If you look across the business, it probably is our best performance across any of the different divisions, given the circumstances, of course. Manufacturing has been a real growth driver in Aspen and continues, and we hope it will. We're really hopeful that this is something that continues strongly and organically. Because if you look at what we've done with a lot of our money, we put money into our manufacturing. Yes, Sean has shown you we decreased our debt, but let me tell you, we put a lot of money into CapEx as well. The API business had a strong H2.
Remember, we were 11% down in the first half, and we rebounded with an improved H2. We'd hoped to get to better than even, but I'm still very pleased with where we got to there. I put Viatris and Biocon together. Why did I do that? Well, Biocon is our heparin business. The Viatris volumes are increasing and continue to increase, and we've been battling to meet their demand. So much of the time, we had very high absenteeism. If you go to our first half, you'll see we showed you a chart of how high absentee rate was in France. The reason we put it together is when they take volume from us, they also take a lot of heparin from us.
When they take a lot of heparin, we've only got limited heparin to sell to third parties. We're in a position now. Their offtakes on heparin have increased substantially. It makes sense to put it together because we are selling them both heparin. They are by far our biggest customer and users of heparin. We put them together to give you an overall picture of what's happened. The growth in Viatris has resulted in a decrease in the sales of heparin. I mean, it's as simple as that. Our finished dose form growth was driven by COVID vaccines. We had ZAR 1.4 billion in this year of turnover. It's gone ZAR 800 million, then ZAR 600 million, in terms of halves, and it was ZAR 400 million in the prior year.
If I take out Viatris and the Biocon business, our business has grown about 15%, in the manufacturing side. A very strong revenue that has sustained. We're really proud of what we do around ESG. We spend a lot of time. I like to think that Aspen don't talk a story, we live it. You might not find us on the pickets around the rugby or cricket or soccer fields, but hopefully you'll see us in areas where we think it really counts. When our students were stuck in Ukraine and being treated quite badly, we brought them back from Ukraine. I think for us that is ubuntu, as we understand ubuntu and how we'd like to be. We've seen terrible things around the world.
In Lebanon, we saw problems in Ukraine. We had nearly 400,000 patients across those countries that we supported. We're supplying a lot of essential medicines. You know, people around the world are dependent on Aspen. I told you at ZAR 100 million a day, you can imagine how many people are dependent on Aspen in low and middle-income countries. At the same time, we've got to spend a lot of time in looking at our environment. I think we just have to look at your TV sets and see where things are going. We've got to look very carefully at how we manage things like electricity and water, particularly in a South African environment. You know, we've become self-sufficient on water.
We've also looking at alternatives for energy. We are fortunate in that we are a critical industry, so we are on the grid, but that doesn't make it acceptable to not be looking more broadly. Hopefully we're gonna have some interesting. We're looking at some very interesting opportunities there. Of course, a subject close to my heart, given that I have four daughters and a wife at home, is that we're increasing our representation of women in top management. I mean, they're already 100% in my house, but it's nice to see it at 34% at this level, so that's good. Let's just have a look at strategic review because I think the results speak for themselves.
I think it's pretty clear when you understand all the macro trends, why those results were where they were. Let's look at our commercial pharma business. We've had organic growth with improved margins. For me, there's only one thing. If I look at one thing and you say, "Bring the results," I'll say, "Show me the organic growth. I just wanna see organic growth." Because organic growth pays for everything. That's the bottom line. It pays for everything. When you've got organic growth, acquisitions on top give you that accelerate you. People have questioned the model and, "Is your portfolio good or bad?" I hope that we never have that question again. We've got a very relevant and a resilient portfolio. We've sustained positive momentum for a few years now on that.
I think we've picked the right products that fit Aspen. We've picked the right geographies, and our portfolio continues to deliver. You've got to understand, this is a very strong deliverer of cash flow in the business. Doesn't come with a lot of stock, it comes with high margins as stock values, and it comes with high margins. It's a strong cash generator. If someone had told me before this year started and said, "Listen, you've got divestments of products in South Africa. You've got a war in Russia where you're gonna take quite a big knock. You're gonna be 70% down in your second half.
You're gonna have VBP in China, and you're gonna have lockdowns on top of that, and you're going to have a fire in your facilities which are gonna impact your South African business. I would say, "Look, I'm not coming for this presentation, and you're gonna have a..." Oh, sorry, let's not forget the biggest, ZAR 1 billion adjustment for just exchange rates. I wouldn't be here. I'd say, "Listen, I'm not coming to talk to you about turnover growth or anything like that. In fact, I don't wanna come." We did it. And that's. Of all the numbers that were on the thing, I know it looked better and all, but for me, the revenue was for me, the standout performance, believe it or not, of everything.
As I spoke to you, I think the one thing that was demonstrated to you and to us, to an extent, is how balanced our portfolio is, even when you have a shift in COVID, et cetera. The standout performance for us across the whole, this whole thing. You say, what is your one standout performance here? It has been the improvements in our margins. It's been an outstanding performance. There has been massive pressures, and we've done a lot of work in our factories. All the stuff that we tell you we're good at have delivered for us when we needed them to deliver most. Of course, Sean and his financial team have done a fantastic job around OpEx too.
You know, Sean's got a black belt in budgetary control there, so well done, Sean, and it continues to decrease over the last couple of years, so thank you. If we look at the outlook going forward for commercial pharma, we've got organic growth. We expect organic growth across most of our regions. We'd like to see China rebound, and China's got a way of rebounding really quickly, but they can also just do draconian things. You sort of own your business in China, but you never control your business. You know, they might do things that they take different views on lockdowns to others, for example. We don't see this year going. We see limited VBP impact, some spillage from the prior year, you're annualizing.
