Cipla Quality Chemicals announces Ugx 14.5 billion loss

Cipla Quality Chemical announces Ugx 14.5 billion loss
Cipla is struggling to make money from drug sales.

Kampala, Uganda | URN | Drug manufacturer Cipla Quality Chemical Industries Limited has announced a loss of 14.5 billion Shillings for the period from April to September 2019, underscoring the struggles the drug maker is going through. This is a significant drop from the 3.3 billion Shillings profit announced for the period between October 2018 to March 2019.

The company said in a statement on Monday 2nd, December 2019 that the losses were due to the fact that it has failed to collect debts from the Government of Zambia, increased competition from other companies that produce similar products and reduction in drug prices.

The company also said it put aside money to provide for the expected losses in line with the new accounting rules – the International Financial Reporting Standards (IFRS).

The results are bad news to the people who bought the company shares just a year ago for 256 Shillings apiece. Its value has slumped by more than half to 127 Shillings per share on Monday. This is an indicator that people have lost faith in the company’s performance.

To calm the fears, the company said in a statement that “Management endeavoured to minimize the impact on the reduction in revenue from Zambia through increased funder related sales.” It said sales to Global Fund business has rebounded significantly in the first half of this reporting year.

As revenues fell, operational costs were skyrocketing. Operational costs increased by 26.7 per cent to 34.1 billion Shillings in the reporting period. The company again blamed the increase to expected credit loss due to challenges in the collection from Zambia.

There is yet more trouble, the company has no money. It reports that cash and cash equivalents – that the money it has at hand or things that can turn into money quickly – were a negative 57 billion due to failure to collect payments from the government of Zambia.

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Should the Zambia default on its debts to Cipla, it would put a huge dent to the company’s financials?

For now, it is banking its hopes on the Global Fund and the USA President’s Malaria Initiative (PMI) for WHO prequalified antimalarial to an African based Manufacturer, where it was shortlisted as one of the providers.

Cipla, which was established in 2005, manufactures Anti-retroviral (ARV), artemisinin-based combination therapies (ACTs) and Hepatitis medicines to treat HIV/AIDS, Malaria and Hepatitis.