Lupin Posts Surprise Loss In Q4; Gives FY19 Margin Guidance Of 19-21%

Lupin Ltd. reported a surprise loss in the quarter ended March due to a one-time provision for impairment of certain assets.

The company reported a loss of Rs 783.5 crore as compared with a profit of Rs 380 crore in the same quarter last year, according to Lupin’s filing with the stock exchanges. Analysts tracked by Bloomberg had projected a profit of Rs 338 crore. The bottom line was hit by an one-time impairment charge of about Rs 1,464 crore in relation to the Gavis group acquisition during the quarter.

The one-time impairment charge was incurred on the Gavis acquisition in-line with the changed market conditions, the company’s press release noted yesterday. “In hindsight, it does look like we overpaid for the Gavis acquisition, however it should be seen in the context of circumstances prevailing in the U.S. market,” Chief Financial Officer Ramesh Swaminathan told BloombergQuint today. The U.S. government’s clampdown on opioids’ use upset their calculations further, he added.

However, the hit is a one-off, assured Swaminathan as the intrinsic value of the portfolio is still high and there are tailwinds seen in the market. Going ahead, the company has guided for a 19-21 percent Ebitda margin, which is higher than the 17.6 percent margin attained in March quarter. However, inching towards the higher mark won’t be difficult, said Swaminathan.

Key Financial Highlights:

• Revenue fell 5.2 percent YoY to Rs 4,033.8 crore.
• Earnings before interest, tax, depreciation and amortisation declined 14.2 percent YoY to Rs 708.7 crore.
• Operating margin contracted 90 basis points to 17.6 percent.

Geographical Break-Up

• U.S. revenue fell 21 percent year-on-year
• India revenue rose 13 percent
• Asia Pacific revenue up 8 percent
• Europe, Middle East and Africa revenue up 17 percent
• Latin America revenue jumped 30 percent

The company has made “meaningful strides” in the complex generics pipeline, made progress on the speciality build across U.S., Europe and Japan and have had strong growth in emerging markets, especially India, managing director Nilesh Gupta had said in the press release.

The drug maker’s near-term priorities include resolution of the U.S. drug regulator’s warning letter on Goa and Indore, successful commercialisation of Solosec in the U.S. and executing on meaningful product launches. Swaminathan expects resolution of the Goa and Indore facilities to be completed by 2019.

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