For us, the big focus for us is, you know what, post-lockdown when do you recover to 100%? We have assumed that our input costs will remain elevated. We think the OpEx will in commercial pharma is likely to move in line with sales growth, people moving around more. And there's a point where you don't want to break your business by cutting too much expense. The Australian, we expect the regulated price decrease in Australia will impact us by about AUD 10 million. How do we do we have a cushion against these inflationary impacts? You know, we're passing on increases where possible, so there's parts of our portfolio where we can, and there's parts where we can't. We expect further COGS reduction.
Some of our cost reductions will from prior year annualize, and we bring more products online. With all of that, if the costs stay where they are and you're getting, you know, two halves of ZAR 225 million reduction in, you know, increases in freight, et cetera, et cetera, we internally have budgeted for our gross margin impact to be of probably around 1%, close to 1%, to have a negative impact. The Russian business improved from interims. We're expecting sales maybe at 50% of the 2021 levels. Remember, we have elevated first half, lower second half, but we.
It's sort of been picking up towards the end of the second half, and we're getting slightly more visibility on that market, together with some improvements in the currency. The ruble is stronger now than it was before the war. Crazy situation. It went from 100 to 200 when I did the last interims that you thought, "It's gone." It's now better than 100, using 100 as a baseline. I think we should be looking for some impact from some of the acquisitive opportunities that are out there. The manufacture. Our manufacture split between API and finished dose form sales.
We've made a lot of investments in finished dose forms, and that was to in-source the anesthetics range and also to add the capacity for the type of opportunities you're seeing us rolling out now. Our anesthetic transfers were delayed. We decided to put vaccines, for example, on our vial lines first in the South African facilities. We had big COVID interruptions. Even the people that were supposed to bring machinery and they got COVID, then they'd go, and then they'd be. We had very high absenteeism. What you end up doing is making your existing products or products that give you turnover before bringing on a new product. It delayed bringing on products. You've got to validate them, so it delayed those validations.
Our API business, as Sean told you, is a solid business. It's niche, it's steady, it's dependable. It's a key contributor to profitability. Our challenge there is trying to pass on the costs that we've incurred. Sometimes we can, and we are talking. There's generally some sympathy out there for full cost increases, but there's not a lot of sympathy anywhere. I think if these costs continue to elevate, I think your ability to pass on costs into the future is going to become harder and harder. Manufacturing is a driver of growth for us, and it continues now, and we expect it to continue further.
I think our vaccine capability was an important demonstration, as was the contracts that we're announcing, which gives you indication of the stimulus that it will be for future growth. Our finished dose form was driven by COVID vaccines. You know, six months ago when I spoke to you and there was, you know, Africa was less than 20% vaccinated, you know, I had different view on certainty around offtake. I'm not prepared to go out on a limb again on it. I'll tell you, it has an uncertain trajectory. In the Biocon, Viatris business, I think you will see we've seen material increases in offtake, and we think that the growth there will continue to accelerate. It's grown a lot, and it continues to accelerate.
We also now, in the time now we need to start doing all our tech transfers, for example, in our French facility, which really fell behind because of the absenteeism, et cetera, and COVID, to bring on those 80 million doses that we've contracted with third parties. COVID vaccines, this has been pretty topical and a lot of people spend a lot of time asking of me. I think let me put it in numbers too, so you fully understand the impacts that the business that it has on our business and where it's going. The J&J contract's important. It's sort of nearly 70% of the costs of it. What does that mean? You put shifts in, you run lines, you've got people standing behind the lines, and a big part of those one.
The ZAR 1.4 billion of revenue we've got are fixed costs. The sales, as I've told you, went ZAR 800 million, ZAR 600 million. We anticipate future sales of ZAR 200 million in H1. We're not assuming any sales beyond that date. Why aren't we assuming that? Because I think there are sufficient stock levels of J&J in the market. I do believe that the type of people buying the J&J vaccine will now pivot into Aspenovax. Any future orders for that type of vaccine, whether it's for the J&J, is likely. I'm almost sure will be the Aspenovax vaccine. Experts are really hard to call, you know? We've seen every expert call COVID waves and get them wrong.
We don't know what COVID will do or won't do next, and I'm not prepared to go out on a limb. What I can tell you, a severe strain of COVID will obviously influence demand. The reality right out there across Africa is the offtakes are anemic despite sufficient supply. This is not a supply-driven issue. This is a demand-driven issue now, which is completely opposite to where we were, you know, not so long ago. Bear in mind, even at these lower levels, even these are potentially material to Aspen. As I said to you, both COVAX and AVAT. COVAX is a global procurer. AVAT is an African regional procurer, already committed to Aspen. I can't tell you anything else. [inaudible], they are in the
They are really looking at how they reduce their stocks and their commitments. They're actually going to say, "Look, we ordered this many. How do we reduce our commitments so we can have an opportunity to place on Aspen?" From an Aspen internal position, we're focusing on. We think there's an opportunity for us in time around the booster doses. With all of that, where are we and what are our prospects? Let's just summarize quickly in 2022, and we'll go through some of the prospects. We've delivered very strong financial results. The OpEx is well managed. We've managed tricky conditions, and we've shown the widening of the gross margin, and the EBITDA margins, which Sean showed you.
