AGP: Margins remain unaffected amid rising cost

Karachi, September 19, 2022: AGP held its Analyst Briefing yesterday to discuss its 2QCY22 financial performance and outlook.

To recall, AGP posted an EPS of Rs 0.84 for 2QCY22, down 58% QoQ largely due to imposition of super tax (EPS impact Rs0.73), higher S&D charges and rise in finance costs amid higher interest rates.

The result takes EPS for 1HCY22 to Rs2.82 (+2% YoY).

Sandoz contributes 31% to net sales

Consolidated net sales clocked in at Rs 3.5bn (31% contribution from Sandoz) for the quarter, down 5% QoQ owing to seasonal variation and absence of a one-time institutional order in the previous quarter.

Total industry sales during FY22 stand at Rs 656bn, up 13% YoY where AGP’s position in terms of value has improved to 17th (up from 22nd pre-acquisition of Sandoz).

Margins to bear the brunt of inflation in the coming months

AGP posted a stable performance at the gross level aided by higher than usual inventory levels. As per the management, the company currently holds 5 months’ inventory as compared to its usual level of 3 months as a way to mitigate supply chain issues.

Going forward, however, the company expects to face pressure at the gross level as the impact of inflation and PKR devaluation (PAT impact of Rs15mn for every 1% devaluation) kicks in during 2HCY22.

Read More: AGP Pharma to launch 12 new products

On the pricing front, AGP has passed on the impact of inflation this month. As allowed through the CPI linked pricing formula by DRAP, the company is allowed to increase prices of essential drugs by 7% and non-essential drugs by 10%.

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