Pharmaceuticals company Cipla Quality Chemical Industries posted a 74.3 per cent fall in its net profit for the six months to September 2023, despite growth in sales, as expenses increased.
The company reported net profit of Shs3.6bn ($0.95mn), down 74.3 per cent from Shs13.9bn a year earlier.
Total sales rose slightly to Shs121.2bn, compared to Shs120bn, as almost all segments recorded growth, the company said Monday. These gains were however offset by an 80 per cent decline in contract manufacturing due to a drop in demand from India’s Cipla Limited and uncertainty over the sale of its majority stake in the local drugmaker.
Africa Capitalworks, a Mauritius-based private equity firm, recently acquired a controlling stake in the company for $25mn. Cipla Quality Chemical Industries said that as part of the sale, it had entered into an agreement with the Cipla Group “that will result in the continuation of this segment (contract manufacturing) for at least the next three years.”
Gross profit decreased by 15.2 per cent to Shs30.9bn, compared to growth of 26 per cent last year, due to an 8 per cent increase in cost of sales.
Last year’s half-year profit was boosted by the receipt of Shs9.4bn from the government of Zambia in partial settlement of a previously written-off trade receivable. This year, however, Cipla reported an impairment charge of Shs334.1mn. This contributed to the 69.2 per cent decline in operating profit, despite a reduction in general and administrative expenses.
The company paid Shs5.4bn to settle a term loan during the period, reducing its interest expense from Shs0.6bn to Shs0.2bn. However, finance costs increased by 81.4 per cent to Shs1.2bn, which Cipla attributed to foreign exchange rates.
The stock closed at Shs52.5 on Monday, down 25 per cent from the opening price of Shs70.
($1 = Shs3,761.21, as at 29 September)