Even with all of their better commercial pharma gross percentages are there. The reduction in finance charges is significant to the group and important. We were able to do a buyback. You know, a buyback is something one way to say what other opportunity. This is the best opportunity we have out there of how we deploy capital. As Sean pointed out, we achieved the highest HEPS in our history. We made 225 million doses of COVID vaccines for Africa, and that is obviously a standout highlight for us as well. Our relationship with Serum is an important first step, I believe. I think it will give us more sustainable African volumes.
You know, it's nice to get an order for ZAR 1.2 billion, but then you've got to go and buy 8 machines, and how long are you gonna keep them? It's terrible to get nothing or people looking at nothing. Factories like predictability. Everyone likes predictable volumes. We continue to progress further opportunities there. Our organic growth is sustained, and we've got an exciting pipeline of opportunities, and I'll try and talk through a few of those now. I think that sort of wraps up the financial year 2022 for us. In terms of acquisitions, licenses, at the interim stage, I mentioned to you we were looking at acquisitive licensing opportunities. It included Latin America, Africa, Australia, and diverse sterile opportunities. Some we closed, some we continue, and we continue to progress positively on others.
They're all still there. I think if we close a few of these, we will get a material increase in annualized sales and a knock-on in profitability as well. Once you've got your fixed costs in place, it's much better to put things on top. You get a much better return than saying, "Okay, where we were before, we're setting up this commercial platform. You've got to put in all your infrastructure, all your costs." The cost that we put into setting up China, for example, were massive. Now you just put a product on top of that, you get a lot more flow-through. The sterile manufacturing, we signed the transaction with Serum and, you know, the other multinational, discussions progressing.
A lot of multinationals very interested in trying to access that capacity capability. We acquired a business called ENT Technologies. Not surprising when you look at the name, when you look at the type of products in there. The sales of about ZAR 10 million or so. The products are both sterile and OTC. OTC, as I told you, is not impacted by you. You can set your own pricing. Australia's been a stellar performer. We'll talk a little bit about China, but we see an opportunity, a retail strategy opportunity for these brands in China as well. Often with Australian registered products, and in this case, some of these range, you can literally launch in China without going through a regulatory process. You've got to put in a bonded warehouse, et cetera.
This could feed into some of the retail strategies, which I'll talk about now in China. Let's talk about China, because China is a really interesting business for Aspen. Aspen has performed very well there. If we look from 2017 to 2022, we've more than doubled the sales in China. Just become a bigger and bigger. From being nowhere in Aspen, it's probably after South Africa and Australia, it's probably third country-wise in the ten. It wouldn't surprise me to see Australia, I mean, China in years to come being the largest contributor to Aspen. What we have seen is we have a very good and strong team there. And they've been sustaining that momentum. As I showed you, even with all the implications, Asia was flat.
We started to put some initial pipeline registrations. We submitted them over that period. We now see the next period, and the next period we think is between 2023 and 2026, and there's uncertainty over volume-based procurement. Now, we were told no injectables, no steriles will be in volume-based procurement. Then a few years later, they were. Our internal assumption is that everything will be volume-based procurement. That is how we work and how we think. We wanna cushion that potential exposure. The thing with China is it has higher gross margins, but also has a very high expense. You've got an army of people. We've got more reps in China than anywhere, any other country, even more than in South Africa and Australia than any other country.
There's a very high expense base in China as well, but we wanna keep that team together. How do you do that? We're looking to acquire some products and license products. We just concluded a deal with Baxter, that American company, on an anesthetic gas, so that tells you. There are opportunities which we are performing. It's like anything, if you perform, people wanna tag on and say, "Can you help us grow our products?" We've put, we've continued to introduce more products into the pipeline, and we've had a couple of launches into there. Those launches were pretty impressive.
If you look at that, the products we're gonna launch and the expected turnover relative to that brand across the rest of the globe. Then we've got a retail strategy because we can register products quickly, also not impacted by volume-based pricing. We see the years 2027-2030 to be important years for us because it becomes a realization of these pipelines. We've learned a lot. I wish I knew three years ago what we know now. Maybe our pipeline would have progressed further, but we were so worried about setting up, not failing, being able to get growth from. If you remember when we acquired these portfolios, the China was declining by 19% in the multinationals' hands. Just to give you a sense of how we turned these products around.
What's gonna give us, what makes us excited for this period is we will have an internal and external pipeline, and we're looking at products that will not be impacted by volume-based procurement. When you've got our Emla cream, for example, which we've launched now, it can be used. Sure, it's used in hospitals before someone has anesthetics, but it can also be used as an anesthetic cream. It can also be used for tattoos, Botox, and it's unlikely to be on any VBP, to be regarded that essential for VBP, et cetera, et cetera. Then there are other products where we are looking with partners, are coming to us, which will give us long-term exclusivity. See it as patented, in pharma terms. And those will give us strong growth trajectories.
What's interesting about China is if we take product A and we go across our whole group and we say, "Okay, who wants it?" If they all put up their hands. When China's volumes are so material. They're probably, in many instances, bigger than the rest of our world added up. Just to give you a sense. There's only a handful of products that are sitting here in China, and this is the turnover it's already generated. They're very material to our overall group. It's important for us to roll out these pipelines here for us, but they literally are bigger than. The turnovers, their forecasts are larger than the rest of the group added up.
