Lupin Ltd. reported the biggest ever quarterly decline in net profit in the April-June quarter on account of a stronger rupee, price erosion in certain products and de-stocking ahead of GST implementation.
Net profit fell 59 percent to Rs 358 crore from the corresponding period last year, according to the company's exchange filing. This was way below the Bloomberg consensus estimate of Rs 532 crore and follows a 49 percent year-on-year decline in the bottomline last quarter.
Revenue of the drugmaker fell 13.4 percent to Rs 3,869 crore from the same quarter last year. The topline also missed the consensus estimate of analysts tracked by Bloomberg which stood at Rs 4,302 crore
Earnings before interest, tax, depreciation and amortization (EBITDA) declined 41 percent on a year-on-year basis to Rs 767 crore. The profit margins contracted to nearly 20 percent from 29 percent in the same period.
“Our Q1FY18 results have been below our own expectations on count of higher than anticipated price erosion in select products like Glumetza, disruption on count of GST implementation in India and appreciation in the rupee,” Nilesh Gupta, managing director of Lupin said in the exchange filing.
Our focus remains on building our complex generic pipeline, operational excellence, regulatory compliance and building a differentiated specialty business.Nilesh Gupta, Managing Director, Lupin
Broking house Credit Suisse expects the pressure on margins to continue. “Gross margins were impacted with leading products Fortamet and Glumetza coming down sequentially and further impact of rupee appreciation, channel consolidation,” Anubhav Aggarwal, pharma analyst at Credit Suisse said in a report.
Geographical Performence
- North America sales declined to Rs 1601.8 crore from Rs 1,900.7 crore year-on-year. North America accounts for 42 percent of Lupin's sales. Deterioration in gFortamet and gGlumetza was visible in the weak U.S. sales .
- India sales declined 1.8 percent on a yearly basis to Rs 932.4 crore
- Sales in the Asia Pacific region increased 10.5 percent versus the same quarter last year to Rs 598.9 crore
- Sales in Latin America increased 16.5 percent year-on-year to Rs 126.9 crore
- Global API sales declined 5.8 percent during the quarter to Rs 279.3 crore
Management Optimistic
Despite missing estimates for the second straight quarter, the management remains optimistic that the worst is over. Here are key takeaways from the earnings call with analysts:
- FY18 will be a year of muted performance but the worst is behind us.
- Optimistic on business as we believe can launch 35 products in U.S. this year.
- Fortamet sales is U.S. have been stable while Glumetza may see sequential decline.
- Base business price erosion is in low single digits.
- Visibility on some of the first-to-file launches has increased.
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