Strides Arcolab, a Bangalore based Rs 750 crore pharma company, suffered setback during the year ended December 2006 due to heavy provision for taxation, temporary closer of US facility, operating loss for its joint ventures and capacity constraints.

The company's consolidated net profit for the year ended December declined by 17.2 per cent to Rs 40.23 crore from Rs 48.56 core for the previous year, despite significant growth in top line. Its consolidated net sales moved up by 41.9 per cent to Rs 742.98 crore from Rs 523.72 core. With fall in profits, its EPS came down to Rs 11.51 from Rs 13.43.

The Board of Directors recommended equity dividend of 20 per cent for the year 2006 on equity share of Rs 10 each.

The pharmaceutical sales increased by 41.8 per cent to Rs 701.31 crore from Rs 494.51 crore and sales from contract research and manufacturing went up by 65 per cent to Rs 50.58 crore from Rs 30.65 crore in the previous year. Regulated market sales registered an increase of 22 per cent growth and reached at Rs 210 crore. Latin American operations registered an increase of 60 per cent to reach at Rs 332 crore.

The consolidated EBDIT improved by 21.6 per cent to Rs 140.96 crore from Rs 115.88 crore. Strides' interest burden and depreciation provision put pressure on bottom line. Its interest cost went up by 23.3 per cent to Rs 40.80 crore and depreciation provision increased by 42.6 per cent to Rs 33.62 crore.

Commenting on the performance, Arun Kumar, vice chairman and managing director, said, "The year 2006 has been a strong growth year for Strides with further consolidation of its global strategy of becoming a niche pharmaceutical player. Significant investments in growth strategies and R&D pipeline will ensure that the company emerges as a strong and significant player." While the company will continue to grow at an estimated 27-28 per cent range over the previous year, margin growth will be dependent on new product regulatory approvals. R&D spent in 2007 like in the past year will exceed income.

The company has filed 30 ANDAs/ NDAs during 2006 with US FDA and it has received 5 approvals for HIV drugs under the expedited review provisions of the President's Emergency Plan for AIDS Relief programme. The company continued aggressive investment to create a strong R&D pipeline in the areas of niche generics, NDDS and other proprietary products.

Its US facility was closed or most part of the year to facilitate the conversion from Nutritional manufacturing to prescription manufacturing to meet manufacturing needs of a changing soft gelatine strategy. Consequent to this the company incurred a loss of Rs 19.5 crore. The facility is now fully commissioned and ready or Rx manufacturing and expects to turn around in 2008. The company's operations in Poland suffered from under-utilisation of capacities and incurred a loss of Rs 3 crore.

Stride has three joint ventures - two in the US, and one in Turkey -, which are in early phase of growth and currently incur costs for filing and start-up costs. An operating loss Rs 5.2 crore was incurred in the JVs.