Very important to get that plan right for China and to pick your products carefully, to limit your future VBP exposure, et cetera. Because I think what we've got to learn, and it's not just in China, it's in Australia, it's everywhere. When things get tight, all the promises made before this won't be in price or this one, it doesn't. It's meant at the time. I don't think anyone's lying to you. It's meant at the time, but the circumstances change, and you get changed circumstances. You know, you don't wanna learn lessons twice. You can learn it once, you don't wanna learn it twice.
If we look at the broader vaccine, moving on to some of the other prospects for us, the broader African vaccine opportunity, and this really relates to, you know, this first transaction with Serum is a good demonstration of this. If I told you this without Serum, it wouldn't have been probably as clear. The African Union's called for 30%, more than 30% of the continent's vaccines to be made on the continent. Supply of these vaccines is critical for future manufacturing footprint because you know, if you're dealing with pediatric vaccines, for example, in Africa, it's the same vaccines, whether it's for pneumonia, meningitis, measles, mumps, whatever. There's a known quantity, and it's repeated.
It provides predictability, and it gives you certainty on, you know, being able to recover your overheads, et cetera. As I've mentioned to you earlier when I first started, there's a real commitment to this regional manufacturer, and Gavi provided a white paper. Aspen provided a neat solution for everybody. It gave Africa its independence, it gave it strength to talk, and for people like Gavi who are unaware of the capacity and capabilities we've had, it's also a very neat solution for them as well. No one needs to be at loggerheads over this. It's a solution for all parties. It also gives one confidence to invest and more certainty on volumes and recovery of overheads.
It's given us confidence to be able to continue to expand our African manufacturing footprint, because this is clearly a real opportunity for Aspen. We're looking at two additional lines, and this, the transaction with Serum, as I've told you, is really a first step, and I think you should be looking, you should be thinking about further contract license flow. The positives with this is the volumes. It's like, the negative is it takes a while to bring products in. The positive is, it's not easy to get out as well. So you get the volumes locked in.
If we can build up a pipeline of opportunities here and bring them on year, on year, on year, it's something that when the hose pipe turns on, it's when it finally gets to the end, we're going to have incremental earnings going forward. I think no one. When you see people like the Gates Foundation endorsing what we do, understand they are big funders of global vaccines. They don't want to see prices going up. Everyone, everyone wants to help Africa. Everyone does. One thing we've learned is people talk a story at a time, but you have to be competitive. If you aren't competitive, and you're relying on charity or, "Oh, we're gonna give Africa 30% price allowance or 50%," I tell you that's not sustainable with donors.
Nobody wants to pay more to cover less lives, in spite of what people might say now about it. We've demonstrated a global competitive capability, and a competence in the region. This for us is a major strategic advantage, and it's been amplified, in all the discussions that we see and have now. We're very excited about the prospects across there. Of course, the Serum transaction, it leads logically onto this. The Serum is the largest producer of vaccines globally. They're gonna license the IP for Aspen to register and manufacture for public and private markets in Africa. We've got some key vaccines, that are critical to Africa, and to Gavi.
You must see this transaction, if I can explain it to you in the sort of J&J terms, when we went for J&J, we were a CMO, a contract manufacturer. You know, they would provide a whole lot of things to us, and we just filled it and gave it to them. This is more on like Aspenovax. The way our base business normally works, we tend to buy APIs from third parties, and we've got our own brands. It's more akin to that than it is to a contract manufacturing operation. They will supply the drug substance. You know, they've got some of these already registered with WHO.
The processes should be relatively speedy, where you take an exact copy of the dossier, and all you do is you add Aspen as a manufacturer and you change the name. Hopefully, there's not a lot of bureaucracy in that process, and we expect anything from 12-24 months. People say, "Well, how do you know you're gonna get volume? You know. Why are you gonna get volume?" You know. The positive is that once you're on that list, the African countries have the right to determine their brand. Why would Serum Institute partner with Aspen? Because African countries are gonna choose the Aspen brand. We've got such unbelievable support across and from Africa. Africans are so proud of Aspen. You've got to see us on the global stages and the meeting at Addis Ababa.
I think that's what gives everybody a huge amount of comfort is that they will decide where they wanna place their demands. The contract, as I mentioned, is very important to Aspen and Africa. It is worth repeating some of these. It really fast-tracks the opportunity towards vaccine health independence for the continent. We've got security in our manufacture. We've seen what insecurity looks like around COVID vaccine. You know, every day, we get a new story. Here we'll get security through sustainable vaccine volumes and related capacity utilization as we continue to build and broaden the skills base. 'Cause that's another thing that's important is that, you know, you've got people. Somebody can give you money, but some of these people aren't working.
You've got to have your skill base focused and doing something every day so it becomes a routine. It's not good to have breaks in anything. It's supported by the Gates Foundation and CEPI, and I think that's pretty big endorsements because it's, one, they're gonna be funding future procurements. Two, CEPI are critical to future pandemics, and they're all desperate for a share of Aspen capacity. Those are very heavy endorsements to Aspen. They, you know, they are committed with grants. We haven't agreed the total grants funding, but they want to give grant funding to Aspen to help us towards the technology transfers, to some of the expenses we are incurring along the way, et cetera.
I really think it gives us an opportunity for future African vaccine initiatives. I think you should see this as one, and then there might be other products that we need, and we'll look to others. I think a lot of other people want to piggyback on what we've achieved here. I mean, I know this is a very personal thing to say, but from an Aspen perspective, I think we deserve this breakthrough. We've shown incredible perseverance here, and I felt it was a deserved breakthrough. The financing and how this works, well, we're now dependent on orders. We literally signed the deal, you know, not long ago. I'm trying to work out if it's days or hours ago, but it's not long ago.
