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May 10, 2012, 06.16 PM IST
Higher tax expenses led to a decline in consolidated net profit of pharma company, Lupin in the fourth quarter of FY12. The company posted a decline of 31% year-on-year to Rs 156 crore. However, net sales were up 25% between January-March at Rs 1,883.2 crore.
The Geoden generic and the brand business gave a boost to the company's sales figures. In an interview with CNBC-TV18, Kamal Sharma, MD, Lupin acknowledged the company's poor performance to increased tax expenses.
However, Sharma was happy with the 20% profit before tax (PBT) figure.
In Q4FY12, Lupin's tax expenses rose nearly to Rs 135 crore, including Rs 13.3 crore tax due to unrealised gain on inventories in foreign subsidiaries. Its other income in the quarter also halved to Rs 8.24 crore. The company's profit before exceptional items, other income and finance costs rose 20% from a year ago period to Rs 302 crore.
Below is edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: Could you take us through this quarter's performance and in specific your US market performance and how it’s been?
A: We don't generally share productwise numbers. But, our overall growth in generic business has been to the order of 19% and Geodon has obviously contributed handsomely. It will continue to contribute likewise in the coming quarters, but at this juncture, for competitive reasons, I can’t share the numbers.
Q: Could you elaborate more on how the branded formulation segment has done; the likes of Antara and Suprax?
A: The brand business has grown 8.5%. The tablet grew 31% and suspension has also grown handsomely despite us being in that product group for almost six years. Antara, the Fenofibrate market as such, degrew by about 18%.
Our brand degrew by about 6%. Having said that, the prescriptions of Antara grew by about 3% and to me, that’s a positive mark because while the market is degrowing and there is a lot of confusion in the market of Fenofibrates, Antara has still performed relatively better. I am certainly not saying it’s a great performance. We could do better.
In terms of overall brand position we have always said that about 30% of our revenue from US would be in branded formulations. That’s what we have been maintaining. Suprax is obviously maturing and whatever I am sharing is in the background that the flu season was very weak this year. America saw no winter this year. In that case, I think, overall the brand business has done well.
We need to infuse more products into the portfolio. We now have160 strong sales force to really leverage the entire strength in good quality business. That’s where the focus is at the moment.
Q: What about your margin performance for the company this time around and what’s a sustainable level for FY13?
A: We should improve them. If you see in terms of our growth of profit before tax (PBT), it has been 20% and that’s a good number.
I have always maintained that in the growth phase of the company, while we are attempting hard to grow the EBITDA percentage, which has been around 21%, it would take a little extra effort. The team is quite enthused to actually increase our EBITDA margins in future. The rest will all fall in place.
Once the EBITDA margin goes up, the PBT line also goes up. But, we have entered a high tax regime as you can see. However, that's nothing to do with Lupin. I think that’s a general law of the land because EOU benefits have seized, which were there till 31 March last year. Therefore, some of the major manufacturing orders, Goa and Mandideep are now taxed at full rate.
Although, we have a SEZ in Indore, it has not been fully operationalized yet. So that benefit is not coming in. In the initial start-up phase, the cost structures will always be higher than the benefit. Again, we are working in the right direction because we are setting up two new plants and both are in SEZ area.
Although, the formulation plant is in a SEZ in Nagpur in Mihan, it is a lot more valuable because major profits come out of the formulation business.
Q: Can you take us through some sort of a guidance or numbers for the coming years, in terms of growth?
A: No, I think that will be very difficult for me. The character of Lupin has been that we don't do inorganic strokes purposely. These have to be the ones which have strong strategic fit with the business. We did Irom and we spoke a lot about forays into DPC hospitals in Japan.
That being a major lever for growth in Japan and obviously, before we acquired Irom, we have looked at a few other options. There is no point talking about those because it’s a very delicate issue for the seller and the buyer. Least to say, it raises antennas for competition. So, it will not be fair for me to comment on that.
I can only assure you that we have had a very strong track record in the company of value creation and capturing of value. I think that will continue unabated.
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