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Granules’ profit up 43% in FY12 despite ‘dynamic’ raw materials prices

By Gareth Macdonald , 25-Apr-2012
Last updated the 25-Apr-2012 at 13:15 GMT

Fluctuating raw material prices mean market knowledge is a must for companies competing in the intermediates and ingredients space according to Granules India.

The Hyderabad-firm posted an impressive set of results for fiscal 2012 with double-digit revenue growth for its active pharmaceutical ingredient (API) - up 20 per cent to INR1.8bn ($34.4m) - and pharmaceutical formulation intermediates (PFI) businesses - up 27 per cent to INR.19bn and a net profit of INR300m, which in an increase of 43 per cent in the previous fiscal year.

This growth – coupled with the 83 per cent leap in finished dosage revenue – understandably dominates today’s news headlines . However, a closer look at Granules' figures yields some interesting developments, most notable of which is the 41 per cent increase in raw material costs to INR4.2bn.

Rising raw materials prices are a major headache for the whole ingredients supply sector with - In the last year alone - several major suppliers in Europe and the US citing them as the reason for increasing their own prices.

Spokesman Vijay Ramanavarapu acknowledged this trend, telling in-Pharmatechnologist.com that “raw material prices continue to be very dynamic” and setting out the firm’s strategy for coping with it.

“We have representatives in India and China, which enables us to understand market trends as they develop.  Granules is very transparent with customers and we constantly inform customers of market trends.”

He also stressed that: “Granules is focused on quality conscious customers; while our customers acknowledge pricing plays an aspect, they value a partner that offers consistent high-quality material and is transparent. Granules believes in long-term partnerships instead of a transactional business-model.

Finished dosage demand

Customer relationships were also important for Granules’ finished dosage revenue gains, according to Ramanavarapu, who explained that higher demand for products like Paracetamol, Ibuprofen and Metformin from existing customers was the main driver.

Our partners are continuing to ramp up production as contracts progress and we foresee strong demand in FY 13. Granules' finished dosage sales have grown more than 85% and we continue to expect strong sales as we add capacity.

Customers have been very happy with their relationship with Granules and have understood our competitive advantage, which is producing high-volume products at a competitive price.“

Expansion

Ramanavarapu also spoke about Granules’ ongoing facility expansion efforts, relating them to increasing customer demand.

In FY12, we improved our Paracetamol API capacity from 830 tons per month to 1,000 tons per month.  In addition, we increased Metformin and Guaifenesin API production in FY12.While we're always looking to de-bottleneck, Granules has invested in an expansion at our PFI and Finished Dosage facilities.”

He added that: “We are in the middle of more than doubling our PFI capacity to 18,000 tons and our Finished Dosage capacity to 18 billion doses,” explaining that both projects will be competed in June and will start contributing revenue in July.

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