We now need to go and sit with those procurers to understand when our registrations will come through, and what the volumes and the orders will be from those procurers. Once fully realized, we're gonna have higher sales than the contract manufacture that you see in our business from J&J, because now we also sell, as I told you, Aspenovax type sale, where you'd sell at the price. Of course, your costs are up now because you're paying for API. We didn't pay for APIs before. We believe that the volumes coming out of here will more than compensate for any lost J&J recoveries that we might incur if we don't achieve Aspenovax orders. Let's sort of round off now with some of our prospects across the major.
The major areas for 2023, because 2023 is an important year for us. Our revenue growth is forecast to be sustained. Bear in mind, we now have a full impact of Russian business, South African divestments and China VBP, but we expect that to be sustained. Any acquisitions obviously will be additive. We expect gross margins contraction. It's if the current inflationary environment continues and even accelerates, and we are starting to see increased pricing still coming through across Europe, particularly around energy. Fortunately, as I said earlier, we can limit that we believe to no more than 1%. OpEx, as I said, we expect to increase in line with sales. What is important is to look at our revenue out of this year.
We had revenue of ZAR 14.3 billion, and it dropped to ZAR 13.4 billion in the second half. That's the base we start from, ZAR 13.4 billion. That is why our opportunities are very heavily weighted to H2, because we've got this good growth, underlying growth in the business, which will mean that from the ZAR 13.4 billion base, we are going to get closer to ZAR 14.3 billion, which we did in the first half, than ZAR 13.4 billion. We don't. It's gonna be hard to get back to the ZAR 14.3 billion in the half. However, in the second half of the year, we expect to go beyond the ZAR 14.3 billion we did in H1. That comes from some.
The pipeline launches in South Africa, and we start recommencing supply out of our Alphamed facility. We also start to see the impact of Emla and Avastin launched in China. I know this is a big call, but our second half in China has been impacted by lockdowns, and so we're making a bold assumption that maybe there won't be a lockdown in the second half of 2023. Strong weighting towards the second half and organic growth expected across the business. Manufacturing, it's quite a hard area for us to call and you'll see why. At a revenue level, we're very comfortable we'll have another strong year as per revenue forecast. That excludes any Aspenovax sales, and it's limited vaccine sales.
We see ZAR 200 million in sales for J&J, as I've told you earlier. Of course, any sales of Aspenovax will be a material contributor to us. We're not going to give guidance on Aspenovax. Sales and manufacturing is also weighted heavily to H2, because we need to prioritize. We need to start doing our tech transfers in France, and we need to start prioritizing Aspen production as well. The way China works is when you move a registration, which we're in the process of, you have to build up a lot of stock. China has massive volumes, so we've got a big stock build coming for China, which is needed, as I say, for that regulatory transfer. That means.
We're doing all of that in the first half. That's putting a lot of focus on trying to be in position to really roll in the second half. We'll be doing that the same thing with the serum vaccine to try and initiate as much as we can, as soon as we can. Even with that, we once again are expecting very strong revenue growth despite the potential vaccine impact. Even if we only get ZAR 200 million from J&J versus the 1.4, we expect strong revenue growth. We expect H1 to be in line with the prior year H1, and H2 will provide a real growth kick, and a lot of it will come from our third-party finished dose form sales.
Our challenge here is to replace potential loss of COVID vaccine volumes. That's our challenge in this, and that's the margin challenge that we'll face in this business. If we look at it, we summarize and look at all our prospects for 2023, we see revenue growth between 3%-7%, and it's led by manufacturing. No Aspenovax sales. That's driven by volume. Our volume demand is strong, it's buoyant. We're in good markets. You know, some of the emerging markets you still see population growth, volume growth in many of those markets. Our gross margin will be impacted if we don't get COVID volumes in manufacturing, because we've got people now sitting in the factory. They're now not doing revenue-generating things.
They might be there to transfer serum vaccines and bring our anesthetics online, but that's not revenue generating. It has costs. You know, the synergies will limit where we are in the GM, the gross margin percentage and commercial pharma. The inflationary effect on OpEx has to be contained. Understand that, you know, people in Europe are now wanting double digits and very high single-digit salary increases, et cetera. It's an environment we've never really worked in Aspen, where you had developed markets under much more pressure, even inflationary pressure than developing markets. It's a very hard, tricky area. We are confident that we'll be able to restrict them to less than the increase in revenue.
We do expect strong cash flows. I'm so cautious in COVID to say anything, but you know, if we just stay where we are, we do expect the cash conversion to be strong, over 100%. Of course, rising interest rates will affect finance charges. We've put ourselves out on a four-year target, as you know, four-year target performance. We're on target to achieve the commercial pharma organic growth targets, and revenue and EBITDA margins, which Sean shared with you. We also had a manufacturing EBITDA upside of ZAR 2.3 billion by 2024, and that included both anesthetic savings and it included capacity fill. This still remains a target.
This is unaltered in spite of where we may or may not be around COVID. I think closure of the capacity fill opportunities for us as a management team is the key deliverable in this financial year, and these take a long time. You know, you've seen some of the things coming through from six months ago. I think I mentioned to you then that even Asian manufacturers were coming to us. Those were people like Serum. It just does take a little while to get all of that tied in. It's a lot of technical work. It's not, "Oh, yes, we wanna move into your place." Have you got a compounding area? What does the environment look like here? Et cetera, et cetera, et cetera. Have you got the equipment? Does the machinery work quick?
