Forex gains help improve outlook for Ranbaxy

Forex gains help improve outlook for Ranbaxy
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First Published: Thu, Jul 19 2007. 10 37 PM IST
Updated: Thu, Jul 19 2007. 10 37 PM IST
New Delhi: India’s second largest drugmaker by sales, Ranbaxy Laboratories Ltd has reported a 118% rise in its net profit for the quarter ended June, its second in 2007, on the back of more sales in Europe and a foreign exchange gain of Rs106 crore.
The company said it expects sales and profit to grow further in the second half of the year, with revenues from sales of cholesterol-lowering drug Pravastatin kicking in, and the planned global launch of almost 100 products.
“The national gains due to foreign exchange movements are painting the picture rosier for Ranbaxy. Minus this, the quarter has been okay for the company although they should do better in the next two quarters owing to US revenues,” said a sector analyst with a Mumbai-based brokerage, who did not wish to be identified.
Gurgaon-based Ranbaxy ended the quarter with Rs1,623.8 crore in sales, an increase of 12.27% from Rs1,446.4 crore in the corresponding quarter in 2006. Net profit for the quarter was Rs266.2 crore, up from Rs122.3 crore in the June quarter last year. Less the foreign exchange gains, Ranbaxy’s profit for the quarter was Rs160.4 crore, an increase of 31.2% over the corresponding quarter in 2006. A Mint poll of five analysts prior to the results had yielded a profit figure of around Rs121 crore on sales of Rs1,456 crore.
Shares of the drug maker rose 1.36% to close at Rs351.55 on the Bombay Stock Exchange on Thursday. The exchange’s benchmark index Sensex closed 1.63% up. “We had taken forward cover to hedge against the currency risk and kept our liabilities open and that has helped,” said Malvinder Mohan Singh, managing director, Ranbaxy. Although the rupees’ appreciation had a role to play in the firm’s growth, sales had also grown on account of a better performance in the US and Europe, he added.
Ranbaxy has foreign currency debt of almost $500 million (Rs 2,020 crore) and a stronger rupee reduces its interest payments; it also means Ranbaxy pays less in rupees for all its imports and global expenses. “Going forward, we will focus on branded generics. The next six months will see close to 100 products being launched globally,” said Singh who maintained the guidance of 20% growth in sales for the year, issued earlier. While Ranbaxy’s sales in North America in the quarter grew 12% year-on-year to $102 million, that in Europe rose 55% to $86 million, driven largely by the integration of its Romanian acquisition Terapia.
Analysts said it is possible for Ranbaxy to do better in the second half of 2007 even without any benefit from foreign exchange gains.
“The company can pull it off. Integration of Be-Tabs (in South Africa) and Terapia will pay off. It will have Pravastatin exclusivity and the new dermatology products from Bristol-Myers Squibb (BMS) in their kitty, not to mention the new launches,” said Sarabjit Kaur Nangra, an analyst with Mumbai-based Angel Broking.
Ranbaxy is expected to earn around $25-30 million in the next six months from sales of a copycat version of cholesterol-busting drug Pravastatin in the US markets during a period when its competition will be limited by law. In May, the firm bought 13 dermatology brands from BMS for the US market with annual revenues of $15 million.
“We are working on six alliances that will give us new products and technologies that can add to our topline right away,” said Singh who also dismissed the fact that the company’s Paonta Sahib manufacturing facility in Himachal Pradesh had not yet received an approval from the US food and drug administration. “It (non-clearance by USFDA) is just an emotional overhang. We continue to service all the markets other than US from there,” he added.
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First Published: Thu, Jul 19 2007. 10 37 PM IST