Indian contract drug maker Divi’s misses profit view on high material costs, one-off labour charge

Feb 11 (Reuters) – Indian contract drug manufacturer Divi’s Laboratories reported third-quarter profit below estimates on Wednesday, as high raw material costs and a one-off charge due to changes in India’s labour codes weighed on its bottomline.

The Hyderabad-based company’s consolidated net profit marginally fell to 5.83 billion rupees ($64.31 million) in the quarter ended December 31, from 5.89 billion rupees a year earlier.

Analysts, on average, had expected 6.18 billion rupees, according to data compiled by LSEG.

Global pharmaceutical firms have been increasingly looking to Indian contract drug manufacturers such as Divi’s, Sai Life Sciences and Piramal Pharma as part of their plans to diversify supply chain beyond China.

Demand for customised production of chemical compounds from large pharmaceutical companies stayed strong in the quarter.

However, the cost of materials consumed jumped 19%, pushing up its total expenses 9.7% to 18.38 billion rupees.

Additionally, Divi’s Laboratories chalked up a one-time charge of 740 million rupees as it complied with India’s new labour laws.

Revenue from operations rose 12.2% to 26.04 billion rupees, beating analysts’ average estimate of 25.96 billion rupees.

($1 = 90.6600 Indian rupees)

(Reporting by Rishika Sadam; Editing by Mrigank Dhaniwala and Janane Venkatraman)