Contract drug maker Divi's misses profit view on high material costs

Indian contract drug manufacturer Divi's Laboratories reported third-quarter profit below estimates ​on Wednesday, as high raw material ​costs and a one-off charge due to ‌changes in India's labour codes weighed on its bottomline.

The Hyderabad-based company's consolidated net profit marginally fell to ₹583 crore ($64.31 million) in the quarter ended December 31, from ₹589 crore a year earlier.

Analysts, on average, had expected ₹618 crore, according to data compiled by LSEG.

Global ‌pharmaceutical firms have been increasingly looking to Indian contract drug manufacturers such as Divi's, Sai Life Sciences and Piramal Pharma as part of their plans to diversify supply chain beyond China.

 

Demand for customised production of chemical ​compounds from large pharmaceutical companies stayed strong in the quarter.

However, the ‌cost of materials consumed jumped 19 per cent, pushing up its total expenses 9.7 per cent ​to ‌₹1,838 crore.

Additionally, Divi's Laboratories chalked up a ‌one-time charge of ₹74 crore as it complied with India's new labour laws.

Revenue ‌from operations ​rose 12.2 per cent ​to ₹2,604 crore, beating analysts' average estimate of ₹2,596 crore.