Animal healthcare player, Hester Biosciences Ltd on Wednesday posted 68 per cent dip in consolidated net profit to ₹3.56 crore for Q1 ended June 30, 2022.

Consolidated revenues took a beating too at ₹50.70 crore for the quarter, 16 per cent lower than ₹60.19 crore recorded last year.

Decline in profit

The company attributed the dip in profits to reduced sales of high-margin vaccines. “Individually, the gross margins of the vaccines and the health products have been in line with the corresponding quarter, however, the overall margins have reduced due to the increase in the proportion of health product sales, which have lower gross margins compared to vaccines. Health Products sales constituted 34% of the total sales in Q1 FY23, versus 20% in Q1 FY22, “ it said.

The vaccine sales declined by 30 per cent in Q1, primarily due to high base of last year, when there was a prevailing poultry disease outbreak. Also, slowdown in poultry industry impacted sales of poultry vaccines. “Consequent to severe margin pressure, the poultry industry sharply reduced new bird placements along with initiatives towards input cost optimisation.

Plans for profitability

Sales of health products grew by 42% on back of a strong momentum gained from new product introductions and territorial expansion.

According to the company, earnings and profit margins were down due to several factors, including reduction in vaccine sales, relative increase in marketing expenses, and higher market development cost in Animal Health and Petcare Divisions to expand its reach.

In an outlook, Hester stated the company looks to implement measures to arrest the degrowth in Q2 and hopes to improve the profitability.

On vaccines front, Hester is currently supplying vaccines for the recent outbreak of Lumpy Skin Disease (LSD) in certain parts of the country. The additional sales will be reflected in Q2. Further, it has emerged as a successful bidder in a government tender for PPR vaccine for sheep & goat, the supplies for which are likely to start from September 2022.

Covid-19 vaccine update

Hester informed the construction of BSL-3 facility is nearing mechanical completion. Planning and preparation for commissioning is ongoing. The facility is expected to be ready for commercial operation in Q3 FY23,” a statement said.

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Other vaccine developments

Hester is strengthening its new product vaccine pipeline by developing new vaccines like Classical Swine Fever (CSF), Sheep Pox, and an improved version of Brucella vaccines.

Also, its bulk antigen production capacity expansion project is completed and trial runs are ongoing. Expansion of Fill-Finish line capacity is expected to be completed by Q4FY23. These 2 expansions will double the production capacity in vaccines, it said.

On the recent notification by Government of India to allow the manufacture and sale of Avian Influenza Inactivated vaccine, H9N2 strain, Hester stated it will contribute to the company’s sales from Q3 FY23.