European Directorate for the Quality of Medicines, Strasbourgh Cedex 1, examined the information provided by the company on the manufacturing method and subsequent processes (including purification) for the Pseudoephedrine Hydrochloride which is being manufactured at our Regadichelika, Nellore facility and they have granted the Certification of Suitability of Monographs of the European Pharmacopoeia vide Certificate No. RO-CEP 2002-145-Rev 00 dt.21/07/2003.

This certificate is granted within the framework of the procedure established by the European Pharmacopoeia Commission [Resolution AP-CSP (93) 5 as amended] for a period of five years starting from 21 July 2003.

Department of Health & Human Services, Public Health Service, Food and Drug Administration, Division of Manufacturing and Product Quality, Maryland, USA, inspected our manufacturing facility situated at Regadichelika, Nellore on September 10-12, 2003 and based on that inspection, they have classified the facility as acceptable.

The surveillance inspection was conducted for the three APIs, for which the company submitted Drug Master Files in the US, now approvals as acceptable for the following products from the US Food and Drug Administration (USFDA) were accorded:

The summary of the EIR (Establishment Inspection Report) is reproduced below:

Surveillance inspection of this bulk drug manufacturer was conducted per Drug Pre-Approval for three API drugs: A. Pseudoephedrine HCl DMF # 15714; B. l-Ephedrine HCl DMF # 15753; and C. Pseudoephedrine Sulfate DMF # 15814. There is no inspection history on this firm. No Significant objectionable conditions were observed, and no FD 483 was issued to management. Several discussion items regarding laboratory records were addressed during the close-out meeting. Corrections were promised by management.

No samples were collected, and no warnings or recommendations were given.

Krebs Biochemicals & Industries Limited is a biochemical company engaged in manufacture of active Pharmaceutical ingredients with its product portfolio comprising of Statins (lifestyle drugs), Neutraceuticals and anti-asthmatic groups and has pioneered in the fermentation technology.

Audited financial results for the Year 2003-04

During the year under review, the company has achieved a turnover of Rs. 101.23 Crores as against 101.50 crores in the previous year with a gross profit of Rs. 30.71 Crores and net profit of Rs. 13.51 crores as against Rs.29.38 Crores and Rs.14.87 Crores respectively in the previous year. The profitability is affected mainly on account of slowdown in the movement of anti asthmatic segment drugs, namely ephedrine and pseudoephedrine and increase in the raw material costs (Molasses) and drop in the sales price of some of the products. With the substantial restructuring of the plant at Unit II at Kothapalli (Vizag), the turnover has increased significantly from Rs. 32.45 Crores previous year to Rs.49.90 Crores in the current year.

During the year under review the company has achieved an EPS of Rs. 22.52 as against Rs.24.79 in the previous year. The Board has recommended a dividend of Rs.8.00 per share on a paid up capital of Rs. 6.00 crores.

Consolidation:

During the last 10 Years, the company has witnessed substantial growth in the turnover both export and domestic with good profitability and dividend payment record and consolidated its position as one among the top 10 Big Pharmaceutical companies.

Diversification Plans:

Having consolidated in the current line of activity, the company has initiated steps to diversify into other activities. In this direction the company has identified bio fuels and it's down stream products to catalyze the growth. The company was successful bidder for the Jampani and Kovur co-operative sugar mills and completed the crushing operations in the Jampani Unit for the crushing season 2003-04. However, the handing over the possession of the Kovur Unit is yet to be completed. The company has also diversified into food products by setting up of stackable potato chips unit with a capacity of 1800 MT per annum. The commercial operations will commence in the 2nd Quarter of the current financial Year. The company is aiming to achieve a turnover of Rs. 200 crores in the current year 2004-05 with a net profit of Rs.30 crores. With all the major expansion & diversification projects coming to fruition during the 1st quarter of current year, these targets are quite achievable.

A.Veerendra Kumar
Company Secretary

Audited financial results for the Year 2004-05

During the year under review, the company has achieved a turnover of Rs. 79.26 Crores as against 101.23 crores in the previous year with a gross profit of Rs. 27.69 Crores and net profit of Rs. 7.43 crores as against Rs.30.71 Crores and Rs.13.51 Crores respectively in the previous year. The profitability is affected mainly on account of slowdown in the movement of anti asthmatic segment drugs, namely ephedrine and pseudoephedrine and increase in the raw material costs (Molasses) and drop in the sales price of some of the products. As the existing facilities at Unit II at Kothapalli (Vizag) were under modification to suit to the requirement of USFDA, production of Lovastatin and Simvastatin had been reduced to a nominal quantity during the last quarter.

During the year under review the company has achieved an EPS of Rs. 12.39 as against Rs.22.52 in the previous year. The Board has recommended a dividend of Rs.3.00 per share on a paid up capital of Rs. 6.00 crores.

Future outlook:

To cope up with USFDA requirement, the plant at Vizag has been renewed/modified, which improves the turnover and profitability of the company. As far as Unit I at Nellore is concerned, the Company is working out to enter into Manufacturing Contract (Outsourcing) tie ups with some of the reputed multinational companies, which will help the company not only to improve its turnover and profitability but also to utilize the Plant at its full capacity.

Diversification Plans:

Having consolidated in the current line of activity, the company has initiated steps to diversify into other activities. In this direction the company has identified bio fuels and it's down stream products to catalyze the growth.

The company was successful bidder for the Jampani and Kovur co-operative sugar mills and completed the crushing operations in the Jampani Unit for the crushing season 2003-04. However, as per the directions of the Hon'ble High Court of Andhra Pradesh vide its order dated 29.06.2004, the Government of Andhra Pradesh has restored the management of the Jampani Sugar Factory to the erstwhile managing committee of the society. The Hon'ble High Court orders dated 29.06.2004 were challenged by the Company before Supreme Court and the Company is hopeful of getting the orders of the Apex Court in favour of the Company.

The company has also diversified into food products by setting up of stackable potato chips unit with a capacity of 1800 MT per annum. The Company is working out to enter into marketing tie ups with some reputed companies for domestic as well as export markets. The company is aiming to achieve a turnover of Rs. 130 crores in the current year 2005-06 with a net profit of Rs.30 crores. With all the major expansion & diversification projects coming to fruition during the 1st quarter of current year, these targets are quite achievable.

Adalat Srikanth
Company Secretary