Sopan Pharmaceuticals Limited reported a sharp deterioration in profitability in its unaudited fourth-quarter financial results for FY 2082/83, with net profit plunging 82% despite relatively stable revenue growth.

The pharmaceutical company posted a net profit of Rs 38.28 million, down from Rs 217.79 million in FY 2081/82.

The decline came despite revenue from operations increasing 2.18% to Rs 511.47 million from Rs 500.53 million a year earlier. The sharp divergence between revenue and profit points to a significant increase in the company's cost structure.

The biggest pressure came from the cost of goods sold (COGS), which more than doubled to Rs 280.31 million, compared with Rs 123.18 million in the previous fiscal year. As a result, COGS consumed more than 54% of operating revenue, compared with around 24% a year earlier.

Operating and administrative expenses also increased. Administrative and selling expenses rose to Rs 126.48 million, from Rs 106.50 million in FY 2081/82, adding further pressure on the company's operating profitability.

Finance costs, however, moved in the opposite direction. Interest expenses declined to Rs 43.93 million from Rs 56.87 million, providing some relief but not enough to offset the sharp increase in production costs and other expenses.

Sopan Pharmaceuticals' balance sheet also shows a significant increase in capital and assets. Paid-up capital rose to Rs 1.71 billion, from Rs 1.28 billion, while reserves and surplus increased to Rs 367.31 million from Rs 329.62 million.

However, the company's trade receivables jumped to Rs 833.85 million, up from Rs 564.35 million a year earlier. The increase suggests that a larger amount of reported sales remains tied up in credit extended to customers.

This creates an important working-capital concern. Even though revenue has grown, slower collection of receivables could put pressure on the company's cash flow and liquidity if the trend continues.

Total assets increased to Rs 2.70 billion, compared with Rs 2.32 billion at the end of the previous fiscal year.

For Sopan Pharmaceuticals, the FY 2082/83 results therefore present a mixed picture: the company has expanded its capital base and maintained revenue growth, but cost escalation has severely weakened profitability while rising receivables are increasing pressure on working capital.

The key issue going forward will be whether Sopan can bring production costs under control and convert its reported sales into cash more efficiently.