There's a lot of work that goes before you can say, "Yes, this is something we can do." We are progressing many of those, and that's what gives us some comfort to tell you that this is an area we are comfortable that we will be delivering more than a Serum opportunity in capacity fills. I think our capacity and capabilities in Africa are unique as we are at the moment. We've really got a first-mover advantage, and we offer access and sustainability to partners. It's gonna be very hard to compete with us in Africa from Africa, because in spite of what anybody says, as I told you, price is going to be an important factor.
Serum is an important first step, and as I said, it will likely offset any impact of J&J volumes over time. As I also said earlier, you know, fixed costs will be retained, but you know, our recoveries will be lost when the COVID vaccines decline. The licensing period, so we've got a period when Serum, and it's between 12 and 24 months, we think we'll have licensed products. We have used the opportunity in our lyophilized anesthetic product. It's quite a big product from a capacity utilization point of view. It's called Ultiva, general anesthetic. We've started to do the validation batches. They've actually completed.
You complete them, now you go to the registration, say, in Europe, will you please put Aspen as a manufacturer on the dossier, et cetera, et cetera. You bring commercial manufacture. We would expect some of our anesthetic commercial manufacture to come online from H2 of 2023. Of course, Aspenovax intuitively will be immediately additive and would, should that be achieved. We've got scope for investment. We probably under-leveraged, and we've got potential for an industry unwind and we've been positive about it. Say, when supply risks stabilize. The extent of acquisitions, I mean, I think you should expect acquisitive period.
We've been in a period of divestments, and I think you should be thinking that Aspen would be in a period where there's likely to be some acquisitive opportunities looked at. You know, as I said to you earlier, if there's one takeout for us in 2023, it's getting the pipeline of opportunities that have been under discussion and settling them. That will provide very clear clarity for ourselves and for investors of our path forward. Capacity fill for us is a real earnings enhancer. You've got your expenses in place. You've got all your CapEx in place. You're all dressed up and you're ready for the wedding. Yeah, we can. That's where we are. We're ready to take a stride down.
Sean touched on this briefly, but I think it's quite interesting because sometimes you watch the Aspen journey in six months and you don't necessarily always see the full picture. I thought, let me just show you a picture as we've seen it. If we go back to 2013, that was an important period for us. At that period we said, "Whoa, we're really worried about generics and potential commoditization of generics, and we need to look at specialty pharma, and we're good manufacturers." That's why the multinationals engage with me, and we're very strong in our sales and distribution platforms, particularly across emerging markets. We are able to turn declining product from multinationals into growing products.
That was the acquisitive phase where we bought a whole lot of products to rationalize building a very big sterile base, and that was debt-funded. What you see is our EBITDA going from ZAR 5.9 billion to ZAR 12 billion over that 5-year period, but our debt also went from ZAR 11 billion to ZAR 47 billion. A period of acquisitive growth. We've been through a phase now over the last four years where you have seen a consolidation. We've got our products. We've seen where we're good. We know what markets we're good at, and we are able to. What can we deliver organically out of what we have? We've sustained organic growth out of what we bought. That took a little time for us to work it out.
For example, we thought Japan would be a great market for Aspen because there was limited competition, high regulatory barriers, et cetera. Then they had something called unilateral price decreases. Now, you've got a differentiated product, and you're gonna be knocked down again and again with no regard to whether you have a margin. That didn't seem like a market that we really should be in. We made material investments in steriles, and if you look at the debt, you've got ZAR 30 billion of debt reduction in here. We've also done buybacks, and we've done a phase of CapEx here. There's probably about ZAR 40 billion more in cash generation in those four years that we generated, and we lost ZAR 1 billion of EBITDA. Of course, when you sell things, you're losing EBITDA. No one's paying for something that's losing. Yes, when they bought products.
I think it's. They've been incredible, period, and just puts things into context. This was the period we grew. This is the consolidation phase. By the way, I did share all of those with you in 2014, 2015, 2016, 2017. Not a lot of people believed us, but we've delivered on exactly what we showed you. I'd suggest you go back and look at some of those presentations a long time ago. Now we're in a great position, I believe. We've got an opportunity to. We're growing organically. We've got a foothold that grows organically. We've got opportunities, acquisitively. Broader opportunities. We've got bigger platforms. You know, we didn't have China. Before, you couldn't buy something for China. You didn't have a business in the Philippines, you can't add to it.
We've got all that infrastructure in place. Everything's growing organically, and we've got acquisitive growth that can be really bolted onto these platforms, can give good, superior earnings. Of course, we spent a lot of time building facilities in an area that we think is gonna be critical, that sterile biological area. You've seen it as critical. I don't have to persuade anyone, I hope. It's really about how we leverage those manufacturing capacities. If we do nothing, you've got what you've got. There's this fantastic potential upside as we fill those capacities. Of course, you know, Aspen is very focused on cash flows, strong cash flows, return on investments. I remind you, we don't issue shares. We've done this entire thing without issuing.
We've been through this whole metamorphosis, we never issued a single share. Everything you see, everything there is transparent. You see the debt go up, you see the debt go down, but Aspen is a business that has always and will always continue to deliver very strong cash flows. Thank you. I think that takes us to Q&A. Thank you for your time. It was a long presentation. There's quite a bit to tell you in the space. Thank you. No one yawned, so that was good. No one left. Can we move to Q&A, Trish?
Thank you, Stephen and Sean. We will now open up questions from the audience.
