Net profit of 25 major pharmaceutical companies registered a 79 per cent drop in the October -December quarter of 2008-09 as compared to their performances in the same quarter of the previous year. The companies recorded a combined profit of just Rs 424.34 crore in October-December as against Rs.2062.03 crore achieved in the previous year. However, the net profit before foreign exchange losses, improved by almost 31 per cent despite difficult marketing conditions.
A Pharmabiz study shows that the consolidated foreign exchange loss of 25 companies went up to Rs 1,717 crore during the quarter under review as against foreign exchange gains of Rs 404 crore in the same quarter of last year. Ranbaxy's provision for foreign exchange loss amounted to as high as Rs 1,263.10 crore during the quarter ended December 2008 as against a gain of Rs 72.07 crore in the last period.
As per the new norms prescribed by ICAI regarding 'Accounting for Derivatives', several Indian companies adopted the Hedge Accounting as suggested in Accounting Standard 30 with effect from October 1, 2008 and shown mark to market losses in profit and loss account. The loss or gain in this regard is a non-cash charge/accrual. Foreign exchange loss or gain on loans represents exchange differences arising during the period on foreign currency borrowings including Foreign Currency Convertible Bonds (FCCBs).
Though the net profit after provision for taxation and foreign exchange losses declined sharply, the 25 pharma companies improved their operating level during the quarter ended December 2008. Their PBDIT improved by 12.8 per cent to Rs 3,005 crore from Rs 2,664 crore. The profit before tax and provisions improved by 2.2 per cent to Rs 2,047 crore from Rs 2,003 crore. Analyst pointed out that this growth is very negligible for the pharma companies and recessionary conditions and competition will impact further in near future.
Out of Pharmabiz sample, Ranbaxy Laboratories, Jubilant Organosys, Aurobindo Pharma, Biocon, Cipla, Piramal Healthcare, Orchid Chemicals and Pharmaceuticals suffered heavily due to foreign exchange loss of over Rs 30 crore each during the quarter ended December 2008. Few other companies like Ankur Drugs, Cadila Healthcare, Ipca Laboratories, J B Chemicals, Panacea Biotec and Shasun Chemicals also incurred foreign exchange loss of over Rs 10 crore respectively as against gains in the similar period of last year. Top companies like Dr Reddy's Labs, Sun Pharmaceutical, Glenmark Pharmaceutical, Lupin, Matrix Labs, Torrent Pharmaceutical, Divi's Laboratories, have not shown any foreign exchange loss or gain during the quarter and their bottom line is not impacted by these provisions.
The consolidated net sales of 25 companies increased by 21.6 per cent to Rs 13,787 crore during the quarter ended December 2008 from Rs 11,334 crore in the corresponding period of last year. Their other income moved up by 3.3 per cent to Rs 530 crore from Rs 513 crore. Biocon achieved strong sales growth of 83.8 per cent followed by Surya Pharma (64.4 per cent), JB Chemicals (58.2 per cent) and Dr Reddy's Labs (50.5 per cent). However, net sales of Panacea Biotec declined by 22.3 per cent, Shasun Chemicals (20.6 per cent), Glenmark (14.4 per cent), Divi's Labs (6.8 per cent) and Ranbaxy (3.9 per cent). Alembic and Orchid recorded single digit growth in sales.
The total raw material cost of 25 companies increased by 17.6 per cent to Rs 5,660 crore during the quarter ended December 2008 from Rs 4,812 crore in the same period of last year. The employees cost also went up by 28.1 per cent to Rs 1,650 crore from Rs 1,288 crore other expenditure including administration, selling and marketing increased by 29.9 per cent to Rs 4,032 crore from Rs 3,097 crore.
The interest cost of 25 companies jumped by over 83 per cent to Rs 374 crore from Rs 204 crore in the previous period and depreciation provision increased by 27.9 per cent to Rs 584.21 crore from Rs 456.69 crore. The hefty rise in interest cost put pressure on profit before tax which increased only by 2.2 per cent to Rs 2,047 crore from Rs 2,003 crore. With positive returns of Rs 113.89 crore from taxation as against a tax expenditure of Rs 351.45 crore in the last period, the net profit before adjustments increased by 30.8 per cent to Rs 2,161 crore from Rs 1,651 crore in the last year.
Ranbaxy's standalone foreign exchange loss climbed to Rs 1,263 crore during the quarter ended December 2008 as against a gain of Rs 88 crore in the corresponding period of last year and this largely impacted the aggregate profit level. With these provisions, it incurred a heavy standalone net loss of Rs 806 crore as compared to a net profit of Rs 48.40 crore. Its consolidated net loss amounted to Rs 915 crore as against a consolidated net profit of Rs 787 crore in last year. The company has not provided other figures on consolidated basis for the period.
Ranbaxy's profit before interest, depreciation, taxation and extra-ordinary items of foreign exchange loss improved to Rs 89.48 crore from Rs 18.97 crore in the corresponding period of last year. Its profit before taxation reached at Rs 20.60 crore as against a net loss of Rs 35.82 crore.
The PBDIT of Alembic, Divi's Labs, Elder Pharma, Glenmark, Lupin, Matrix Labs and Panacea Biotec declined during the quarter ended December 2008. Glenmark's PBDIT declined by 45.2 per cent to Rs 198.29 crore from Rs 361.60 crore mainly due to lower sales and higher employees cost. Its employees cost went up 38 per cent to Rs 82.80 crore from Rs 59.98 crore in the same period of last year. Lupin's PBDIT declined by 32.4 per cent due to lower operating income of Rs 21.84 crore as compared to Rs 134.96 crore. Panacea Biotec profit level affected due to lower sales of vaccines at Rs 122.8 crore as against Rs 177 crore in the previous period.
Thus, the net profits impacted by the new provision of accounting standard during the quarter ended December 2008. The growth in top line of almost 22 per cent despite competition and stringent approval system in regulated markets, and better growth in PBDIT as well as profit before foreign exchange loss provisions, the pharma segment is set to achieve better performance during 2008-09. However, overall recessionary conditions will give tough time.
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