Renata’s profit falls 42% despite higher sales in Q1

Drug maker Renata's profit fell 42 percent year-on-year to Tk 52 crore in the July-September period of the current fiscal year, mainly due to increased spending on raw materials, manpower, energy, and interest amid the devaluation of the local currency.

However, the company's sales rose by around 8 percent year-on-year to Tk 1,009 crore in the three-month period, despite the political turmoil and natural disasters that hit the country.

Costs at the manufacturing level rose due to a jump in labor costs and a 48.6 percent increase in power costs, the company said in a statement.

The company also reported that its selling, marketing, and distribution costs spiked due to salary increments effective from January 2024, a 10.5 percent increase in permanent staffing, and a further 12.5 percent increase in casual staffing.

"Mitigating actions and initiatives taken to manage labor disruptions during August and September have also contributed to the increased personnel costs," it said.

Factory overheads also increased due to depreciation, Renata added.

During the year, Renata capitalized an additional Tk 453 crore in expansionary investments, leading to a 28.4 percent rise in depreciation costs.

"This cost is being incurred now, but these investments have enhanced its manufacturing capacity to support further revenue growth going forward," the company said.

The increase in its debt positions from Tk 1,430 crore to Tk 1,880 crore, coupled with a rise in interest rates, contributed to higher finance costs.

"Increased debt is directly linked to the increased investments made during the year," the company stated.

Prior to the elections and for several months afterward, the company had entered into UPAS (Usance L/C payable at sight) positions due to a lack of dollar liquidity in the country. This approach exposed the company to significant foreign exchange risk.

The risk materialised following the introduction of the crawling peg model in May 2024.

The stock price of Renata dropped 1 percent from the previous day to Tk 658 today.