Neuland Laboratories (524558) Q4 05/06 earnings summary

Executive summary

• FY06 revenue rose 7% in a competitive year; net income reached a record Rs6.24 crore, up 27.4% YoY on audited figures.

• Growth reflected higher production and sales volumes, customer and market expansion, and manufacturing efficiencies despite subdued selling prices and elevated raw-material costs.

• Strategy advanced toward an integrated API, research and development, and drug discovery partner, supported by new products and planned R&D capacity.

Financial highlights

• Gross revenue was Rs170.3 crore, up 7.6% YoY; audited revenue after excise duty was Rs163.16 crore, up 6.7% YoY.

• Net income was Rs623.61 lakh versus Rs488.98 lakh, up 27.4%; FY06 had no prior-period or exceptional items, versus Rs40.73 lakh net exceptional items in FY05.

• Profit before tax and exceptional items was Rs869.18 lakh versus Rs729.23 lakh; profit before depreciation, tax and exceptional items was Rs1,471.72 lakh versus Rs1,313.98 lakh.

• Manufacturing volume reached 653 tonnes, up 4%; exports were Rs120.06 crore, nearly unchanged from Rs119.95 crore.

Outlook and guidance

• FY07 export turnover target was Rs133.61 crore; the new financial year opened with good orders and manufacturing facilities at optimal capacity.

• Several products were targeted for launch in H2 FY07; most pipeline products were expected to go off-patent only after 2009, delaying revenue contribution.

• The new R&D centre was expected to go live in Q2 FY07; the planned Nanakramguda development includes two R&D facilities and a headquarters, with groundbreaking targeted for Q3 FY07.

• Research and development service revenues were expected to take 2–3 years; longer-term plans include drug discovery, development, and contract research services.