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Ladies and
Gentlemen, |
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It is my privilege
to extend a warm welcome to the 17th
Annual General Meeting of the Members of the
Company. The Annual Report has been with you for
a while, and with your permission, I shall take
it as read. |
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FINANCIAL RESULTS |
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Aurobindo Pharma
produced another year of gratifying performance.
The Company set new records seen from some of
the key indicators – volume sold, turnover
value, exports, operating profit and net profit.
All the primary drivers touched new records. You
would have noticed turnover at Rs.13,410 million
was an increase of 12.65 per cent. Despite the
challenges, the net profit rose by 23 per cent,
at Rs.1,270 million. The fully diluted Earnings
per Share at Rs.26.41 on the enhanced capital
reflects this progress. |
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We accomplished some
of our key objectives. For instance, capacity
utilisation has increased, even after additional
investment in manufacturing capacities. There
was 14 per cent increase in exports at Rs.6,420
million. The cash flows have improved and there
was a 24 per cent drop in interest at a time,
when we have been investing higher in
manufacturing, as well as growing our business
volume. |
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Net Profit as a
percentage of sales has been on the rise from
6.6 per cent two years ago, and 8.6 per cent a
year ago, to 9.5 per cent in the latest year.
There is a secular growth. Return on Net Worth (RoNW)
was 15 per cent even after incremental
investment of over 158 per cent in fixed assets
in the last two years. |
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This is after
absorbing extraordinary costs, in the nature of
developmental expenses while running pilot
batches and conducting stability tests. Your
Company believes in charging off to revenue, all
expenses like R&D costs, outlay on DMF and ANDA
filings, cost of scientific machinery for the
regulated facilities, etc. |
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It is also
significant to note that the spree of
inspections from regulatory authorities and
vendor audits hampered the production in the
short term. We have also strengthened our
management by adding eminent management
professionals in the US and in Europe. We see
them as investments in the business, and not as
costs. |
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These are essential
activities that will help drive the Company into
the regulated markets, and we believe that such
non-recurring expenses would affect the short
term results, possibly impacting the next two or
three quarters. Going forward, we believe that
the incremental revenues would help offset the
pioneering costs. |
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I must also mention
here that during the year under review, some of
our subsidiaries have incurred losses. These are
early days at most of our locations, and as
expected there have been activation costs. Such
initial costs are part of low volume beginning
and are overcome when stability levels are
reached. We believe in conservative accounting
and adopt prudential norms, and have been
charging off all variable and revenue expenses. |
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True to your
Company’s track record of investor friendly
approach, the dividend recommended has been
stepped up from 35 per cent to 45 per cent. We
hope you will appreciate this gesture and accord
your approval. |
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ON A FAST FORWARD
MODE |
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Our business mix has
improved and we are further migrating by adding
to our existing high value products. The product
basket has been enhanced. We are further moving
up the value chain by preparing ourselves to
enter the regulated markets. We are working on
improving the quality of business, and thereby
working on sustainability levels. We are seeking
to accelerate on faster tracks. |
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Indeed, we derive
satisfaction from the fact that we have
positioned ourselves better. Our manufacturing
facilities meet the regulatory standards; we
have vertical integration of production from key
raw materials, through APIs and intermediates to
formulations; the product portfolio has an
enviable value chain; we have aligned our R&D
with our production requirements; we have global
presence that would improve our visibility; and,
we have an incredible and energetic team that
takes pride in delivering what the customer
wants. |
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We have also wired
our internals with the latest in technology, and
we are in the advanced stage of implementation
of our ERP platform. We believe the decision
making processes would also improve as we settle
down with the demands of the new systems |
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RESEARCH &
DEVELOPMENT |
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R&D spending has
been increasing steadily each year. This year
saw the completion of our new research facility
at Mumbai. We have placed sophisticated
laboratory equipment at the disposal of our
research team. Our existing facility located
near Hyderabad has also been upgraded. |
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The uniqueness of
Aurobindo is in its five product platforms
comprising sterile and non-sterile
semi-synthetic penicillins, cephalosporins, and
presence in therapeutic segments like CNS, CVS
and antivirals. Such a broad portfolio requires
significant investment in manufacturing
facilities and R&D Centre. |
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Your Company’s
research efforts are currently bent towards
widening the product portfolio with a view to
