Cipla Quality Chemicals faces loss on Zambia debt

Antiretroviral drugs to treat HIV infection
Antiretroviral drugs to treat HIV infection. Photo: Wikimedia Commons

The drugmaker Cipla Quality Chemical Industries Limited faces a net operating loss for the year to March 2020 after a delay in payment of debt owed by the Zambian government, the company said in a profit warning.

Cipla Quality Chemicals said that it has, with the help of the Ugandan government, engaged Zambia to speed up payment of the debt.

“Any funds collected from this engagement will result in a reversal of the expected credit losses to that extent,” the company said. “This announcement is based on the unaudited financial results of the company for the year ending March 2020,” said the statement.

It added that profitability is further expected to be eroded by its decision to suspend sales to Zambia, leading to a reduction in revenue, and increased competition in some product ranges, which forced it to reduce prices to stay competitive.

However, Cipla said the impact of the suspension of sales to Zambia was “partly offset” by increased sales to donor organisations. But “change in the product mix in the orders received affected the gross margins,” said the warning, released by the Uganda Securities Exchange.

The company manufactures drugs used to treat malaria, HIV/Aids, and Hepatitis B. Its biggest customers are the Global Fund, a Geneva-based international financing institution, the government of Uganda, and governments of sub-Saharan Africa countries.

Cipla Quality Chemicals listed on the Uganda Securities Exchange in 2018, and is controlled by Cipla Limited, the Indian pharmaceutical giant. It reported a 14.2% decline in revenue in its first full-year financials as a listed company, which it attributed to changes in the product mix of received orders and price reductions due to increased competitiveness.

Cipla‚Äôs profit warning said that it has continued with “normal operations” during the Covid-19 coronavirus pandemic.