Jubilant plans expansions, new plants to build in Q4 growth

By Nick Taylor

- Last updated on GMT

Related tags Life science Generally accepted accounting principles Life Jubilant

Jubilant Life Sciences is to build an intermediate plant and expand production to continue double-digit growth seen in the fourth quarter.

Extension of production capabilities and improved capacity utilisation will be key growth drivers at Jubilant in the coming fiscal year. Execution of this plan will help Jubilant build on fourth quarter double-digit sales growth in life science ingredients.

We expect to deliver a robust sales growth and better margins across all the businesses on account of increased capacity utilisation, commissioning of new plants, innovation led new launches and expansion of market geographies​”, said Hari Bhartia, managing director of Jubilant.

Planned production expansions relevant to the pharmaceutical industry include: commissioning of an intermediate plant; a 20 per cent increase in pyridine capacity; construction of a niacinamide facility; and addition of life science chemicals capabilities.

Jubilant has budgeted Rs500 crores ($112m) for capital expenditure in fiscal 2012, mainly for the above plants and agrochemical expansions. When at full capacity utilisation Jubilant expects the plants to generate revenues of more than Rs1,200 crores.

Ingredients and generics

Jubilant posted double-digit fourth quarter growth in life science ingredient sales. A 19 per cent uptick in revenues from active pharmaceutical ingredients (API) and strong performance at the life science chemicals unit drove full year sales growth.

Year-on-year growth in fourth quarter generic sales was 24 per cent. Sales of solid dosage forms, up 33 per cent for the full year, and radiopharmaceuticals were the main growth drivers in fiscal 2011.

Despite close to double-digit fourth quarter and full year sales growth at the life science products group operating profit dipped in both reporting periods. Rising expenditure and weak performance at the service unit were responsible for the drop.

Service dip

Net sales for Jubilant as a whole fell in the fourth quarter, and experienced a modest full year rise, as a result of the service unit dragging on performance. In the fourth quarter service unit sales fell 32 per cent compared to a year ago when figures were buoyed by H1N1 revenues.

Jubilant’s contract manufacturing organisation (CMO) benefited from the H1N1 sales a year ago and as such revenues were down 40 per cent in the fourth quarter. This compounded weak performance in earlier quarters and led to a 20 per cent drop in full year sales.

The drug discovery and development solutions unit performed better in the fourth quarter, with revenues flat, but posted a 16 per cent drop in full year sales. Total full year sales at the life science services unit fell 19 per cent to Rs749 crore.

Jubilant expects a turnaround at the service unit in fiscal 2012 to result in a “substantial increase in margins​”. Increased capacity utilisation is expected to improve margins in the coming year.

Shares in Jubilant were up 7.92 per cent at Rs171.70​at the time of publication.

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