Glenmark’s core business does well
Consolidated revenue in June quarter up 19.8% year-on-year to `1,041 crore
Glenmark Pharmaceuticals Ltd benefited from good growth in key markets such as the US and India. While the rupee depreciation bumped up overseas sales growth, mark-to-market (MTM) losses and the absence of licensing income have affected reported numbers. The firm’s consolidated revenue in the June quarter rose 19.8% year-on-year (y-o-y) to ₹ 1,041 crore and net profit declined 61.7% to ₹ 80.3 crore.
It had earned a licensing income of ₹ 111.2 crore in the June 2011 quarter, which was absent in the current period. It also reported forex-related MTM losses of ₹ 55 crore, compared with a gain in the year-ago quarter. These have distorted the reported numbers, and after adjusting them, net sales rose by a healthier 37.4% y-o-y, and operating profit rose 18.6%.
The firm’s operating profit margins have still declined y-o-y, chiefly due to the presence of a one-off component in its US market revenue in the June 2011 quarter. On a sequential basis, margins have improved, which may be more indicative of the trend. But some credit for that should go to the rupee’s weakness, as Glenmark’s average rupee-dollar conversion rate considered for the June quarter was up 20.5% y-o-y and 12.6% quarter-on-quarter. The company’s speciality drugs business contributes to 48.6% of total sales, and India contributes to 55% of this business, with the rest coming from the overseas markets. Its generics business contributes to 51% of revenue (with others making up for the balance), and the US market contributes to three-fourths of that. Thus, a weaker rupee can make a significant difference to its revenue and margins as well (to the extent its costs are denominated in rupees).
Almost all its geographical regions did well. Sales in India rose 24.1% and other markets did well, too, except for Latin America, to contribute to 22.9% overall growth for the speciality business. The generics business saw US market revenue rise 56.2%, and in dollar terms by 29.6%, which is also quite healthy. Other markets did well, too, and overall generics sales grew 57.7%. Glenmark’s earnings show sales growth continues to be healthy, even after adjusting for currency-related translation gains. The kinks in its results will be visible in the September quarter, too, as it earned licensing income of ₹ 118 crore in September 2011. Sequential comparisons will give a better picture. A key near-term trigger could be the arbitration panel’s final decision on the disputed collaboration pact for crofelemer, an anti-diarrhoea drug in-licensed by Glenmark. A favourable decision for the firm will be seen as a positive development. Glenmark’s share has done well, rising 28% since April, and this quarter’s performance shows its core business continues to be in good health.
Ravi Ananthanarayanan
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!