Q4 Results: Sun Pharma’s Profit Falls By Half After Transfer Of Distribution Business
Sun Pharma’s net profit fell 52.6 percent year-on-year to Rs 635.90 crore in the March quarter.
Sun Pharmaceutical Industries Ltd.’ s quarterly profit fell by more than half, missing analyst estimates, due to restructuring of business.
Net profit fell 52.6 percent year-on-year to Rs 635.90 crore in the January-March period, India’s largest drugmaker said in an exchange filing. That compares with the Rs 976-crore consensus estimate of analysts tracked by Bloomberg.
The company, in a media statement accompanying the filing, said the reported profit was not comparable with the fourth quarter of last year due to a one-time impact of distribution change for its domestic business.
In April, Sun Pharma had said it will transfer its local distribution business run by a promoter arm— Aditya Medisales Ltd.—to its wholly owned subsidiary to take corrective measures to allay investor concerns on corporate governance. Sun Pharma has taken over unsold inventory of Aditya Medisales worth Rs 716.15 crore during the three months ended March, the filing said.
Sales for the quarter included a one-time impact of about Rs 1,085 crore related to the change in distribution for India business, the company said in the statement. Revenue rose 2.7 percent to Rs 7,163.90 crore—against the Rs 7,535-crore estimate. Consolidated sales, adjusted for this one-time impact, stood at Rs 8,129 crore, a growth of 21 percent year-on-year, the filing said.
The company also announced that its whole-time director Sudhir Valia— and a relative of Shanghvi— will become a non-executive director instead. Local media reports in January said the second whistle- blower complaint alleged the Shanghvi-owned drug distribution business Sun Pharma relied on in India had made improper loans to firms controlled by Valia. The company has denied these loans were made.
Operating income, or the earnings before interest, tax, depreciation and amortisation, declined 39.6 percent to Rs 1,016.80 crore. That’s short of the Rs 1,717-crore estimated. The operating margin contracted to 14.2 percent from 24.1 percent a year ago.
The contraction in margin may be partly due to higher raw material costs, which nearly doubled as percentage of sales compared to the same period last year.
Other Highlights
(Year-On-Year)
- Domestic sales dropped 44 percent to Rs 1,101 crore.
- U.S. finished dosage sales rose 20 percent to $443 million.
- Sales of Taro Pharma, a Sun Pharma subsidiary, rose 3 percent to $180 million.
- Active pharmaceutical ingredient sales rose 46 percent to Rs 484 crore.
- Domestic sales dropped 44 percent to Rs 1,101 crore due to the transition of distribution channel and related adjustments.
- Rest of the world sales came in at $153 million, registering a growth of 32 percent. The high growth was also partly on account of consolidation of Pola Pharma, company's Japanese unit effective January 2019.
Shares of Sun Pharma ended flat at Rs 414.50 apiece ahead of the earnings announcement compared with an unchanged Nifty.
