Cipla Quality Chemical’s exports fell sharply, largely as a result of suspending sales to the government of Zambia following delayed payments, leading to a decline in revenue and the company’s first loss since listing in 2018.
The company said export sales were down 53% in the year ending March 2020 mainly a result of “suspension of sales to GOZ due to delayed payments for previous deliveries.” Local sales, however, rose by 18% on increased orders from international health organisations.
Revenue fell to Shs192.6bn, 1.3% less than the previous year. The cost of sales rose 9.9% to Shs155.7bn, causing gross profit to reduce to Shs36.9%, down 30.9% year on year.
The pharmaceutical manufacturer said it sought to “minimise the reduction in GOZ related revenue” by increasing donor-funded malaria products. “To a certain extent, this was successful with Global Fund sales increasing significantly to $16.4m from $2.6m in the prior year,” it said.
However, Cipla Quality Chemicals noted that the ‘substantial’ increase in donor-funded sales could not “fully make up for the decline in GOZ business”. The company said it is working with the Ugandan government to get Zambia to “expedite the settlement of the outstanding balance.”
The Zambia debt saw Cipla Quality Chemicals increase its impairment allowance on financial assets to Shs32bn, up from Shs3bn the previous year. As a result, the company recorded an operating loss of Shs31.8bn compared to a profit of Shs9.7bn a year earlier.
Finance costs rose 52% to Shs3.9bn after the company borrowed “to cover the working capital gap” created by the Zambia debt. Cipla Quality Chemical’s income tax expense for the year rose to Shs12.6bn. The company recorded a loss of Shs23bn, compared to a profit of Shs6.7bn the previous year.
The firm’s board of directors did not recommend payment of a dividend for the financial year.