The financial performance of your Company during FY 2017-18 suffered particularly due to continued weakness in international business. While domestic formulations business continued to show robust performance, currency depreciation and pricing pressure in some markets impacted the exports. We have taken steps to create more focussed approach in international business which, I believe, will yield good results going forward.
Total sales for FY 2017-18 at Rs.1,227.80 crores registered growth of 5.17%, while total income for the year at Rs.1,289.99 crores registered growth of 3.65%. Besides lower growth in income, investment in expansion of field force in domestic market, higher depreciation and certain nonrecurring operational expenditure impacted the profits. The profit after tax for the year at Rs.128 crores was 26% lower over the previous year.
Performance at group level too fell short of the target as sales of the subsidiary companies were lower than the previous year. Consolidated income for the year was Rs.1,450.08 crores against Rs.1,418.47 crores in the previous year. Consolidated profit after tax at Rs.138.34 crores was 24.84% lower compared to the previous year.
I consider this dip in performance temporary. I am hopeful that our growth plans for domestic and international business will help us deliver better performance. I shall now touch upon your Company’s main businesses, their performance and our plans going forward.
DOMESTIC FORMULATIONS BUSINESS
I am happy to share with you that domestic formulations business continued to grow at better than industry rate for fourth year in running. With net sales of Rs.543.60 crores, the domestic formulations business achieved growth of 9.63% against the industry growth of 6% (AWACS, March 2018), while focus products registered growth of 23%. An anti-hypertensive brand Cilacar crossed Rs.150 crores in sales. The consolidation and renewed focus in this business that commenced some six years ago has not only helped in consistent growth but also in creating a robust business that has developed new brands. The Company is ranked 37th in the domestic industry with Company’s four brands viz., Rantac (anti-peptic ulcerant), Metrogyl (amoebicides), Cilacar (calcium channel blocker) and Nicardia (calcium channel blocker) featuring in top 200 brands in unit terms (AWACS, March 2018).
In FY 2017-18, the Company initiated exercise of restructuring of Unique and JB divisions to create therapy focussed divisions to support growth. As a result, the Company now has therapy focussed 4 divisions viz. VIVA, JIVA, DIVA and IIVA with total strength of more than 2,000 field people for better focus on the product portfolio and wider reach in the market. This has now also created capacity to efficiently handle more products. The Company has laid out aggressive business strategy for this business to accelerate the growth. With more feet on street coupled with intensive training, scientific product promotion and introduction of new products is expected to help deliver superior performance.
The investment in expansion of field force will impact bottom line for some time but is expected to result in better growth in top line and bottom line in coming years.
The future outlook of the domestic formulations industry appear positive. Let me tell you that your Company is committed to growing this business and will continue to make necessary investment in products, people and processes to achieve growth objective.
The contrast media products business in the domestic market achieved marginal growth at sales of Rs.44.54 crores. This business is fraught with severe price competition leading to erosion of margins. In order to differentiate and grow, the Company plans to launch next generation MRI contrast media agents during current year and also focus on Tier II and Tier III cities offering diagnostic facilities.
Overall exports of formulations amounted to Rs.537.88 crores during the year, which represents moderate growth of 2.65% over the previous year. Global business exports at Rs.398.13 crores were higher by 5.28% in Rupee terms, while Russia-CIS and other exports were lower. While sales to the focus markets of US, Australia and South Africa achieved growth, the sales to certain African and Middle-east countries faced slowdown due to local currency depreciation and payment delays.
The sales to the US market at over Rs.100 crores are now sizeable for the Company thanks to the focussed investment in ANDAs made so far.
We now have 11 ANDAs approved by US FDA, while 6 ANDAs are pending approval. We plan to file 6 more ANDAs during the current year. The Company is committed to growing US business and will make necessary investments in this regard. The Company continues to also focus on lucrative site variation opportunities for multinationals as well as growing sales of generic products.
The primary sales for Russia-CIS market at Rs.60.53 crores were marginally lower. Market situation in Russia presently appears difficult. There was no secondary sales growth in Ruble terms in that market during April ‘17 to February ‘18 (IMS). However, the Russian market remains potential. The Company is currently investing in new products for the Russian market to grow the products basket. Certain topical, lozenges and contrast media products are under registration process, while two new products are under clinical trial.
The Company’s South African subsidiary, Biotech Laboratories (Pty.) Ltd., recorded revenue of 274.90 million Rands. This was lower compared to the previous year due to certain tender purchases not materialising. However, Biotech was able to achieve profit before tax of 20 million Rands, the same as last year. Biotech is in the process of commercialising several acquired dossiers approved by MCC, South Africa. Biotech’s broadbased product basket, good product pipeline and strong marketing skill makes me confident of its better performance in coming years.
The sales in API business at Rs.92.76 crores were marginally higher over the previous year. Significant part of this business is out of contract manufacturing arrangement.
RESEARCH & DEVELOPMENT (R&D)
The R&D division continues to play an important role in your Company’s growth. R&D is currently focussed on the development of new formulations for ANDAs filings and new products for Russian market, new drug delivery systems and new formulations and APIs. Our R&D has been playing an important role in the growth of exports. Let me underline that R&D activities will continue to remain in the forefront for driving future growth of your Company. We are hopeful that our R&D initiatives will foster growth going forward.
Like all businesses, we also have challenges. For the domestic market, increasing span of price control and Government’s new stand on fixed dose combinations are some of the hurdles that we face. For the international business, currency volatility and changing regulatory environment are the challenges, to name a few.
With focus on building brands and increasing operations size in the domestic business, we are hopeful of a bright future. With focus on US business and other key markets and contract manufacturing, we are hopeful of good growth in the global business.
I take this opportunity to thank members of the medical profession, trade, institutions, government and semi-government hospitals, customers and shareholders for their continued trust and support. On behalf of the management of JBCPL, I would also like to thank all the employees of the Company for their deep commitment to achieving the Company’s objectives.
I am confident that with this commitment and support, your Company will continue to surge ahead.
Chairman & Managing Director