Fourth quarter and full year results of Sun Pharmaceuticals clearly show margin pressures because of higher input and R&D expenses. The company has managed to achieve impressive growth in the top line despite pricing pressures, especially in the US generics market.
For the quarter ended 31st March 2006, standalone net profits increased 25.76 per cent to Rs115.89 crore from Rs92.15 crore for the previous year quarter. Quarterly revenues increased 39.04 per cent to 454.43 crore from Rs326.83 crore.
Operating profits for the quarter went up by 24.03 per cent. Operating margins as a percentage of net sales declined to 24.74 per cent from 27.4 per cent for the previous year quarter.
Material and production costs increased 57.33 per cent during the quarter while R&D expenses went up by 49.11 per cent. Staff costs were higher by 57.47 during the quarter while other expenses increased by 65.88 per cent.
Depreciation charges were higher by 30.56 per cent while provision for taxes went up by nearly 150 per cent. An increase of 62.43 per cent in other income helped the company to protect its bottom line.
Standalone net profits of the company for the full year 2005-06 increased 40.97 per cent to Rs461.29 crore from Rs327.22 crore for the previous year. Standalone revenues were higher by 38.12 per cent at Rs1,805.02 crore as compared to Rs1,306.83 crore for the previous year.
Full year operating profits increased 24.61 per cent while operating margins declined to 25.38 per cent from 27.15 per cent for the previous year.
Margins were impacted by a 49.53 per cent rise in material and production costs and a 49 per cent increase in R&D expenses. Staff costs increased by 57.54 per cent while other expenses went up by 44.18 per cent.
Depreciation charges went up by 41.57 per cent while provision for taxes rose 65.2 per cent.
The company managed to protect its bottom line through a 3 fold jump in other income to Rs95.64 crore from Rs24.46 crore. Interest income forms a significant portion of Sun's other income.
Consolidated net profit for the year 2005-06 increased 44.67 per cent to Rs573.18 crore from Rs396.2 crore for the previous year. Consolidated revenues were higher by 46.03 per cent at Rs1,796.31 crore as compared to Rs1,230.06 crore.
Sun Pharma is de-merging its innovative research and development business as a separate entity. On receiving necessary approvals, the division would be hived off as Sun Pharma Advanced Research Company with effect from 01 April 2006. This would help the company to reduce research and development costs in future and protect margins. R&D expenses were Rs202.9 crore during 2005-06 on a consolidated basis.
The company's US-based subsidiary, Caraco Pharma, achieved sales of $82.8 million for the full year – an increase of 29 per cent over the previous year. Fourth quarter sales of Caraco increased by 43 per cent to $24.7 million.