Strong domestic growth and exclusive supplies of generic lexapro (anti-depressant drug) to Teva helped Cipla grow its revenues by 23 per cent in the June quarter. Robust demand for the company’s antibiotics and anti-asthma products lifted domestic sales by over 30 per cent. Cipla’s branded business staged a remarkable 23 per cent growth in the quarter while its unbranded business registered 6 per cent growth.

Favourable sales mix driven by a strong domestic performance, high-margin lexapro sales and lower contribution from low margin anti-retroviral products, boosted Cipla’s gross margins by 4.6 percentage points to 62.6 per cent.

Lower interest outgo and higher other income, in addition to the strong operational performance, facilitated the 59 per cent jump in the net profits to Rs 400 crore.

With domestic formulations growth in excess in 16 per cent and upcoming product opportunities such as Dymista, Cipla’s management is confident of sustaining growth momentum over the next two quarters.

Trading businesses aid GAIL

Gas transmission major GAIL grew its June quarter profits by 15 per cent over the same period last year. On a sequential basis, profit more than doubled. This good show received the thumbs-up from the market, especially after the company’s dismal performance in March due to high subsidy burden. But what remains a concern is GAIL’s weak volume across segments, especially in the flagship gas transmission business.

The company’s profit growth was driven by its trading businesses. The gas trading segmentgrew by 58 per cent year-on-year, while profit of the LPG and liquid hydrocarbon segment more than doubled. That the trading segments’ profits grew despite stagnant or declining volumes suggests good pricing power in the businesses. This more than offset the continuing weakness in the gas transmission business in which volumes declined more than 6 per cent and profit dipped 13 per cent.

Lower volumes also led to the petrochemicals segment’s profit falling by 20 per cent. Over the past several quarters, stock has been dragged down by weak volumes in the key gas transmission business. This is the result of declining gas production domestically. Meanwhile, the company’s depreciation and interest cost continues to rise due to its ongoing pipeline expansion plans.

GAIL’s subsidy burden in the June quarter was Rs 700 crore, around 3 per cent higher year-on-year, and 50 per cent lower than in the March quarter. But the final adjustment towards subsidy usually happens in the last (March) quarter each fiscal. So, quarterly subsidy numbers don’t mean much.

(This article was published on August 4, 2012)
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