Conference Call      
          Cipla
Expects Capex to be Rs 1200 crore for next two years


Cipla recently announced the financial results and held a conference call on 14th November 2011 to discuss the results and its future growth strategies. The key takeaways of the call are as follows

Highlights of the Concall:
Net sales grew by 10% to Rs 1731.83 crore for the quarter ended September 2011 and net profit grew by 17% to Rs 308.97 crore for the same period.

Revenues from the domestic business grew by 12% to Rs 847.03 crore for the quarter ended September 2011, contributing 48% to the total sales. Further, export business (52% of total sales) grew by 9% to Rs 911.06 crore.

Revenues from the export formulation business higher by 13% to Rs 751.58 crore for the quarter ended September 2011. However, Revenues from Export API formulation business declined by 5% to Rs 159.48 crore.

Revenues breakup for the Export business across the geographies during the quarter: Africa 35-40%, Europe 15%, America (North & South) 25%, Middle east 5% and Asia 10%. Further, the total contribution from ARV's is 15-20% to exports Malarial 8- 10% to exports.

Raw material cost as % to sales is lower during the quarter due to improved realizations, reduction in input costs of certain products coupled with the change in product mix and also there have been higher cost efficiencies due to increased utilization levels at Indore SEZ facilities.

Other exp increased due to provision for bad debt.
During the quarter, other operating income includes Rs 14 crore forex gain. Further, it has Forward contracts USD 180 million.

It has filed 11 products in the EU market in inhalers business. However, it has received 4 approvals and 6 are under various process of filing and it expects approval for these may come in next couple of years. Its Inhaler business contributes 20% to the total revenues.

During the quarter, Sales from Indore SEZ was Rs 150 crore includes incremental revenues as well as shifting of products from other manufacturing facilities.

However, it insisted that Indore SEZ would take a couple of years to reach optimum utilization levels, which could be the significant driver for export business. It might go for US FDA filing for the facility in next year as it has en-half approved capacities

The company plans to reduce sales from lower margins ARV's and also trying to get higher price mainly in South Africa based contracts.

It expects 2-3% down side impact on domestic sales due to the change in the new pricing policy.

The Capex expected to be Rs 1200 crore for FY'12 & FY'13 is for R&D and two API facilities. It also includes maintenance capex of Rs 200-300 crore.

Expects the Tax rate would be 20-22% for the FY'12.

It expects Revenues to grew by 10-12% for FY12 and bottom-line growth would be in line with H1'FY 12. Moreover, it expects domestic market may grow at 10-12% for the FY'12.

The Company would like to focus on margins and targets 24-25% operating margins going forward. The niche products in pipeline and Respiratory approval from EU would increase the margins going ahead.