Trading Dominates

Updated: May 25 2002, 05:30am hrs
After suffering low sales during the last two years, Novartis managed to increase slaes by 16 per cent to Rs 467.7 crore in the year to March 2002. Pharmaceuticals account for more than 81 per cent of total sales.

Top three brands "Voveran", "Tegrital" and "Calcium Sandoz" account for one third of pharma sales. Voveran is likely to come under the new DPCO. Further, there are many new entrants in this segment which can bite into the market share of Voveran. But ‘Tegrital’ may come out of price control.

In the pharmaceutical business around a fourth of income comes from generics. The company is targeting this business as one of the focus areas for further growth despite low margins as compared to branded products.

Novartis took over Ciba’s CKD business and repaid its entire debt of Rs 90 crore. Novartis is restructuring the product portfolio of Ciba CKD business that is marked by low return

Novartis is among a few companies with low level of its own manufacturing that accounts for only five per cent of turnover. The rest comes from trading. Raw material consumption is about Rs 16 crore while purchase of finished goods is worth Rs 216 crore. During the last few years, the company has been selling its properties and production capacities and resorting to trading activities.

The company has restructured its product portfolio by assigning greater weightage to high margin products. A shift from manufacturing to trading has also helped saving in overheads. Other income up 27 per cent to Rs 39 crore helped increase profit in 2001-02. Operating profit increased by 20.4 per cent at Rs 104 crore and margin improved from 21.4 per cent to 22.2 per cent. Net profit increased by 24 per cent at Rs 65.3 crore.

The company is slow in introducing new brands. New brands contribute only 9 per cent to total sales. Novartis will receive a boost to its bottomline if it gets new drugs from its parent company, as cost control and shifting from manufacturing to trading will have limited impact on the bottomline.

Dhruv Rathi