A company release attributed the reduction in net profit to additional debit--proportionate up to September--to the profit and loss account, on account of the payments made to the employees who left the company under the voluntary retirement scheme (VRS).

For the quarter ended September 30, 1999, net profit declined to Rs 7.27 crore as against Rs 8.27 crore in the correponding period of the previous year. Sales jumped to Rs 74.4 crore from Rs 69.9 crore in the previous year. The profit before tax showed a decrease of 10 per cent due to a one-time charge of VRS and gratuity of Rs 3.54 crore and also write-off of assets of Rs 1.25 crore.

Excluding the one time charge of VRS compensation and gratuity and the one time write-off of assets (included in depreciation) of Rs 1.25 crore, the profit before tax shows a healthy growth of 25.6 per cent. Provision for tax for the quarter at Rs 2.7 crore has been taken based on anticipated profits for the current year.

The outsourcing of the production and other facilities of the chemical division and setting up of a supply chain division has benefited the company in the reduction of cost as well as in the better availability of products.

The company says that it is reviewing the steps to be taken as a result of the recent government notification banning the fixed dose combinations of vitamins B1,B6 and B12.

INSIGHT
New products may prop margins

INSIGHT

At the PBT level, E Merck has shown a smart growth rate of 25.6 per cent. The company's operating margin, though higher than those in the previous quarter (on account of higher prices of Neurobion and Polybion), remains low as compared to other companies as nearly 70 per cent of the company's turnover is under price control.

What is worth watching is whether authorities increase the prices of vitamin E brands, for which the company has made representation. Further the company is also likely to benefit from the host of products it is planning to launch subsequent to the acquisition of Seven Seas by Merck KGaA.

Shishir Asthana