Piramal Healthcare April-June net up 57 pct

Thu, Jul 24 05:10 PM

MUMBAI (Reuters) - Piramal Healthcare Ltd on Thursday said quarterly net profit rose by more than half aided by growth in its India-based contract drug making business and a rise in its domestic formulations business.

Mumbai-based Piramal has received a license from the government to set up a unit for manufacturing codeine, a narcotic substance and a key input in one of its top selling drugs Phensedyl, Chairman Ajay Piramal said at a media briefing.

"We hope to put up the plant in three years," he said, adding the investment and location details were yet to be decided.

Last year, Piramal Healthcare's profits were hurt due to a shortage of codeine, whose supplies are controlled by the government of India.

The plant will take care of Piramal's annual codeine requirement of 150 tonnes besides supplying to other drug makers, Piramal said.

He also stood by his earlier full-year forecast for earnings of 21 rupees a share and operating profit margin of 20.5 percent on a 16 percent revenue growth.

"We still continue to hold on to our guidance. The growth will be skewed towards the third and fourth quarters," he added at a conference to discuss the company's quarterly results.

Consolidated net profit for April-June rose 57 percent to 681 million rupees, after providing for 208.2 million rupees in notional mark-to-market loss on outstanding foreign currency borrowings and 21.4 million rupees in realised forex losses.

"The results are a bit below our expectations," an analyst covering the firm said, declining to be named. "They will have to grow beyond 16 percent to catch up. It will be interesting to watch the next few quarters."

"The license to set up a codeine unit is good. They will not have to face constraints in supplies."

Piramal, which provides custom drug manufacturing services to global drug firms from its units in India and the United Kingdom, saw its India-based business more than double during the quarter to 588.9 million rupees, the company said in a statement.

The company is in the process of transferring some of its manufacturing contracts from its UK units to India to help improve margins, as it is more cost effective to manufacture at its Indian units.

Piramal's UK operations comprise the drug making unit it acquired from Pfizer in 2006 and another it bought from Avecia in 2005.

Domestic formulation sales rose more than 20 percent to 3.5 billion rupees, compared to a year ago, when revenue was hurt by lower sales of cough treatment Phensedyl due to codeine shortage.

The rise in formulations business and custom manufacturing in India resulted in its operating margins improving to 16.9 percent from 13.8 percent in the year-ago quarter, Chairman Piramal said.

Piramal is aggressively focusing on contract research and manufacturing services as large global drug firms, reeling under rising drug development and manufacturing costs, are outsourcing a large part of these activities to low-cost manufacturers.

The company's shares ended 0.4 percent higher at 297.65 rupees in a weak Mumbai market.

The shares have lost 3.5 percent this year, slightly better than a 5.3 percent fall in the BSE Healthcare index and a 27.2 percent loss in the broader BSE sensex.

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