Profit might be hit in FY16: Sun Pharma

Sun Pharmaceutical Industries, India’s largest in the segment by revenue, on Monday said its profit might be 'adversely impacted' this financial year, owing to expenses related to its integration with Ranbaxy, as well as remedial action at plants under the scanner.

It added it was exploring the sale of low-margin businesses.

“As part of the integration process, the company expects to incur certain integration charges to generate long-term synergies from this merger.

"Also, as part of the process, the company might decide to discontinue certain non-strategic businesses,” Sun said.

On a standalone basis, the company had posted revenue of Rs 8,017 crore (Rs 80.17 billion) and a loss of Rs 1,472 crore (Rs 14.72 billion) for FY15.

On a consolidated level, net sales stood at Rs 27,286 crore (Rs 272.86 billion), while net profit was Rs 4,541 crore (Rs 45.41 billion).

“We have initiated the process to integrate Ranbaxy.

"The integration charges should help in controlling operating costs,” said Managing Director Dilip Shanghvi. Sun acquired Ranbaxy Laboratories from Daiichi Sankyo for $3.2 billion last year.

“Our target for synergy benefits from the Ranbaxy acquisition has risen 15-20 per cent compared to our original target of $250 million by FY18.

This will be achieved by focusing on overall profitability improvement, driven by revenue and procurement synergies, manufacturing rationalisation and additional cost-management measures,” the company said.

“There are certain aspects of Ranbaxy businesses that are better or in line with our expectations.

"We haven’t had any major negative surprises,” Shanghvi said.

Four Ranbaxy facilities in India have been barred from exporting to the US market by the US Food and Drug Administration, which found violations of good manufacturing practices at these units.

Shanghvi said remedial measures at the company’s Halol plant (also under the US FDA scanner) had led to supply constraints in the case of certain drugs.

The company, he added, was working to ensure good manufacturing prices that met global regulatory standards.

“We expect this situation to continue for some more time till all remedial steps at Halol are completed.

"The remedial action at the Mohali, Dewas, Paonta Sahib and Toansa facilities (all Ranbaxy’s) is on track.

"We are working towards the fulfilment of the requirements of the US consent decree and will try to expedite the resolution for at least one of these facilities,” the statement said.

Sun is considering divesting businesses that are less strategic, or low margin.

“We are evaluating two-three businesses internally,” Shanghvi said, without giving the details.