The leading nine multinational pharmaceutical companies, including Ranbaxy Labs, have recorded only single digit growth of 5.5 per cent in aggregate net sales during the year ended December 2009. But their net profit jumped by 278 per cent, mainly due to adjustment regarding foreign exchange gain/loss by Ranbaxy. Despite fall in real profits, these companies offered handsome dividend to share holders as the major stake of these companies is with the foreign partners. These companies have built up strong reserves and surplus position over the years.
A major consolidation is taking place in the international pharmaceutical market with Pfizer Inc's acquisition of Wyeth, Schering-Plough merging with Merck and Abbott Labs taking over over pharmaceutical business of Solvay SA. These changes will have impact on Indian domestic pharma companies in the coming years. With stiff competition, loss of patent exclusivity and difficult marketing conditions, there will be more and more such strategic mergers and acquisitions in current year. In recent past, a few important Indian companies like Ranbaxy, Matrix Labs and Dabur Pharma became MNCs after selling there majority stake to foreign giants.
The net sales of nine MNCs touched to Rs 13,040 crore during 2009 as compared to Rs 12,365 crore in the previous year, a growth of 5.5 per cent and other income reached to Rs 886 crore as against Rs 799 crore. The nine MNCs viz, Abbott India, AstraZeneca Pharma India, Aventis Pharma, Fulford (India), GlaxoSmithKline (GSK) Pharma, Merck, Pfizer, Ranbaxy Laboratories and Solvay Pharma have posted a sharp jump of 278 per cent in bottom line to Rs 1,353 crore in 2009 from Rs 358 crore in the previous year. This jump is resulted mainly on account of Ranbaxy's significant gain in foreign exchange transactions of Rs 328 crore in 2009 as against a heavy loss of Rs 1,872 crore in the previous year.
Excluding Ranbaxy's working, the net profit of eight MNCs dropped by 19.3 per cent to Rs 1,056 crore in 2009 from Rs 1,309 crore in the previous year. Major MNCs like AstraZeneca Pharma, Aventis Pharma, Fulford (I), GSK and Pfizer received setback during 2009. Abbott India, Merck and Solvay Pharma registered very small gains in net profits. A few MNCs like Novartis India, Wyeth, Matrix Laboratories and Fresenius Kabi Oncology could not be included in the study on account of different set of year ending period. Wyeth has changed its year ending for eight months ended November 2009 and not included in this report.
The earnings before depreciation, interest, taxation and adjustments (EBDITA) of nine MNCs improved only by 8.4 per cent to Rs 2,600 crore from Rs 2,398 crore in previous year. With lower interest and depreciation provisions, the profit before tax went up by 19.1 per cent to Rs 2,275 crore from Rs 1,910 crore. MNCs have undertaken cost cutting measure and their other expenditure remained same level at Rs 3,465 crore, raw material cost increased by only 5 per cent to Rs 5,710 crore and staff cost by 15.4 per cent to Rs 2,152 crore.
Further, these companies have earned interest income of Rs 13 crore as against interest expenditure of Rs 138 crore and provided lower amount for depreciation of Rs 338 crore as compared to Rs 351 crore in the previous year. These lower provisions helped them to improve there profit before tax and adjustments by over 19 per cent during 2009 to Rs 2,275 crore. The provision for taxation went up sharply to Rs 1,248 crore from Rs 16 crore in the previous year.
Pfizer's net profit declined to Rs 137.12 crore from Rs 299.58 crore, Aventis Pharma to Rs 157.40 crore from Rs 166.20 crore, GSK to Rs 507.86 crore from Rs 591.09 crore, AstraZeneca to Rs 57.62 crore from Rs 73.84 crore and that of Fulford's net moved down to Rs 13.46 core from Rs 19.73 crore. Pfizer's net profit declined as the company sold its consumer healthcare business to Johnson & Johnson in 2008 and shown an exceptional income of Rs 210.95 crore in the previous year.
With majority stake with foreign partners and strong reserves position, MNCs have declared handsome rewards in the form of dividend during 2009 and 2008. AstraZeneca recommended equity dividend of 500 per cent (previous year 750 per cent), Aventis Pharma, Merck and Solvay Pharma declared equity dividend of 200 per cent, GSK 300 per cent (400 per cent), Abbott India 170 per cent (140 per cent) and Fulford 45 per cent (20 per cent) for the year ended December 2009. Ranbaxy did not declared equity dividend for both the years i.e. 2009 and 2008.
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