Aug 07, 2013, 05.47 PM | Source: CNBC-TV18
In an interview to CNBC-TV18, Sharma credits the foreign exchange for about 2 percent EBITDA growth in the company’s earnings.
However, Sharma adds that the company's performance is heartening as the base level business has done well.
"I think the reasons for that are also reasonably obvious because apart from undertaking company-wide program on cost control, cost containment, we are working with Accenture for last one year on bringing in new levels of efficiency all around," adds Sharma.
Below is the edited transcript of Sharma’s interview to CNBC-TV18.
Q: What are your views on the company’s Q1 numbers?
We are working on making it a more consistent number. It doesn’t happen that it just increases every year or every quarter. It will increase and stay there for some time. It is like a step change not ramp change. So, I am happy that the business is doing well.
I must also add that there has been some benefit of foreign exchange in this. So, I should be honest in saying that what we see as 28.7 percent EBITDA, if I correct it for the foreign exchange also even then it comes to almost 26.8 percent. To me, that is heartening because that shows that the base level business itself has been doing well.
I think the reasons for that are also reasonably obvious because apart from undertaking company-wide program on cost control, cost containment, we are working with Accenture for last one year on bringing in new levels of efficiency all around. We are also working on lean six sigma program which we are working here.
Our contribution from US and Japan has also grown. Also the profitability of the business despite price cuts in Japan has been consistently at 42-43 percent margins. So, generics which used to make losses has now been breaking even and hopefully will make profits this year. So, it is a combination of cost containment, cost reduction as well as improving the quality of the business.
Q: If you look at the revenues they have just grown about 9 percent if we compare it to the last year. What really has been the reason for that?
A: If one sees the constitution of the revenue line, America has grown at 20 percent. Japan in yen terms has grown 5 percent. Kyowa has grown 10 percent, I'Rom has degrown by 11 percent so the net growth is 5 percent.
Kyowa growth is very good, about 12 percent as against the market 7 percent. I’Rom growth is lower because I’Rom has a component of contract manufacturing business and that is not a business which happens on a regular basis because the client would put orders on us for manufacturing and then build stocks and then may have some kind of deferment in some period. So, what we are facing in I’Rom is really a deferment of contract manufacturing orders. This will get corrected over a period of time.
However, the translation element of yen to rupee has caused degrowth when we consolidate our account. So, when one sees this 9 percent top line growth, I think one of the key elements that has contributed this is the National List of Essential Medicines (NLEM) policy. So, in India, the growth has been stagnant because the trade has been destocking in anticipation of the new prices coming in.