The Hindu Business Line : Fluctuating rupee hits Cipla’s Q2 net profits

Uncertainty caused by the fluctuating rupee and the liquidity crisis continues to paint a grim scenario ahead, said drug-maker Cipla’s Chief Executive, Mr Amar Lulla. The Mumbai-based company saw its profits for the three months ended September 30, 2008, taking a forex hit of 21 per cent.

Cipla has provided Rs 104 crore on account of net loss for the quarter on revaluation of forward contracts and foreign currency loans consequent to the depreciation of the rupee against the US dollar. A substantial portion of these losses (amounting to Rs 74 crore) is notional, the company told the Bombay Stock Exchange.

Uncertainty abounds and it is difficult to project, Mr Lulla said, on how the forthcoming quarter would pan out. The worst is yet to come, he added. Responding to whether the pharma industry was a little insulated from the credit crunch that has severely impacted global financial and banking services, he said, no industry is an island. The uncertainty in the exchange rates and liquidity crunch will impact everyone.

Expansion plans

On Cipla’s Rs 2000-crore capacity expansion plans between 2007 and 2010, he said, the funds had been tied-up and the plans would not be impacted. During the quarter under review, the company’s domestic sales grew by about 16 per cent and exports grew by about 33 per cent. This was largely due to a 48 per cent growth in formulations.

Material cost (as a percentage to income from operations) has decreased during the quarter mainly due to improved exports on account of favourable exchange rate pursuant to the depreciation of the rupee and changes in product mix. This impact of the exchange rate is also reflected in increased operating margins, as compared to the previous year, since exports are booked at prevailing exchange rates, the company told BSE.

Cipla shares were down 3.32 per cent at Rs 183.45 on the BSE on Wednesday.