Wockhardt has posted heavy loss of Rs 139 crore during the year ended December 2008 on account of provision for mark to market losses of Rs 581 crore as against nil in the previous year. Its net sales grew by 35.4 per cent to Rs. 3,593 crore from Rs 2653 crore in the previous year. Its operating profit (EBITDA) was up by 26.5 per cent to Rs 808 crore as against Rs 639 crore. Wockhardt's international business, contributed 73 per cent of the total revenue grew 40.3 per cent.
Considering the huge losses and debt burden, the management has decided to sell its animal health division after the shareholders approvals through postal ballot.
Its R&D expenditure amounted to Rs 51.30 crore as compared to Rs 50.5 crore in the previous year. Its interest cost went up by 65.1 per cent to Rs 270.4 crore from Rs 163.80 crore. Similarly, its employees cost also gone up sharply by 37 per cent to Rs 607 crore from Rs 443 crore. Depreciation reached at Rs 113 crore as compared to Rs 78.5 crore. With the heavy loss during 2008, its reserves declined to Rs 963 crore from RS 1219 crore in the previous year.
Some of the banks, based on the early termination clause in the agreement had terminated certain forex contracts and claimed an amount of Rs 489.52 crore. The Board is of the view the forex transactions were unilaterally cancelled by the banks and the mark to market losses had arisen on account of counter positions advised by the banks. The company has obtained a legal opinion that these contracts can be disputed, and accordingly no provision for the same has been made.
"We have had an exceptional year in all ways, both in terms of sales revenues and operating profits. Our acquisitions have started paying-off and have posted double-digit growth in their markets. With 73 per cent of our turnover coming from our international operations, in the normal course of the business, it was prudent to hedge our foreign exchange exposure. But due to the meltdown in the global markets and the consequent currency volatility, we had to make provisions for MTM losses, which had a marked impact on our bottom line," said Wockhardt chairman, Habil Khorakiwala.
"Wockhardt has applied to its lending banks for Corporate Debt Restructuring (CDR) and the same has been admitted. The passage of this in the coming few months will ensure enough liquidity for operations and mitigate most of our current issues, which in turn will facilitate our planned growth and benefit all our stakeholders," he further elaborated.
Wockhardt's US business, including Morton Grove Pharmaceuticals, grew by 140 per cent. Currently, it markets 65 products in the US and all its manufacturing plants in India are US FDA compliant. Wockhardt received US FDA approval for 23 ANDAs during 2008.
Revenues from Europe grew by 30 per cent. Wockhardt UK is the key driver with generics and hospital business showing phenomenal thrust. Pinewood market share improved to 29 per cent. Negma in France and esparma in Germany are showing a healthy resurgence. Restructuring in manufacturing and a strong focus on contract manufacturing has helped in overall consolidation.
For the fourth quarter of 2008, consolidated sales moved up by 10.7 per cent to Rs 869 crore from Rs 786 crore in the similar period of last year. It incurred a net loss of Rs 20.2 crore as against a net profit of Rs 50.8 crore. MTM losses amounted to Rs 31.6 crore as compared to Rs 51 crore in corresponding period of last year.
"We are taking significant management initiatives towards containing these MTM losses during the current financial year," stated Khorakiwala.
In the first quarter of 2009, Wockhardt's US business grew by 70 per cent and it received 7 ANDA approvals from the US FDA with a market potential of US $2 billion. Its European business remains steady with Wockhardt UK showing a 6 per cent growth, double than the industry growth. It has also won large tender business from other countries with a total business potential of £4.5 million. Besides, esparma recorded a 15 per cent growth against the industry growth of 7 per cent.