Cipla warns of headwinds in second half after second-quarter profit miss

Cipla Ltd, India’s second-largest drugmaker by market capitalisation, warned on Monday of “multiple headwinds” in the second half of the financial year after its quarterly profit fell short of analysts’ estimates.

Shares of the company declined as much as 7.7 per cent, in their sharpest intraday drop since November 2017.

The upcoming challenges include capacity balancing in certain categories at plants and sanctions, Cipla said in a post-earnings presentation without elaborating.

Higher crude and commodity prices, and rising supplies sourced from China will also pose challenges in the next two quarters, the company added.

Indian pharmaceutical companies had been hit by weak sales in the United States as regulatory bans and warnings over quality control violations at production plants weighed on their profitability. Although pricing pressure remains in the United States, Cipla’s North America business grew 23 per cent in the September quarter.

The company’s second-quarter profit fell nearly 11 per cent from a year earlier to 3.77 billion rupees as sales slowed in markets such as India and parts of Africa.

Analysts on average had expected a profit of 4.56 billion rupees for the quarter ended Sept 30, according to Refinitiv data.

Sales in India were flat, while those in South Africa fell about 3 percent, Cipla said. Total net sales declined 1 per cent to 39.48 billion rupees ($540.21 million).

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