Pharmaceutical major Cipla has attributed the steep drop in December quarter net profit to increased investment in R&D and a change in product mix. Cipla’s third quarter net profit fell 23 percent year-on-year to Rs 260.8 crore, while quarterly revenues rose 11 percent to Rs 2281 crore.
Rajesh Garg, global chief financial officer, Cipla, told CNBC-TV18 that operating profits were impacted in the absence of anti-depressant Escitalopram sales in the US, and higher sales of anti-retroviral (ARV) drugs, where profit margins are low.
Cipla Medpro, formed as a result of the acquisition of South Africa-based Medpro last year, added Rs 500 crore to the topline and Rs 50 crore to operating profits during the quarter. Cipla had paid around Rs 2200 crore for Medpro, a leading provider of chronic medicines and over-the-counter drugs to public and private sectors.
Garg said Cipla Medpro sales saw its highest sales in October and had the highest market share in the Central Nervous System drug segment.
Garg said the company had a business strategy in place which would help maintain an annual revenue growth rate in the mid-teens and a 20 percent growth in operating profits.
Contribution of exports has now increased to 58 percent of revenues, with Africa accounting for one-fourth of exports.
The company is targeting a capital expenditure of Rs 400 crore in the coming financial year.
Below is the verbatim transcript of Rajesh Garg's interview with CNBC-TV18's Archana Shukla.
Archana: Tell us more about your numbers
A: EBITDA has been impacted by one, obviously the one-off from last year where sales of Escitalopram included in last year, but the big reason is actually what we call good cholesterol which is investment in R&D and the whole pipeline and portfolio and that number from versus being less than 3 percent is inching towards 5 percent and the results are clear. The number of filings that we have, YTD we have done more than 1,000 filings internationally - 16 EU and US and so on and so. Overall we are very comfortable with that, so that was one of the big reasons.
There is a small impact of mix where there is a product mix impact in this quarter from higher sales in ARVs versus the rest of the portfolio and there is a slight lower margin in ARVs, it is showing up in our EBIT impact. Medpro actually had the highest sales ever in the month of October. For a company going through integration and acquisition we are very proud and happy about that. They have also had very good sales, much higher market share in the CNS area and that has been appreciated by all of Cipla because that is an area which they are very strong, but they need to continue in that direction.
Archana: If you could quantify what sort of contribution we saw from Medpro in terms of revenues, margins and profitability?
A: Medpro contributed just around Rs 500 crore in revenue and above Rs 50 crore in EBITDA.
For entire interview watch video
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