Cipla profit after tax reduce by 21% to Shs 18.9bn

But directors have recommended a dividend of Shs2.5 per share payable in September this year which is higher than Shs2 per share paid last year.

Kampala, Uganda | JULIUS BUSINGE | Pharmaceutical manufacturing company Cipla Quality Chemical Industries Limited has reported a 21% decline in profit after tax from Shs24bn in FY2021/22 to Shs18.9bn in FY2022/23 signaling tough business environment.

The company’s overall operating profit went down by 26% from Shs39billion in FY2021/22 to Shs29billion in FY2022/23 according to its financial results released on May 23, signed on by Emmanuel Katongole, the company’s chairman and Ajay Kumar Pal, chief executive officer.

Revenue during FY2022/23 was Shs221.5 billion compared to Shs267.4 billion in FY2021-22. “Revenue decreased compared to FY2021/22 under difficult trading conditions, which include ongoing cost pressure and supply chain disruptions…export sales were hit hardest, declining by 38%, mainly because of the reduction in the contract manufacturing business,” company executives said.

Profit before tax reduced by 16% to Shs31.8billion compared to FY2021/22 largely because of a reduction in revenue and increased general and administrative expenses.

However, continued success in the collection of overdue amounts from the Zambia government improved its performance and supported the reduction in the loan balance and interest expense.

On the positive, the gross profit margin improved by 4% compared to FY2021/22 due to continued focus on operational excellence and product mix.

Executives said a benefit of reversal of impairment allowance on trade receivables was recorded after the recovery of some overdue amounts resulting from earlier sales to the government of Zambia. The company recovered Shs14.7 billion from GoZ.

The company has applied collections from GoZ to reduce its related term loan, which now stands at Shs5.4 billion compared to Shs23.2billion in FY2021/22. This benefit was, however, reduced by increased general and administrative expenses resulting from inflationary headwinds.

Finance income and costs

Interest income was earned from short-term cash placements with banks. Early-term loan repayments were effected in FY2022/23 following receipt of long overdue amounts from GoZ. Consequently, loan interest expense was reduced by 30% to Shs744 million compared FY2021/22.

Meanwhile, foreign exchange gains in FY2022/23 amounted to Shs3.2billion compared to a foreign exchange loss of Shs0.1 billion in FY2021/22 mainly due to the depreciation of the local currency against the foreign currencies.

Excluding the impact of Zambia collection, profit for the year would have been Shs 10.3 billion (FY2021/22: Shs13.3billion) resulting in a net profit margin of 5% (FY 2021/22: 5%).

The other positive performance was recorded on the cash flow area generated from operating activities which increased from Shs15.9 billion in FY2021/22 to Shs 41.9 billion in FY2022/23 mainly due to profitable operations and part collection of the GoZ debt.

Net cash used in investing activities of Shs10.6 billion (FY2021/22: Shs 8.0billion) was used to equip the new store to boost the company’s storage capacity of raw materials and finished goods. The other capital expenditure was mainly to maintain factory capacity.

Net cash used in financing activities of Shs28.9billion (FY2021/22: Shs 7.0 billion) was mainly for term loan and shareholder dividend payments.

Proposed dividend

Subject to approval by shareholders, the directors have recommended payment of a dividend of Shs2.5 for the year up from Shs2 paid out a year before.

The dividend shall be paid to shareholders registered in the books of the company at the close of business on September 7, 2023, and will be paid on September 28.