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Novartis: Agribusiness pulls down margins

Nov 14, 2000

A bad performance by the agro chemicals division has put pressure on Novartis' profitability in the second quarter of the current year. While turnover has slipped 8%, the net profit has crashed over 33%. The company has infact clarified that of its agribusiness contributed 53% of its turnover but 32% of its pre–tax profits for the first half of the current year.

(Rs m) 2QFY00 2QFY01 Change
Sales 2,366 2,168 -8.4%
Other Income 99 97 -2.3%
Expenditure 1,920 1,931 0.6%
Operating Profit (EBDIT) 447 237 -46.9%
Operating Profit Margin (%) 18.9% 10.9%  
Interest 6 5 -18.2%
Depreciation 37 48 30.1%
Profit before Tax 504 283 -44.0%
Other Adjustments      
Tax 180 66 -63.3%
Profit after Tax/(Loss) 324 217 -33.2%
Net profit margin (%) 13.7% 10.0%  
Earnings per share* 40.65 27.15  
(annualised)      

The company has set in process a division of hiving of this business in line with the decision to do so by its international parent. This would improve the proftiability margins considerably. The demerger would be effected with retrospective effect from October 1, 2000 and the company plans to split its share to Rs 5 paid up value.

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