Management Discussion Report
FY 2004-05
Index
•
•
•
•
•
Key Financial Numbers
Operating Margins
Balance Sheet Summary
Performance Highlights
Business Operations & Outlook
Key Financial Numbers
• Q4 2004-05
- DF Net Sales Rs 45 Cr
 Due to VAT impact, sales loss of approx. 6 weeks
 VAT adjusted growth (on net sales basis) – 11%
- Consolidated Net Exports Rs 44 Cr
 Growth mainly due to improved performance from Brazil & Asia /
Africa
 First supply of generic to Europe commenced
- PAT Rs 3 Cr
 Stand-alone PAT de-growth Rs. 6 Cr
Key Financial Numbers
• Year 2004-05
- DF Net Sales Rs 290 Cr
 2% Growth
 VAT adjusted growth (on net sales basis) – 10%
- Consolidated Exports Rs 130 Cr
 Growth Rs 63 Cr & 95 %;
- PAT Rs 53 Cr ; Consolidated PAT Rs 49 Cr
 Stand-alone PAT de-growth Rs 11 Cr
 Consolidated PAT de-growth Rs 6 Cr
Operating Margins – Q4
Rs in lacs
Particulars
Net Sales & Op. Income
Jan-Mar
2004-05 2003-04
Growth
10446
10154
2.9%
653
6.3%
1803
17.8%
-63.8%
-11.5%
PBT(before exceptional item)
PBT %
-218
-2.1%
1324
13.0%
-116.4%
-15.1%
Income-tax expense
Tax as % of PBT
(547)
344
26.0%
-259.2%
PAT(before exceptional item)
PAT %
330
3.2%
980
9.6%
-66.4%
-6.5%
EPS for the quarter
1.56
4.63
-66.3%
Operating Profits (PBIDT)*
Operating Margin %
* PBIDT excludes discovery expenditure & other income & is after R&D
development costs for EU/US market of Rs. 718 lacs.
Operating Margins – FY 2004-05
Rs in lacs
Particulars
Apr - Mar
2004-05 2003-04
Gwth
Net Sales & Op. Income (Adj.) #
48370
44308
Operating Profits (PBIDT)*
Operating Margin %
9136
18.9%
11395 -19.8%
25.7%
-6.8%
PBT(before exceptional item)
PBT %
6087
12.6%
9097 -33.1%
-7.9%
20.5%
Income-tax expense
Tax as % of PBT
795
13.1%
-68.5%
-14.6%
PAT(before exceptional item)
PAT %
5292
10.9%
2519
27.7
%
6577
14.8%
EPS
Consolidated EPS
25.01
23.05
31.09
25.74
-19.6%
-10.5%
9.2%
-19.5%
-3.9%
# Excludes research income from Novartis - Rs. 1389 lacs for 04-05.
* PBIDT excludes discovery expenditure & other income & is after R&D development
costs for EU / US for Rs.2000 lacs.
Balance Sheet Summary
Rs in lacs
Source of Funds:
Shareholders’ Fund
Loan Funds
Net Deferred Tax Liability:
36011
21092
4481
58%
34%
7%
30719
0
4154
88%
0%
12%
Total
61585
100%
34873
100%
Application of Funds:
Net Fixed Assets
Long Term Investments
Current Investments
29567
3863
14695
48%
6%
24%
20965
3355
2117
60%
10%
6%
Working Capital:
Inventories
Cash & Bank Balances
Debtors
Other Current Assets
Loans & Advances
Less Current Liabilities & Prov.
14511
830
5980
577
3598
12037
24%
1%
10%
1%
6%
20%
9464
979
4300
393
2636
9336
27%
3%
12%
1%
8%
27%
Net Current Assets:
13459
22%
8436
24%
Total
61585
100%
34873
100%
Performance Highlights
• One-off items affecting the top line and bottom line:
– De-stocking by stockists due to uncertainty in VAT
implementation
 Sales loss in domestic expected to be recouped in the first quarter
of 2005-06
– Stricter implementation of NDPS Act by Narcotics Department
 Retailers and wholesalers stopped fresh purchases
 Subsequent amendment in NDPS rules in Feb 05 restored things to
normalcy
– Withdrawal of Toroxx following withdrawal by the innovator
 Resulting in to sales and margin loss
 Loss to be nearly recouped through launch of Toroxx A / AP
(Aceclofenac/ Paracetamol Combination) and re-launch of
Diclomax in April / May 05
Performance Highlights
• Other major reasons for lower profitability are:
– Higher R & D expenditure in nature of investments
• Aimed at strengthening product pipe line for regulated markets
(e.g. EU & US)
• Fully charged to P & L, pursuant to conservative accounting policy
• Higher R & D expenditure eligible for weighted deduction under
Income Tax law, bringing down tax out-go significantly
– Increased marketing infrastructure resulting in higher staff
cost
• Field force taking time to stabilize
• Lower productivity & higher lead time of field force due to initial
phase of learning curve
Business Operations And Outlook
• Domestic Market:
– Maintained 14th rank in domestic market even in cut-throat
competition
– Introduced 22 new products (including line extensions)
– Pace of new introductions to continue during this year as well
– NPPA driven price reductions likely to affect contribution
– Baddi operations will provide excise / income tax benefits from
Q3 onwards
Business Operations And Outlook
• International Market:
– Geographical expansion to continue to drive growth and
profitability in Brazil
– New product launches & higher export revenue expected from
EU market
– Received marketing authorisation in Netherlands for
Lamotrigine & completed first MRP registration in UK &
Germany
– Received plant approval from UK MHRA for oral solid
formulations
– First DMF with US FDA filed in Apr. ’05
– First ANDA expected to be filed with US FDA in the current
quarter
Business Operations And Outlook
• R & D initiative:
– Received USD 3 million as license income from Novartis for outlicensing AGE breaker compound
– Signed a collaborative research agreement with AstraZeneca
for novel drug discovery in the area of hyper tension
– R & D expansion already under way to ramp up the R & D
infrastructure to support product pipeline of regulated markets
Thus, strategic investments like increased marketing
expense owing to increased field force and higher R&D
investments during FY 2004-05 shall benefit the company
in the medium to long term. Also, readiness to enter the
US markets, commencement of exports to EU and good
performance in other international markets like Brazil and
Russia, are expected to boost the Company’s performance
in near future.
Torrent Pharmaceuticals Limited
Ready for tomorrow
Thank You