Lupin on Thursday said that its measures to strengthen the business going forward, including paring down inventories, shelf stock adjustments and exiting the negative or low-margin products, have had a one-off impact on the earnings after the company reported a weak set of numbers for the first quarter of the financial year 2023.
The pharma company announced its financial results for the April-June quarter on Wednesday with a consolidated net loss of Rs 89.08 crore. The company reported a net profit of Rs 542.46 crore in the corresponding period last year.
“We had roughly around a $50 million impact on the quarter, based on the decisions we made to strengthen our business going forward, a combination of paring down inventories, trade inventories that were running at a higher level, doing some shelf stock adjustment to ensure competitiveness plus we had guided that we would get out of the products that are negative,” said Vinita Gupta, CEO, Lupin, in an interview with CNBC-TV18.
She added that the company had exited approximately 15 products.
Lupin shares, however, ended at Rs 660 on Thursday, an increase of 5.13 percent from the previous close on the BSE.
The company reported that its net sales for the quarter declined 14.95 percent to Rs 3603.96 crore. The earnings before interest, taxes, depreciation and amortisation (EBITDA) — a measure of a company's financial performance — for the quarter ended June stood at Rs 237.88 crore, down 76.03 percent from Rs 992.56 crore in the corresponding period last year.
The company’s management has decided to take guided measures to increase the profit margin for the coming quarters. Apart from trimming its portfolio, it has also cut the workforce to achieve the targets for FY23.
“We took up manpower reduction, workforce reduction across the plants and other parts. Also, there is an overall 14-15 percent reduction because of that. So, the guidance we spoke about in terms of progressive increase on the EBITDA margin front - certainly you would see that. The second quarter is certainly going to be better,” said Ramesh Swaminathan, Chief Financial Officer and Head of Corporate Affairs, Lupin.
The company expects a strong bounceback from the weak first quarter with expectations of double-digit growth in the next three quarters of the financial year. The fourth quarter will see a further ramp-up in the business, said MD Nilesh Gupta.
“We are doing a lot in India, we added 350 representatives, we created three new divisions. So a lot of plans in India, and we are obviously very optimistic about it,” he added.
Meanwhile, market expert Deven Choksey of KRChoksey said: "What is bothering is that in the US territory and in India there was fall in sales. And that is not clear, because the likes of Cipla, Dr Reddy’s Laboratories, and even Sun Pharma have ended up expanding their portfolios in Indian territory and also in the US and they have been focusing largely on the speciality generics where they have been driving their business."
He said Lupin’s commentary was silent on whether they are moving in that direction or they would continue to be having the pure genetic business at play. "So, something which I have not fully got the clarity on is there and that is one of the reasons the stock is not giving enough confidence till the time they end up getting into the track," Choksey said.