maximizing impact on regulated markets. The
emphasis is on creation of non-infringing
processes to produce high quality and cost
effective generic drug versions. |
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Aurobindo has always
had a clearly mapped out generics strategy. A
central element of our strategy is to focus
exclusively on the creation of different
processes without infringing on the IP rights of
our industry peers. We shall patent our
non-infringing processes (NIP), giving them an
effective shield of enforceable property rights. |
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The inevitable
expiry of product patents will open up the
field. Maximizing profits from this opening will
be our priority. Aurobindo will file drug master
files and ANDAs selectively, based on fast
moving products that can seize opportunities in
the post product-patent regime. |
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The year under
review saw us file for a number of DMFs and
ANDAs with the US FDA and the EDQM. We also
filed for patents that will help protect our
intellectual property. In 2004-05, we expect to
announce a marked increase in the number of
filings. |
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IIn
the recent past, your Company’s facilities were
inspected by regulatory authorities from the US
FDA and you will be glad to know that there were
no FDA 483 queries from the inspectors and these
facilities are approved by USFDA. The Company
has also successfully complied with the UK
Audit. |
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We have strengthened
our capabilities in IPR, regulatory affairs,
etc. by attracting talented personnel. There is
a hunger for knowledge and a renewed sense of
purpose in our research team. They are brimming
with talent and keen to put it to good use.
Aurobindo is also actively adding skillful
contributors to its think-tank. |
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GROWTH STRATEGIES |
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These are exciting
days at Aurobindo Pharma. Our growth trajectory
has changed, and we shall be competing in the
quality conscious markets of the western world.
We have upgraded our competitive abilities,
especially with our preparatory work to enter
the regulated markets. Our profile has changed.
It’s a different, more potent and more confident
Aurobindo Pharma that we have created. |
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The Company’s
manufacturing facilities and products have begun
to get international recognition. As you are
aware, we have started receiving approvals from
international regulatory authorities. We assure
you, we shall pursue to get our key products
approved by the authorities in all our
addressable markets. |
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Members will
appreciate that we are strengthening the
Company, while at the same time we are
effectively derisking our business. We have
become the most cost effective producer for all
our products, which will hugely add to our
competitiveness. Our increasing geographic
footprints with units and presence at strategic
locations globally would further add to our
capabilities. Various marketing arrangements
being made in key areas around the world would
help your Company move up the value chain.
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We will be producing
where we have cost or locational advantages, and
our marketing units would be able to convert
approvals and certificates into cash. We are
both a topline and bottomline conscious company.
We will work for volume and margin, while
keeping the costs under control. Our focus will
always remain on operational excellence. |
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EXPANDING OUR
BOUNDARIES |
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I like to believe
that our journey has just begun. We are
transforming into a pharma powerhouse. The new
Aurobindo with all its technical strengths, core
competencies, manufacturing competitiveness and
delivery mechanisms is in a position to meet the
challenges of the premium and regulated markets. |
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We have mapped our
growth plans, and have clearly identified our
strategies that will help the Company gain
momentum. We will remain single minded in
improving value offers to customers, medical
profession and shareholders. |
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We have so far
delivered a superior return to our shareholders
as we grew. Our shareholders have received
higher compounded return on the Aurobindo stock,
considering the market capitalization, the bonus
shares issued and dividend pay-outs. In fact, we
have been giving better returns than the market
indices. |
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Our management team
cannot take responsibility for short term
fluctuations in our stock price, but we would
take full responsibility for building a
profitable company and delivering share holder
value over time. You can count on us. |
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CONCLUSION |
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We have a reservoir
of skills and talents within the Company, and
they have brought the Company this far. On
behalf of the Board, I would like to assure you,
that we shall succeed in our endeavours because
of the smart work they put in, day-in and
day-out. An ordinary word of thanks is not
enough. We are proud of the entire Aurobindo
team. |
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We have a large
family of discerning and knowledgeable share
owners, who have been giving us strong support.
We are grateful for the confidence shown in the
Company. We have the skill and confidence to
produce accelerated growth, and shall stand up
to everyone’s expectations. |
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Thank You.
P. V. Ramaprasad
Reddy
Chairman
31st July
2004 |
PRESS
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