 "An employee speaks on phone as he walks out of research and development centre of Sun Pharmaceutical Industries Ltd in Mumbai")
Higher ‘other income’, lower tax outgo, and improved performance of its US subsidiary Taro helped Sun Pharmaceutical post over three times growth in net profit in Q3FY16.
Net profit rose to Rs 1,416 crore from Rs 395 crore in same period last year. Revenue grew two per cent to Rs 7,047 crore, with domestic business driving growth. The company's India business grew eight per cent while sales in all the other markets declined.
Sun Pharma has also announced it has ended its joint venture with multinational drug company MSD for manufacture of branded generics, citing changes in priorities. It said the decision would have no material impact on the company.
Overall revenue from the US market, which contributes to 45 per cent of the business, declined 11 per cent to $486 million. Sun Pharma's US business continues to be hit due to competitive pressure and supply constraints arising out of remediation measures at company's Halol plant.
The company received US Food and Drug Administration (US FDA)'s warning letter for Halol plant. Also, last year the company had reported higher sales in Q3 because of 180-day exclusivity in blood-pressure tablets Valsartan. However, subsidiary Taro, which had seen sales decline in the first half of the year, showed improved earnings. Taro reported nine per cent growth in revenue and 33 per cent growth in profit year-on-year.
The company reported an Ebitda (earnings before interest, tax, depreciation, and amortisation) of Rs 2,134 crore, a growth of 5.6 per cent. Sun Pharma managing director Dilip Shanghvi said the company had undertaken additional re-mediation measures at the Halol plant and planned to invite USFDA for inspection in the first quarter of FY17. He said the company’s focus was now on consolidating its existing business and the company was not looking at acquisitions and added that synergy benefits of Ranbaxy acquisition had begun to kick in and would be visible in FY17.
He added measures include exit from low margin products in India, cost efficiencies and improving plant utilisation.
The result was also benefited by higher other income arising out of forward foreign exchange contracts (Rs 219 crore in Q3 FY 16). Also in Q3 FY 15 the company had booked a tax expense of Rs 1028 crore and tax outgo in Q3 FY 16 was 80 per cent lower at Rs 202 crore.
The drug major's revenue was in line with analyst estimates and profit came 10 per cent higher than Bloomberg estimates.
“Our results for Q3 indicates sequentially improving quality of business and performance. This is despite adverse currency movements and increase in R&D investments. The synergy benefits of the Ranbaxy acquisition have begun to reflect in our financials. We remain committed in allocating required resources for enhancing our specialty and complex generics pipeline,” said Sun Pharma managing director Dilip Shanghvi.
