The Hindu Business Line : Aventis Pharma: Cost-cutting pays dividends

IN what could be perceived as an affirmation of its re-rating on the markets, Aventis Pharma has turned in a robust performance for the year-ended 2003.

Though topline has grown in lockstep with the overall industry growth rate of 5.3 per cent for the year, cost management initiatives have had a salutary impact on both margins as well as the bottomline.

The story on the margins front is an impressive one. After having had a sluggish 2002 during which operating margins remained confined to the mid-teen range, they picked up from the second quarter of calendar 2003 and have sustained since then.

Driven primarily by a reduction in material costs, the operating margin for the year expanded by close to 6 percentage points to 21.4 per cent. Earnings are up by 60 per cent at Rs 98.6 crore.

Aventis' brands such as Cardace and Clexane in the cardiovascular space and Amaryl in the anti-diabetic therapeutic area continue to be growth drivers. Not only do these brands address high-growth therapeutic areas, they all fall outside the ambit of price control and a higher contribution from such brands should only augur well for Aventis, going forward. Brands such as Combiflam (analgesic) and Avil (anti-allergy), in spite of being under price control, continue to post strong growth rates and are among the leading players in their respective categories.

Aventis has also benefited from the solid support that it has received from its parent; two of the company's launches in India this year being Lantus (once-a-day basal insulin in the anti-diabetic segment) and anti-osteoporosis drug Actonel. As growth in the Indian pharma market is driven primarily by new launches, one could expect these products to serve as engines of growth over the next few years. In the current financial year, exports of Daonil (anti-diabetic) to markets such as Russia and other CIS countries should gather momentum, as the outsourcing theme comes into play.

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