Morning, Stephen. Thank you very much for the presentation, and thank you very much to yourself, Sean.
Thank you.
Kotzé from Investec. Just first have to introduce myself. Two questions from me. The first one relates to your share buybacks. I just wanna understand, is that still a lever that, you know, that's still available to the management team to push or to pull, you know, over the next 12 months? And the second question is more around your COGS savings from your technology transfers. Can you quantify how much of that you've kind of realized to date? 'Cause previously you had guided to a saving of around ZAR 800 million per annum. So how much of that ZAR 800 million, kind of or what's the progression towards that number, in essence? Those are my two questions.
On the story of share buybacks, I think share buybacks are have to be treated on their merits, looking at relative opportunities. Share buyback's no better, no different to making any other acquisition. We didn't have that as a lever. You only can have that lever too if you've got the cash. That's the basis of it. We would look at share buybacks relative to other opportunities of how we could deploy capital into the future. It's not a, it's not a one-off event or an event we would go back to the board say, "We think here we can. You know, the best opportunity we've got out there is this, and this, and this or we've got an opportunity with Aspen shares." I think that's intuitive, probably, for share buybacks. In terms of savings, that's an interesting one.
I don't think we fully quantified it, and some of that stuff gets annualized. Certainly, you can think about it like this. If you sitting with ZAR 300 million-ZAR 400 million more costs in the period or more, and we have delivered improved margins, a lot of that came out of the cost savings. You know, we don't sit and I mean, we will deliver ZAR 800 million in vaccine savings once everything is through, but we have delivered quite a good chunk of that and quite a bit of efficiencies outside of vaccines. You know, they've also bring some, they bring shared costs, et cetera, which sometimes might help, knock on in regional brands. When you think that we had, you know, just oncology price reduction, it's absorbed, also absorbed in those increased margins.
If I had to have a guess, it's, you know, if you want me to give a guess, it's say 300, something like that, ZAR 300 million-ZAR 400 million, something in that quarter.
Thanks for the presentation, Stephen and Sean. Roy Campbell, RMB Morgan Stanley. Just in your manufacturing business and the ramp-up or the increased offtakes from Viatris. Two questions around that. Number 1 is the strong U.S. dollar versus the euro and impact on that on your input costs. Is that passed on to Viatris? And then secondly, is that you're obviously leaving a little bit of profitability on the table by not selling that heparin to the market. Is there a hurdle rate that that contract becomes more profitable to recoup that profitability? Thank you.
Yeah. We passed that hurdle rate, Roy. I think the assumption that we are selling to Viatris at below market price was correct in the initial phase. It will not be correct over here. We would be and our profit is it doesn't matter if we sell to a third party or Viatris. That's what makes that contract better for us. Sorry, what is your first one, Roy?
It's the currency.
Oh, the currency. Yeah, look, the U.S. dollar for us is a strengthening U.S. dollar against all currencies is probably the most negative outcome. I told you I don't like to guess currency, but that is the most negative outcome for Aspen in that we don't have big sales in the U.S. Our contracts to sell vaccines are in euros. But we do sell to U.S. quite a bit of APIs and all that. We do sell, but I think Sean's got a currency mix slide at the back there in the appendix.
-15%.
Negative. It's not a great outcome for us if the U.S. dollar strengthens relative to all others. Very important currency, maybe the most important currency within the Aspen environment. As you correctly noted, this, there's been a shift with the U.S. dollar even against the euro. I think when I last looked it was stronger. I don't know if it still is, but when I last looked it was. Oh, sorry, Sean. Apologies. I'm jumping into your area.
Just add on. We did an exercise where we took this current spot rates, and we restated our numbers to current spot rate. Obviously, the euro and the Aussie dollar have weakened against the rand, so that's not good for us. All your emerging market currencies, the peso, the Brazilian real, the Chinese renminbi, they've all strengthened to the rand. When you put them all together, you actually get a very balanced picture.
At spot rates today, we would deliver similar results to what you're seeing. That's really it.
Hi, Stephen. Ken Osei from the IFC. Congratulations on very impressive results.
Thank you, Ken.
As you look to increase your manufacturing focus, one thing you identified is that offtakes have been anemic for some of the vaccines. As you do this, Serum Institute partnership, how will you secure offtakes so that you don't have the same sort of experience?
I think, Ken, there's a major difference between a pandemic vaccine which could have zero or 1.2 billion. Someone says, "I can give you 300 or 400 million doses a year every year because this is how many kids there are in Africa that need treatment." That's what gives you. That's why I always refer to Serum as sustainable volumes. Can you tell me tomorrow what COVID will look like over the next 12 months? No. Can I tell you how many vaccines kids will need in Africa over the next 12 months? I can get it to you within 10% or 15%. That's the difference in. There aren't wild fluctuations in kids needing pneumonia, yellow fever, whatever it is.
You know, these are standard vaccines that everyone needs to have.
Thank you. We may take one or two more questions.
Hi, I'm Anuja Joshi from Standard Bank. Congratulations on the Serum transactions, Stephen and Sean. What is your latest capacity in South Africa, and how much of that capacity you plan to dedicate for those four vaccines under Serum transaction?
If we go back to why we put capacity in, we put capacity in for anesthetics. That's gotta come back into our plans. We had a lot of extra capacity. For J&J, we have one dedicated line, if you want to call that 200 and 250, whatever, 275, whatever the number of doses in J&J was on that line. We would expect that if we got in a world. We're not sure about COVID. In a world without COVID, we would expect that line to be more than busy with just the four vaccines that we have from them. It wouldn't be. We'd need that capacity and probably a bit more for those fully realized.
