Strong dollar erodes profitability of pharma companies

The leading pharmaceutical companies of the country experienced a drop in their profit margins in the July-September quarter, owing to a strong dollar and soaring freight costs.

The companies, however, logged a year-on-year increase in their sales, according to the first quarter financial statements of the top ten drug manufacturers listed on the local capital market. 

Companies like Square and Beximco Pharma have been able to tackle the increase in their business costs, but others such as ACI and Renata could not make it.

ACI Limited said in its financial statement that in the first quarter, it achieved significant revenue growth mainly contributed by sales growth in some of the business segments. However, the substantial increase in costs due to macroeconomic factors, including a significant hike in import costs, caused the devaluation of the local currency against the US dollar, leading to a decline in consolidated profit compared to the same period of last year.

Square Pharma's Executive Director Kabir Reza told The Business Standard, "Due to an increase in the value of the dollar, raw materials have to be imported at higher prices. But the price of medicine has not increased accordingly."

"Hence the profit margin in the pharma sector has decreased. However, Square Pharma has not been affected by inflation due to its large size and product diversification."

Meanwhile, Beximco Pharma's solo income increased but consolidated profit dropped because of losses incurred by its subsidiaries.

In its financial statements, the company said its consolidated profit has declined due to a drop in profit of the subsidiary Nuvista Pharma and a loss incurred by the other newly acquired subsidiary Synovia Pharma.

The company also noted that net operating cash flow per share declined as against the corresponding period a year ago, due to increased working capital investment consequent upon the record devaluation of the taka, increased price of materials, and higher domestic inflation.

Nazmul Hassan, managing director of Beximco Pharmaceuticals, commented on a briefing filed on the London Stock Exchange, "We are pleased to report continued momentum in our revenue growth this quarter, highlighting the strength of our underlying business. However, as indicated in the recent announcement of our full-year results, we have also seen the impact of a number of macroeconomic headwinds on our bottom line over the period, with particular difficulty caused by challenging exchange rates."

"While we expect this situation to remain throughout this financial year, we will look to find operational efficiency in the business, and maintain our commitment to growing our portfolio of products and delivering high-quality, affordable medicines in both the domestic and international markets."

Currently, Bangladesh meets 98% of the demand for finished-form pharmaceutical products locally. Despite being nearly self-sufficient in the area of finished drugs, the country depends on imports for more than 90% of raw materials.

The national currency lost its value by more than 20% against the greenback, hitting Tk108 in September this year on the interbank exchange market against Tk84.90 on the same day a year earlier. During the period, fuel price hikes caused an increase in transport costs.

Meanwhile, during the first quarter, pharmaceutical exports also fell by 25% to $41.89 million. But people linked with the industry hope that export value will cross $1 billion within the next two or three years.