sanofi-aventis Pakistan limited

INTERIM CONDENSED
FINANCIAL STATEMENTS
FOR THE FIRST QUARTER ENDED

31 MARCH 2012 (UN-AUDITED)

Contents

2 3 4 5 6 7 8 9

Company Information Directors' Report to the Shareholders Interim Condensed Balance Sheet Interim Condensed Profit & Loss Account Interim Condensed Statement of Comprehensive Income Interim Condensed Cash Flow Statement Interim Condensed Statement of Changes in Equity Notes to the Interim Condensed Financial Statement

Company Information
Board of Directors Syed Babar Ali Tariq Wajid Arshad Ali Gohar Syed Hyder Ali Shailesh Ayyangar Francois Jean Louis Briens Jean-Marc Georges Mohammad Ibadullah Amanullah Khan Company Secretary Muhammad Irfan Board Audit Committee Syed Hyder Ali Francois Jean Louis Briens Amanullah Khan Yasser Pirmuhammad Head of Audit & Compliance Board Share Transfer Committee Tariq Wajid Mohammad Ibadullah Management Committee Tariq Wajid Syed Muhammad Ali Hasani Asim Jamal Shujauddin Shaikh Zubair Rizvi Munawar Uqaili Laila Khan Harris Mohammed Sheikh Chairman Managing Director

(Alternate Asim Jamal) (Alternate Shakeel Mapara) (Alternate Syed Muhammad Ali Hasani)

(Chairman) Non-Executive Director Non-Executive Director Executive Director (Secretary)

Mohammad Ibadullah Amanullah Khan Shakeel Mapara Masaud Ahmed Aamer Waheed Masood A.Khan Yasser Pirmuhammad

Auditors Ernst & Young Ford Rhodes Sidat Hyder Chartered Accountants Legal Advisors Abid Hameed Puri Azfar & Azfar Bilal Law Associates Fazle Ghani Advocates Ghani Law Associates Haidermota & Co. Khan & Hafiz Associates Saadat Yar Khan & Co Registered Office Plot 23, Sector 22, Korangi Industrial Area, Karachi - 74900

Bankers Citibank, N.A. Deutsche Bank AG Habib Bank Limited MCB Bank Limited. Standard Chartered Bank HSBC Bank Middle East Limited National Bank of Pakistan Postal Address P.O. Box No. 4962, Karachi - 74000

Registrars & Share URL Transfer Office www.sanofi.com.pk FAMCO Associates (Pvt.) Ltd. State Life Building No.1-A, First Floor, I.I. Chundrigar Road, Karachi - 74000.

