In its latest financial results for the first quarter of fiscal year 2025, Aarti Drugs Ltd. (ADL) reported a significant drop in revenue and profitability compared to the same period last year. The pharmaceutical company, which is a leading producer of various APIs and formulations, saw its consolidated revenue decline by 15.9% year-over-year (YoY) to ₹556.5 crore.
The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) also fell by 22% YoY to ₹66.1 crore, with an EBITDA margin of 11.9%. Profit after tax (PAT) declined by 30.6% YoY to ₹33.3 crore, with a PAT margin of 6%.
Reasons for the Decline in Q1 FY25 Performance
According to Adhish Patil, CFO & COO of Aarti Drugs Limited, the drop in revenue and profitability was mainly due to lower realizations stemming from negative rate variance and subdued market demand in the API business. Relatively lower capacity utilization for the quarter also weighed negatively on the EBITDA margins.
The company’s formulation segment, however, reported a 4.2% quarter-over-quarter (QoQ) growth in revenue, standing at ₹70.4 crore for the quarter. Aarti Drugs recently commenced its facility for dermatology products in Tarapur, but faced some initial challenges that led to increased costs of around ₹6 crore in the quarter.
Outlook for the Remainder of FY25
Despite the challenges faced in Q1 FY25, Aarti Drugs remains optimistic about its future prospects. The company expects an improvement in margins, mostly driven by an anticipated growth in export sales and backward integration.
The greenfield project at Gujarat Sayakha for Specialty Chemicals is on track and is expected to commence by the end of the second quarter of FY25. With this, the company anticipates improved capacity utilization and operating leverage from the second half of the year.
Aarti Drugs plans to ramp up production at its new dermatology facility in Tarapur progressively in the September and December quarters of 2024. The company also incurred a capital expenditure (capex) of ₹52 crore during Q1 FY25, mainly towards capacity expansion, backward integration, and new product launches. It anticipates a total capex of around ₹200 crore for the full year, to be funded primarily through internal accruals and partly through term loans.
Aarti Drugs’ Commitment to Growth and Innovation
Despite the temporary setback in Q1 FY25, Aarti Drugs remains committed to staying ahead of the curve in the evolving pharmaceutical API manufacturing industry. The company continues to expand its capabilities and enhance its offerings to meet the ever-changing needs of its customers.
Aarti Drugs plans to invest in new technologies and equipment that will help streamline its processes and improve efficiency. The company also remains focused on its expansion plans, including the commencement of its specialty chemicals facility in Gujarat and the ramp-up of its dermatology products facility in Tarapur.
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