Aurobindo Pharma

Aurobindo Pharma bottom-line was hit badly on the back of huge forex loss, rise in costs across the business coupled with decline in top line due to lower formulation sales as the Company reported net loss of Rs 80.16 crore for the quarter ended September 2011, compared to net profit Rs 198.32 crore in corresponding previous period. The forex loss was at Rs 185.42 crore compared to forex gain Rs 76.19 crore in the corresponding previous period.

Moreover, Operating profit fell by 55% to Rs 114.63 crore on the back of whopping 1220 basis points fall in Operating margins to 10.7%. Also, net sales were lower by 3% to Rs 1075.30 crore for the quarter ended September 2011, primarily due to the 4% fall in formulation sales to Rs 591.9 crore coupled with lower dossier income. The lower formulation sales during the quarter is due to the full impact of the USFDA import alert on Unit VI Cephalosporin manufacturing facility received by the Company in February 2011.

Commenting on the Company's performance, Mr. Ramprasad Reddy, Chairman, Aurobindo Pharma said:

The first half of the current fiscal has been challenging on account of lower formulation sales, full impact of the USFDA alert on our Unit VI Cephalosporin manufacturing facility, subdued demand environment in Europe, disruption in operations due to regional unrest and notional loss on restatement of foreign currency borrowings. We are confident to deliver on better operational performance in the coming quarters with profitable sales mix

Consolidated Quarterly Performance:

Net sales lower by 3% to Rs 1075.30 crore for the quarter ended September 2011, largely due to 4% decline formulation business to Rs 591.9 crore as it contributes 54% to sales. The formulation business affected due to full impact of US FDA alert on Unit VI Cephalosporin manufacturing facility coupled with subdued demand environment in the Europe. In addition, dossier income witnessed 78% fall to Rs 15.3 crore. However, API business grew by 9% to Rs 490.1 crore mainly due to the 99% surge in ARVs & others business sales to Rs 169.5 crore for the quarter ended September 2011, despite SSPs and Cephalosporin sales fell by 6% and 17% respectively. Interestingly, it has signed an agreement with the global Medicines Patent Pool for the manufacture of several antiretroviral medicines during the quarter making it one of the first major generic companies to tap into the patent pool.

However, at operating level also the company posted poor performance as it witnessed the rise in costs across the business. The raw material cost rise by 440 basis points as percentage to sales and net of stock adjustments due to the change in sales mix, staff cost by 300 basis points on account of new hires and 420 basis points in other expenses on the back of increase in power & fuel, stores & spares and repair & maintenance costs. This resulted whopping 1220 basis points fall in operating profit margins to 10.7% led to 55% fall in operating profit to Rs 114.63 crore. Other income also fell by 44% to Rs 5.97 crore.

Interest cost higher by 7% to Rs 20.70 crore and depreciation by 14% to Rs 46.22 crore. As a result, PBT before forex loss fell by 74% to Rs 53.68 crore. Further, forex loss Rs 185.42 crore compared to forex gain 76.19 crore in corresponding previous period resulted loss Rs 131.74 crore at PBT level compared to profit of Rs 281.01 crore in the corresponding previous period. However, the tax credit Rs 51.55 crore compared to tax provision Rs 82.97 crore resulted Rs 80.19 crore loss at PAT level compared to profit Rs 198.04 crore. Further, after accounting Rs 0.03 crore as minority interest, net loss was at Rs 80.16 crore compared to net profit Rs 198.32 crore in the corresponding previous period.

Half-yearly Performance:

Net sales higher by 6% to Rs 2152.17 crore for the half-year ended September 2011. However, OPM fell by 800 basis points on the back of rise in costs across the business resulting 35% fall in operating profit to Rs 278.56 crore. Other income also fell by 35% to Rs 8.89 crore. The interest cost higher by 10% to Rs 35.25 crore and depreciation by 13% to Rs 91.39 crore resulted 51% fall in PBT before forex loss to Rs 160.81 crore. However, the forex loss Rs 182.24 crore compared to forex gain Rs 34.42 crore in the corresponding previous period has led to loss Rs 21.43 crore as PBT before EO. Further, with the EO loss Rs 319.86 crore as the redemption premium on FCCB's with no EO item in the corresponding previous period the company reported loss of Rs 341.29 crore at PBT level compared to profit Rs 361.09 crore in the corresponding previous period. However, after accounting tax credit Rs 138.31 crore the loss was reduced to Rs 202.98 crore. With the Rs 0.03 crore as minority interest net loss was at Rs 202.95 crore compared to net profit Rs 249.82 crore in the corresponding previous period.

Business Information:

• The Company filed 7 ANDAs and 50 dossiers during the quarter taking the total cumulative filings 222 and 1125 as on 30^th September 2011.
• It recently received final approval for the Abbreviated New Drug Application (ANDA) for Gabapentin tablets USP 600 mg and 800 mg from the US Food & Drug Administration (US FDA). According IMS health, annual sales of Gabapentin in US were approximately USD 220 million for the twelve months ended June 2011.
• It also established Joint Venture with Diod (Russia) to manufacture and market generic drugs in Russia. As a part of this cooperation, the JV intends to construct a state of the art plant to manufacture Non Penicillin and Non Cephalosporin Rx generics and other drugs that are categorized as Over The Counter (OTC) products in Russia. Further, The plant meeting the GMP standards (using Aurobindo's expertise) is expected to be completed and will attain its rated capacity closer to the end of 2013.

Other Information:

• The scrip was down by 4% to Rs 123.25 at BSE, India on 08^th November 2011.
• Consolidated debt is at Rs 3045.79 crore as on 30^th September 2011 compared to Rs 2241.60 crore as on 30^th September 2010.

Consolidated Financial Results: Aurobindo Pharma

Consolidated Revenues Break-up: Aurobindo Pharma