Zydus Lifesciences (ZYDUSLIFE) Q4 04/05 earnings summary

Executive summary

• Standalone FY2004-05 revenue rose 0.8% YoY to Rs. 11,253mn; PAT fell 8.1% to Rs. 1,314mn and EPS declined to Rs. 20.93 from Rs. 22.75.

• Consolidated revenue increased 2.2% to Rs. 13.1bn; net profit fell 9% to Rs. 1,215mn. Results include 13–15 month periods for certain subsidiaries and a JV, adding Rs. 324mn to sales and Rs. 57mn to profit.

• Q4 domestic formulations were sharply affected by pre-VAT channel destocking; management expected normal growth to resume in FY2005-06.

Financial highlights

• Standalone net sales were Rs. 10,634mn after Rs. 619mn excise duty; other income fell 12.2% to Rs. 785mn, mainly on lower JV dividends.

• Standalone PBIDT declined 2.5% to Rs. 2,395mn; PBT fell 8% to Rs. 1,504mn and PAT decreased to Rs. 1,314mn from Rs. 1,429mn.

• Consolidated PBIDT fell 4% to Rs. 2,457mn and net profit declined to Rs. 1,215mn from Rs. 1,331mn; comparison includes extended reporting periods for certain entities.

• R&D expense, excluding depreciation, rose 12.3% to Rs. 710mn, equal to 6.3% of standalone sales versus 5.7% a year earlier.

Outlook and guidance

• FY2005-06 priorities: grow domestic formulations, expand in regulated U.S. and European markets, and pursue licensing, alliances and contract manufacturing.

• Target: become a top-10 global generics player with sales above $1bn by 2010, and a research-driven global company by 2020.

• U.S. generics market entry was expected in early FY2005-06 through the Mallinckrodt marketing and distribution alliance; Brazilian generics launch was planned for Q1 FY2005-06.