Mumbai, July 14: Parke Davis's performance in fiscal 1997-98 has not been very impressive. Although sales turnover has risen by 14 per cent, profit growth suffered a setback. With operating expenditure soaring to Rs 161.03 crore from Rs 137.04 crore last year, profit at the operational level has dropped by 18.32 per cent. Consequently, operating profit margins have fallen from 10.38 per cent to 7.45 per cent.Net profit, too, has fallen by 27 per cent despite a high other income component of Rs 11.28 crore. For the year-ended March 1998, net profit dropped from Rs 9.80 crore to Rs 7.08 crore.
The increase in operating expenditure can be attributed to the high maintainence cost at the Saki Naka plant. The company has been trying to sell off the Saki Naka plant for the past one year, but has been unsuccesful mainly because of the Rs 80 crore price tag attached to the property.The company's interest cost has also jumped to 120 per cent from Rs 3.41 crore to Rs 7.51 cr. This extra interest cost is due tothe funds borrowed for the payment of Rs 11.7 crore to the employees of the Saki Naka plant as part of the VRS. Depreciation charges have also jumped 110 per cent to Rs 6.44 crore because full depreciation has been charged for assets introduced in the middle of the year.
The Voluntary Retirement payments, which are being charged to the P/L account pro rata for five years, have further eroded the bottomline.
The 18 per cent fall in the bottomline has clearly affected the stock price of Parke Davis, which after touching a ten-month low of Rs 173.5 recently, has marginally recovered to around the Rs 200.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
