homehealthcare NewsCipla says change in generic business, cut offs in month end sales impacted India business

Cipla says change in generic business, cut-offs in month-end sales impacted India business

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By Ekta Batra  Aug 8, 2019 11:14:58 AM IST (Published)

Cipla's consolidated net profit rose to Rs 447.15 crore for the June quarter from Rs 445.61 crore in the year-ago period. Umang Vohra, managing director and global CEO, discuss earnings

Cipla reported a mixed set of numbers for the quarter ended June 30, with the US business outperforming and boosting margins but India and emerging markets (EMs) remaining weak. Umang Vohra, managing director and global CEO, expects the India business to recover in the coming quarters with some revenue deferred to the second quarter.

Cipla's consolidated net profit rose to Rs 447.15 crore for the June quarter from Rs 445.61 crore in the year-ago period. Total revenue from operations stood at Rs 3,989.02 crore for the quarter, slightly higher from Rs 3,938.99 crore a year ago.
“This has been a little bit of an unusual quarter for us. We have had Rs 200 crore worth of revenues, which had deferred into Q2 because of certain cut-off procedures and we have had some kind of change in the distribution model in our generic business, which is another impact of about Rs 200 crore," added Vohra.
"We are hoping the first one comes in Q2 and we are hoping that the generic business disruption resolves by Q2. Overall, those are the two things that have impacted the quarter,” he said.
In terms of EBITDA, he added, “We are still about 25 percent up. In Rs 905 crore, we are a good percentage to sales so the profitability, the business model is intact, some deferrals into Q2 and also the change that we made in the generic business.”
When asked if he expects things to normalise in Q2 as well as in the rest of the fiscal year, he replied, “India business should normalise to a large extent by Q2. We are already seeing signs of that coming back. The generic business – I think the normalisation should happen as well both on the branded business as well as the generic business.”
The branded business is more a deferral and there is no issue for normalisation there, he said, adding that the generic business will normalise and some of the emerging markets business where there is deferral will also normalise.
Speaking about why India business was down 12 percent, he explained, “There are two reasons. One is the cut-off. We have had an unusually larger ordering pattern at the end of the month and our accounting policies cut-off that amount of sales, which gets deferred to the next quarter. That accounts for Rs 90 crore or so.
"We have had a change in the business model in generic where we have had to churn some distributors on account of – we were noticing certain destabilisation in the distribution chain. As a result of that, we have another about Rs 200-250 crore of impact,” he said.
While giving guidance for the rest of the year for India, he said India should be above the industry growth. “It should normalise. We have seen the pain in Q1 and we are looking forward to Q2 & Q3,” he further mentioned.
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