Renata’s profits rebound in Q1

Profits of Renata Ltd, a major player among listed drug makers in Bangladesh, rebounded in the first quarter of the current fiscal year as the company's revenue growth doubled during the period.

But on a yearly basis, Renata's profits dropped 18 percent to Tk 101 crore in July-September of fiscal 2023-24, as per the company's financial statements that were approved at its recent board meeting.

Renata's profits had been falling ever since the second quarter of fiscal 2022-23, when it dropped to Tk 85 crore before sliding further to Tk 59 crore in the third quarter later that year.

"After a very challenging fiscal 2022-23, our performance has started turning around," said Jubayer Alam, company secretary of Renata.

Renata's overall revenue grew by around 13 percent year-on-year to Tk 944 crore in the first quarter of the ongoing fiscal while it was lodged at 6.5 percent throughout the previous year.

"We also significantly reduced the amount of credit sales, which is contributing to lower bad debt and allowing our sales force to concentrate on revenue generation instead of collection," he added.

Besides, to mitigate liquidity stress and reduce interest expenses, Renata converted a major portion of its short-term bank loans to long-term debt in June, thereby locking in interest rates for up to a year.

And to allay the risks of changing interest rates, especially considering the current economic climate, Renata plans to raise funds of up to Tk 850 crore by issuing zero-coupon bonds and preference shares.

Also, the company went "cashless" in July so its tax rate will reduce from 22.5 percent to 20 percent this year, generating further shareholder value.

In fiscal 2022-23, Renata's profit declined by 54.6 percent to Tk 232 crore mainly due to several external factors, as stated in its financial reports.

For example, the company's raw material costs grew by up to 25 percent that year thanks to taka's devaluation against the US dollar coupled with higher energy and distribution charges.

Price hikes for diesel and other fuels led to a 72 percent increase in energy costs, the company said.

Meanwhile, devaluation of the local currency by more than 21 percent not only drove up foreign exchange expenses for importing raw materials, but also that of capital machinery.

In a bid to meet these inflated costs, Renata increased the prices for 76 of its 671 products between October and November of 2022.