Forex gain boosts earnings of JB Chemicals.

The stock of drug-maker JB Chemicals gained over 15 per cent in trade on Wednesday. The better-than-expected growth in earnings in the June quarter triggered the rally. The company reported a 56 per cent jump in net profit to Rs. 32 crore.

But this was largely driven by translation gain of Rs. 3.7 crore on account of forex fluctuation, compared with a forex loss of over Rs. 5 crore during the same period last year. The pre-tax profit before adjusting for forex gain/loss grew by a modest 18 per cent in the June quarter, compared with the year-ago period.

Revenues grew by about 12 per cent, aided by 19 per cent growth in domestic sales. The growth in formulation exports remained subdued at 9 per cent. However, cost rationalisation enabled JB Chemicals improve its operating margin by 1.2 percentage points to 18.4 per cent despite an increase in raw material costs.

The company has re-commenced sale and distribution to the Russian and CIS markets during the June quarter. Sales in this geography declined sharply in 2012-13 following the sale of the company's non-prescription drug business to Johnson & Johnson's subsidiary. However, a pick-up in sales in this geography is likely to be gradual and, hence, contribution to overall revenues may not be significant in the short-term.

JB Chemicals also announced investment of Rs. 140 crore for expanding its tablets, liquids, lozenges, ointments, and eye drops manufacturing capacity. The investment will be spread over the next 12-18 months and will be funded through internal accruals.


HBL