Cipla net profit declines 69% due to one-off expenses

Cipla's Ebitda also declined nearly 57% to Rs 219 crore

Drug maker Cipla’s net profit fell 68.9 per cent year-on-year (y-o-y) to Rs 81 crore in the quarter ended March 2016, on account of one-off expenses related to inventory reduction and closure of business in some small-sized foreign markets.

The profit was substantially lower than the Bloomberg consensus estimate of about Rs 250 crore.

Though revenue grew 5.6 per cent y-o-y to Rs 3,267 crore and came marginally lower than Bloomberg consensus estimate of Rs 3,356 crore, the operating performance was hit by one-offs. The company’s earning before interest, tax, depreciation and amortisation (Ebitda) declined 56.9 per cent to Rs 219 crore, as its expenses rose due to higher employee costs, inventory reduction and write-offs, restructuring and regulatory expenses. The research and development (R&D) costs also surged 2.2 per cent. Adjusting for one-offs and incremental R&D costs, the company said Ebitda margins were at 15.8 per cent, compared to the reported 6.7 per cent and year ago quarter’s 16.4 per cent.

Domestic business grew 15.9 per cent to Rs 1,258 crore, while exports rose 2.8 per cent to Rs 1,948 crore. Domestic business contributes about 40 per cent of the company’s overall revenue. The drug pricing issue in the domestic market also impacted the company’s margins.

For the past few years, Cipla has been looking to grow its US business and it completed the acquisition of US generic drug maker Invagen earlier in the year. “We are re-positioning our US business and look forward to file 20-25 products in FY17,” said company's chief operating officer Umang Vohra in a post-results conference call with analysts.

The Cipla management said it continues to grow business in key foreign markets including Sri Lanka, Uganda and Iran but is rationalising its business in certain smaller markets where it has insignificant presence. The company has said it had taken the decision to simplify the business and reduce complexities.

The company expects a revenue growth of 10-15 per cent and base business Ebitda growth of 15-20 per cent.

The company’s stock closed 0.5 per cent down on Tuesday to close at nearly Rs 495 on the BSE. The results were declared after market hours.