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The year was eventful. Aurobindo coped well with the dual challenges of the global environment and strident competition in the pharmaceutical industry. On the operational front, we took necessary steps to address and be ready to resolve the regulatory challenges with US FDA around our Unit VI cephalosporin manufacturing facility. We consciously ramped up our investment in quality management systems, sensitizing the employees at every level, and are striving to make our compliance standards one of the best in the industry.
It was also a year in which we redeemed the FCCBs on the due date, even if it meant incurring a loss while discharging them at a premium. We paid redemption premium (Yield to Maturity) including Withholding Tax amounting to Rs.3198.6 million on redemption of FCCBs which resulted in a loss of Rs.1228 million.
We encountered sharp volatility in currencies, with a tendency for the rupee to get weaker. At the close of the year, the rupee had depreciated by 14.1%. Consequently, this resulted in a forex loss of Rs.2480 million. The rupee's weakness also impacted our foreign currency denominated borrowings.
Raw material costs were fairly correlated to the hardening global petroleum prices, impacting cost of production and putting pressure on margins.
It is in such a backdrop that we closed the financial year with a loss of Rs.1235 million (Consolidated).
I believe the business environment will continue to remain challenging for a year or two. As economies in the advanced markets manage their pressure points and governments intervene and regulate healthcare costs to make it affordable for their people, pricing will be even more competitive. We're witnessing a slowdown across Europe and currencies are expected to remain volatile in relation to the dollar. Having said that, we at Aurobindo believe in getting ahead despite challenges.
Aurobindo aims to deliver better performance in terms of profitability and return on capital in our chosen markets and enhance shareholder value. We do this through our customer centricity, focus on quality, looking for cost efficiencies, pursuing operational excellence and committing ourselves to continuously improving on environment, health and safety standards. All of us at Aurobindo are taking important steps toward becoming a global pharmaceutical presence by working on the following strategies:
We shall be known by our commitment to quality and be a reliable and preferred resource for our customers and consumers. As far as possible, we shall be system driven and where practical, we shall automate our operations to maintain consistency and minimize variance between operations.
Leading with research & development
We shall demonstrate our strength in dealing with complex chemistry, advance and exploit our intellectual capital, build a portfolio of high entry barrier products and reassure with our compliance standards.
Fostering operational excellence
The discernible value that we provide to our customers and cost optimization shall be the motivator for our employees to excel in their efforts & outcomes.
Creating a performance–driven culture
With their heightened professionalism and accountability levels, employees will be encouraged to give of their best, learn from their successes and setbacks and pursue opportunities to improve their performance on their own initiative.
Focusing on environment, health and safety
We actively promote the health and safety of everyone in our facilities with policies, processes and practical programs to help individuals to safeguard themselves and their colleagues. Safe practices shall be part of our value chain.
Driving bottom line growth
We shall focus on complex chemistry and high entry–barrier products. We will refocus on APIs to step up margins, develop markets for our high–value top–ten products both in APIs and formulations and introduce products with high entry–barriers. Managing production cycle–time, cost control and waste elimination will help us to optimize operating efficiencies. We shall target to improve EBITDA quarter–on–quarter from Q2FY13 and shall also generate adequate cash flow from operations to deleverage our balance sheet.
Each of these strategy initiatives are already in action. We are on track towards sustained profitable growth. We are determined to do whatever it takes, and do it fast.
We are also making positive changes at Aurobindo by inducting professionals who have it in them to take us to the next level. I warmly welcome Mr. Govindarajan, a highly experienced professional, who has been inducted into the Board and assumes office as the Managing Director effective June 1, 2012. I also warmly welcome Mr. Ravindra Shenoy, another experienced professional, who joins the Board on June 1, 2012 as the Joint Managing Director. I wish them well and look forward to their success in taking the Company to the next level.
Effective June 1, 2012, I shall demit office as Chairman, and shall remain a Whole–time Director focused on North American markets. Mr. Nithyananda Reddy assumes office as Vice Chairman and Whole–time Director and shall be a resource for the professionals who have joined us. Mr. Ragunathan, a well–known management consultant will be the Chairman of the Board and continue as a Non Executive Director.
I take this opportunity to thank all employees, customers and vendors who have brought us to where we are and have been my source of strength as the Chairman of the Board. Our employees are precious and they have demonstrated the strength and potential of Aurobindo. I would like to thank our large family of investors for the confidence they have placed in our Company. I request all our customers, vendors, employees and investors to extend their usual support and co–operation to the new team that will be at the helm.