Can beat FY12 guidance if exchange rate holds: Orchid Chem

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Can beat FY12 guidance if exchange rate holds: Orchid Chem

Orchid Chemicals reported its second quarter results for FY11. The drug company posted a net profit at Rs. 23.4 crore for the quarter ended September 2011 versus Rs 24 crore in the corresponding period last year.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Orchid Chemical See previous management interviews See what other Experts & Brokerages are saying about Orchid Chemical

Orchid Chemicals reported its second quarter results for FY11. The drug company posted a net profit at Rs. 23.4 crore for the quarter ended September 2011 versus Rs 24 crore in the corresponding period last year.

In an interview with CNBC-TV18, K Raghavendra Rao, CMD, Orchid Chemicals & Pharmaceuticals Ltd talks about their second quarter numbers. He also outlines the pharma major's future plans.

Below is an edited transcript. Watch the accompanying video for more.

Q: How much did Hospira contribute to numbers this time around?

A: Hospira is usually at around 20-22% of our total sales. A similar percentage is there for this quarter as well. We had a robust 10% growth. Before the exceptional and extraordinary items, the profit has also gone up significantly compared to the corresponding quarter. There is a 50% increase in the profit before exceptional and extraordinary items.

There is an FCCB and a foreign currency loan translation loss of about Rs 86 crore. We also wrote back provisions which are no longer required for certain rebates and discounts of about Rs 80 crore. Since they cancel out each other that is the reason why we have Rs 29.8 crore of net profit before the exceptional items and the Rs 23.4 crore profit after exceptional items.

Q: What have you done on the margin front?

A: Margin front has been very robust actually. We have an EBITDA margin in excess of 25% for the quarter. That is partly because of the product mix and partly because the exchange rate is also helping us a little bit. Margins are absolutely intact. In fact they have gone up a couple of hundred basis points compared to the guidance that we gave in the past.

Q: Tell us a bit about the FCCBs and the funds you are planning to raise? They come up for redemption in February and you are seeing huge MTM losses because of that. What is the plan that Orchid has outlined from hereon?

A: We will be replacing dollars with dollars. This MTM loss is just notional because we are making arrangements for this by way of long-term funding which is a combination of external commercial borrowing and bonds to be able to replace these bonds in February.
 
Q: What kind of revenue growth guidance can you give us? What are you expecting to see on the topline front?

A: We have already guided 20-25% growth for the current year and we are on track to achieving that. The first half has seen only 12% growth or so but in the second half we always make up because antibiotics are more consumed in the winter season. We are still sticking to the 20-25% guidance for the current year.

Q: In FY11, you managed to beat your guidance. In FY12 will you be able to maintain it or will you be able to supersede it on the EBITDA, bottomline and the revenue?

A: We should definitely be able to do better than what we guided at the EBTIDA and the bottomline level. Topline will be more or less as per guidance. In terms of translation into rupees it might also exceed the guidance because if the exchange rate holds like this, we are in for a good home run.

Q: What did your interest costs come in this time around? What exactly would be the plans with that Rs 1,000 crore which you had in terms of fundraising which you had approved earlier?

A: That fundraising will be partly used to be able to repay these bonds in addition to taking external commercial borrowing in dollars. The interest rate is about Rs 40 crore for the quarter because rates have gone up and the entire capitalisation also has been done. We expect interest rates to be between Rs 35-40 crore per quarter going forward.