For the other opportunities that we see coming, we would require probably another couple of lines as well.
Thanks, Stephen. Just one more question on your ability to pass on higher costs to customers. Can you just touch on how the negotiations have been with the other stakeholders, regulatory bodies over the last six months or so in this regard? Thank you.
The ability. We've got two areas. You've got your commercial area and your manufacturing area. In your commercial area, you are able, in some products, to pass on costs. A lot of emerging markets, so places like South Africa, Brazil, et cetera, have single exit price increases that take control of inflation and all of those things. There is. Because those markets have always had inflation, there's a mechanism for price increases. But in developed markets, there is no mechanism because there wasn't any inflation. That is where on your non-OTC portfolios, it's quite tricky. Where Aspen is fortunate too is that we have a sterile portfolio which you sell to hospitals. Now, those don't necessarily have a list price. They're a tender type arrangement. You are able, in those instances, to change a price if needed.
Often, those contracts run 2 years, 3 years, et cetera. Our ability to pass on costs in commercial pharma is probably best told to you when we say we expect our gross margin to contract by 1%, so we can pass on some but not all. The manufacturing business is a little different, in that what we are seeing in the market at the moment are levies. People say, "This is a bump, and we don't want you to give us an 8% price increase in EUR. We'll pay you 2% price increase, but 6% we'll have as a levy for when this passes. You know, that is sort of how, you know, people are selling vials to us or glass to us or whatever, and what we are saying to customers as well.
We have had relative success in passing on some of the manufacturing costs, but it's a levy, and I do not believe that if inflation stays elevated and accelerates, that there is much scope to continue passing on those prices. It's up to those companies to start negotiating with regulators to try and get their price increases through. Given how tight money is and all the other things, you know, the easiest place to cut a budget if your government is health, you know. Price is down 5%. Okay, now I can find something else. I'm never too hopeful about how well negotiations would go around developed markets, except if they start having shortages. Which would be a risk in some areas if you don't.
You know, the heparin price is going up. A lot of the products are commodity based. You know, there's the heparin, you know, with us, but there's stuff that comes from wheat and oil and all of those things, and those prices just keep pushing up. At some point, something's got to give. I think everyone is hoping that situation stabilizes and improves, and we can get into a less inflationary environment. The macro factors are gonna have quite an important impact on that going forward.
Thank you. Thank you so much for the questions. Thank you, Stephen and Sean.
Unfortunately, we've run out of time. Yeah.
I'll come to you just now. Okay. Thank you.
Do you wanna take one more question?
I'll take one more question. We had your hand up for a while there. Sorry. Yeah.
Thank you, Stephen. Zainab Kantar, IFC. Just to take you back quickly to the vaccine topic. You talked about your aspirations in investing further in vaccine manufacturing, which obviously is very dear to our heart. The aspiration for Africa is for end-to-end vaccine manufacturing, including drug substance eventually. How do you see the prospects for drug substance manufacturing in Africa, and what would Aspen play a role in this?
Aspen makes a lot of drug substances around the world. We make in South Africa too. We make fine chemicals in Cape Town, and we have very, very big plants in the Netherlands and actually in the U.S. as well. We understand APIs. APIs need volumes. You need volumes, and you need certainty. No different to finished dose form outputs. The more you make, the less costs, the less the incremental costs are. Africa has got volumes. That's the advantage of Africa. When people were trying to force us to make API for COVID, what did I say? I said, "Let's first see the volumes and the stability and let's have a look." Everybody was on our case, "You must go and make this vaccine.
You've gotta go and do the API." We're getting all sorts of political pressure. Thank God we never did it. What you've gotta do with APIs is find the right platforms. Not the sexy platform. "Oh, I wanna be an mRNA," or whatever. That's great. You might want to do all that. If I were to start in Africa, you just take the APIs that back those pediatric vaccines, show you can make APIs. You've got certainty on volume support. Make sure you are cost competitive. You cannot do this stuff and think you're not gonna be costing. "Well, please give us 10 years to be..." You can't do it. There are platforms that one can do and partner with. I would suggest partnering on that because there are people that already make these.
The leverage you have if you want to make APIs is, "I've got the volumes because I'm in Africa and I'm getting support." That's your leverage. Someone said, "Well, either he gets it or he gets the volumes from Africa, so we better quickly partner him because I." You know. That's your leverage here, is can you control the demand? If you can control the demand, you can make the finished form. People will partner you, as you've seen. Of course, once you've got the finished form certainty, you can then look at the API partnering. You know, it's not. It's something we would. We always look at all or any opportunity. You know, we wanna do this one step at a time.
From an Aspen perspective, we put our money down on finished form manufacture. We wanna see that full. We'd be very happy to talk around APIs. In my opinion, though, to have a sustainable and a competitive platform, Africa or funders will need to help in the initial phases. You need to have a plan, but there will need to be help in the initial phase. You can't just sit in there and go and compete with China and India on day one. It's, you know, so you've gotta be smart about how you do this. It is absolutely doable.
Thank you.
If you can do what Aspen did in Africa, and we're not close to any big markets globally, you can certainly make APIs for a market that you know you control.
Thank you. Thank you for the questions. Thank you to Stephen and Sean. Unfortunately, we've run out of time. We'd like to thank everybody for joining us at this presentation. We would also like to thank the participants who have joined the online webcast. Thank you very much, everybody.