Sequent Scientific slips 16% on disappointing June quarter results

Ebitda margins contracted 460 basis points to 11.2 per cent in Q1FY22 from 15.8 per cent in Q4FY21

Shares of Sequent Scientific dipped 16 per cent to Rs 236 on the BSE in intra-day trade on Wednesday after the company reported a sharp 86 per cent year-on-year (YoY) decline in its consolidated profit after tax (PAT) at Rs 2.65 crore for the quarter ended June 2021 (Q1FY22). The pharmaceutical company had posted a PAT of Rs 19.35 crore in the year-ago quarter.

In Q1FY22, its revenues grew 8.6 per cent YoY to Rs 320.5 crore from Rs 295.3 crore in Q1FY21. The formulation business reported an over 15 per cent growth, while API business reported de-growth after many quarters of consistent growth.

Ebitda (earnings before interest, taxes, depreciation, and amortisation) was down 23.2 per cent YoY at Rs 35.8 crore, excluding ESOP costs, while margins contracted 460 basis points (bps) to 11.2 per cent in Q1FY22 from 15.8 per cent in Q4FY21.

That said, the management expects strong recovery in API business in the second half. “Our strategy for API business continues to play out well as we continue to improve the quality of business with ever-increasing contribution of regulated markets business, which now stands at 72 per cent vs 66 per cent last year. Despite a slower start to the year, we stay confident and on track of achieving our financial and strategic objectives for the year,” the management said.

Meanwhile, in notes to accounts, the company said during the closing for the previous year ended 31 March 2021, the management had detected certain instances, wherein, revenue in respect of certain sales transactions of the company was recognised on dates earlier to those allowed by the company's revenue recognition policy, leading to non-adherence with company's accounting policy.

The management had performed a detailed review including examination by an external independent agency and traced all cases of such non-adherence, wherein recognition of revenue was accelerated from quarter to quarter during the previous financial year. The impact of the aforesaid non-adherence on the financial results of the previous comparative quarter is Rs 3.89 crore on revenue and Rs 1.12 crore on profit before tax.

Sequent Scientific is the country’s largest and amongst the ‘Top 20’ global animal health companies, backed by global investment firm ‘The Carlyle Group’ as a promoter. The company has eight manufacturing facilities across Europe, Turkey, Brazil & India with the Vizag site being India’s only USFDA approved dedicated veterinary API facility.