Hikal Limited has reported Consolidated financial results for the period ended June 30, 2023.

The company has posted net profit of Rs. 6.92 crores for the period ended June 30, 2023 as against net profit of Rs. 36 crores for the period ended March 31, 2023. The company posted net loss of Rs. 8.86 crores for the period ended June 30, 2022.

The company has reported total income of Rs. 388.99 crores during the period ended June 30, 2023 as compared to Rs. 545.67 crores during the period ended March 31, 2023. The company reported total income of Rs.382.06 crores during the period ended June 30, 2022.

Commenting on the results, Jai Hiremath, Executive Chairman, Hikal Ltd. said, “FY24 has started off on a challenging note due to global macro-economic pressures and high channel inventories leading to lower demand across both our businesses. The chemical industry faced difficulties due to China's opening up and depressed market conditions specifically in the Crop Protection end use markets.

For Q1FY24, we reported revenues of Rs. 388 Cr. and EBITDA of Rs. 50 Cr. During the quarter we witnessed disruptive channel inventory correction across the supply chain in both the businesses. We were able to navigate through the market headwinds on the back of improved cost control measures and softening of certain raw materials prices.

On 22nd July 2023, the company had received communication from Gujarat Pollution Control Board (GPCB) directing company to seize operations within 15 days from the order date citing certain technical violations. The company has responded to the queries raised by the GPCB and the closure notice has been revoked. There has been no interruption in production and operations at the site, which continues to operate as normal. We are deeply committed to upholding the principles of responsible care and sustainable business practices.

For Q1FY24, our pharmaceutical business reported revenues of Rs. 225 Cr. In the pharmaceutical industry, we witnessed softening of raw material prices at the same time competitive pricing environment. On the Generics side, sales have stabilized, and the inventory is expected to normalize by end of next quarter. We expect that the off take will return to normalcy in the second half of this financial year. We have strengthened our sales network in geographies like Latin America, Middle east and Japan. On the CDMO front, we continue to have a strong future pipeline and are aggressively capitalizing on new opportunities. During the quarter, our API facility in Panoli, Gujarat, was audited by the US FDA, and the audit was concluded with ‘Zero’ 483 observations as a testament of our commitment to high standards of regulatory compliance. 

Our Crop Protection business reported revenue of Rs.163 Cr. for Q1FY24. The global agrochemical industry has been going through a challenging phase over the last several quarters as end customers are destocking amid high channel inventories. The market is witnessing pricing pressure given the higher base of previous year and very aggressive price competition from the Chinese companies. We are experiencing a decline in prices of certain products due to the cost of inventory with channel partners. However, we anticipate a recovery in demand towards end of Q3 FY24. On margins side, softening of raw material prices and deployment of cost improvement programs is expected to have a favorable impact.

In our Animal Health business, the progress on developing new products as part of a long-term contract with an innovator animal health company is progressing well. Our new multipurpose plant for Animal Health is on track at Panoli, Gujarat and commissioning is underway. We will be validating several products in the upcoming quarters.

We are well-positioned to benefit from the significant opportunities considering the current shift in the global supply chain and the diverse capability built over the period of three decades. We are anticipating a better second half of the year with an up-trending revenue, realization from cost improvement programs and raw material price stabilization. We are confident that the journey of longer-term sustainable growth and profitability is still very much intact.”

Key Highlights

➢ Hikal’s Panolisite undergone US FDA audit which was concluded with ‘Zero’ 483 observations

➢ US FDA approval is in line with de-risking strategy for additional API site to service our global customer base

➢ Muted volumes coupled with pricing headwinds and high-cost inventories on our customers side impacted topline and profitability

➢ The performance is expected to gradually pickup and operating leverage to improve in the second half of the year

➢ Pharmaceutical sales was flat and stood at Rs. 225 crore as compared to Rs. 224 crore in Q1 FY23

▪ Good traction in Generics from customers in Japan, Latin America and Middle East geographies for the newer product portfolio

▪ New opportunities are under advanced stage of discussion with various global innovators in CDMO business

▪ New multipurpose plant for Animal Health is on track at Panoli, Gujarat and commissioning is underway

➢ Crop Protection revenue stood at Rs. 163 crore as compared to Rs. 154 crore in Q1 FY23

▪ We have a strong pipeline of opportunities under discussion with various global innovators

▪ New multipurpose facility at Panoli, Gujarat is currently stabilizing and commissioning activity is ongoing