Strides Arcolab aims to do even better

Strides Arcolab, which has recorded a hefty 51.12 per cent jump in net profit to reach Rs 9.40 crore in first quarter (Q1) of the year 2006, proposes to do even better in the following quarters.

According to Strides Arcolab vice chairman and CEO Arun Kumar, profit after tax was affected by higher tax provisions in the current quarter as compared to tax writebacks in the similar period last year.

"The Indian operations recorded strong growth from all its market segments. With the new Cephalosporin plant and the sterile products division reaching critical operating capacities in the last phases of the quarter, the second quarter will see greater contribution from these segments," he added.

International operations put in a strong performance led by Brazil and the recently acquired Italian operations. However, plant closures for renovations and expansions affected US operations. The plant will recommence commercial production in late 2006.

Cellofarm, the Brazilian operations, has commenced the construction of a new facility for sterile dry powder injections. The plant, which is scheduled to commence commercial production in second quarter of FY 2007, will be a global site for certain niche products.

The board which met in Rio de Janeiro, Brazil has also taken a decision to liquidate its holdings in Strides Research and Specialty Chemicals Limited (SRSCL), a 100 per cent subsidiary of Strides Arcolab Limited in favour of the management group of SRSCL.

The decision to exit the specialty chemicals business is based on the lack of synergy between the companies and the fact that SRSCL contributes only about 6 per cent of the consolidated sales of Strides Arcolab Limited. For 2005, SRSCL posted a loss of Rs 3 crore on sales of Rs 30 crore.

The board also approved a proposal to raise upto $100 million by way of preferential, rights or such other issue through issue of convertible bonds/GDRs/ADRs/equity shares or such other equity linked instruments or a mix of them. The proceeds from the issue will be used for part financing new production facilities in India and elsewhere apart from using them for acquisition opportunities.

Arun Kumar said "Our decision to exit the non-synergistic specialty chemicals business is in line with our stated philosophy of focusing on our core domain strengths of sterile injectibles and soft capsules and build leadership positions in these domains through both organic and inorganic means."

He also added that "despite the adverse impact from the US and Mexican operations, we continue to maintain our guidance issued at the beginning of the year of 35 per cent growth in revenues and profits."