Directors Report to the Shareholders

We are pleased to present the un-audited interim condensed financial statements of your company, for the first quarter ended March 31, 2012. These financial statements have been prepared in accordance with the requirements of the International Accounting Standards (IAS) 34 - Interim Financial Reporting and the provisions of and the directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provision of or directives issued under the Companies Ordinance, 1984 have been followed. The Company's pharmaceutical and vaccines business net sales at the end of the quarter at Rs.1,827 (2011: Rs.1,525) million and Rs.62 (2011: Rs.376) million recorded a growth of 19.80% and decline of 83.51% respectively over the comparative prior period. The healthy growth in pharmaceutical sales primarily represented volume growth of our key brands, exploring and materializing growth opportunities (which includes licences acquired for certain pharmaceutical products last year and a new product viz. Entrogermina launched during the period), to a marginal extent an impact of price increase granted to one of our product SKU and adapting our structures to meet the new challenges. Further, as part of our overall strategic model, the retail price for Plavix has been reduced from Rs.130 per tablet to Rs.38 per tablet with effect from the month of February 2012, which we understand will not only eliminate the loss of sales revenue in the hands of counterfeit product but would also make the product affordable and accessible to large population segment. The decline in vaccines business is attributable to public tender market because no tender was awarded to our Company during the period ended March 31, 2012. We have also launched two new vaccine products, which inter-alia includes Shanvac B and Avaxim Injection, during the period under report. As mentioned in our annual report for the year 2011, the Company has also entered into consumer health-care business by taking over Selsun Blue - a Sanofi group product, which recorded net sales of Rs.9.65 million during the quarter ended March 31, 2012 whereas consequent to geographic expansion into Afghanistan market our export sales at Rs.22 (2011: 12) million recorded a growth of 83.33% over similar period last year. Thus, the Company's net sales on an overall basis reached a level of Rs.1,921 (2011: Rs.1,901) million for the quarter ended March 31, 2012. The sales growth, despite the challenging business environment, is the result of our strategy to become A diversified health-care company with patient centric approach. Gross margin as a percentage of net sales has improved from 28.04% to 29.22% over the comparative prior period. The increase in margins is mainly due to various cost cutting and efficiency improvement measures taken by the Company which have been partly offset by the depreciation of Pak Rupee, increased depreciation expense, higher fuel & power cost due to frequent power breakdown, increased repair & maintenance, security expenses and continued high inflation recording increase in all cost categories, full impact of which (i.e. above cost increases) is not yet included in the year to date cost of goods sold. Distribution and marketing expenses have marginally increased by 2.45% in absolute terms whereas given as a % of net sales these expenses have increased from 19.77% to 20.04% over the prior comparable period. The increase is attributable to general inflation and increased spending on advertising and promotional activities necessary to invest in core business and new product. Administrative expenses increased by 10.49% compared to corresponding period last year, again mainly due to general inflation. Operating expenses mainly includes exchange loss of Rs.38.26 (2011: 39.91) million, and statutory charges (i.e. Workers Profit's Participation Fund, Workers Welfare Fund and Central Research Fund) which are all related to profit and have increased due to increase in profit before tax for the period ended March 31, 2012. Operating income for the period includes gain on sales of scrap and licence fee from related party amounting to Rs2.61 (2011: 3.2) million and Rs.2.3 (2011:1.9) million respectively. Finance cost significantly increased by 22.26% over the prior comparable period due to higher borrowings at the beginning of the year. Profit before tax for the quarter ended has increased by Rs.5.73 million over the same period last year because of the reasons explained above. Barring unforeseen events, we expect the sales growth in the remaining quarters of 2012 to be in line with the industry trend. However, due to an adverse impact of Pak Rupee depreciation and inflation, overall profitability is an area of concern for the Pharmaceutical industry. On behalf of the Board of Directors, we would like to acknowledge the hard work put in by all the employees of the Company. By order of the Board

Syed Babar Ali

Chairman

Tariq Wajid Chief Executive

Karachi: April 26, 2012

Interim Condensed Balance Sheet

As at March 31, 2012
Note March 31, December 31, 2012 2011 Rupees in '000 (Un-audited) (Audited)

ASSETS NON-CURRENT ASSETS Fixed assets Property, plant and equipment Intangible assets Long-term loans Long-term deposits CURRENT ASSETS Stores and spares Stock-in-trade Trade debts Short-term loans and advances Trade deposits and short-term prepayments Other receivables Taxation - payment less provision Cash and bank balances NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE TOTAL ASSETS EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Share capital Authorized 10,000,000 Ordinary shares of Rs.10 each Issued, subscribed and paid-up Reserves Capital reserves Revenue reserves

1,506,375 14,151 1,520,526 6,152 4,669

1,531,071 28,188 1,559,259 6,848 4,669

43,241 1,766,371 221,299 31,744 43,775 18,221 662,530 3,035 2,790,216 4,827 4,326,390

43,450 1,652,235 301,715 24,230 58,658 139,990 606,203 3,469 2,829,950 4,827 4,405,553

100,000 96,448

100,000 96,448

109,100 1,412,299 1,521,399 1,617,847

102,743 1,402,144 1,504,887 1,601,335

NON-CURRENT LIABILITIES Long-term financing 5 Liability against asset subject to a finance lease Deferred taxation

1,767 166,343 168,110

125,000 2,433 160,759 288,192

CURRENT LIABILITIES Trade and other payables Accrued mark-up Running finances utilized under mark-up arrangements - secured Current maturity of long-term financing Current maturity of liability against asset subject to a finance lease

1,337,833 51,989 847,919 300,000 2,692 2,540,433 2,708,543 6 4,326,390

1,389,751 32,526 916,099 175,000 2,650 2,516,026 2,804,218

CONTINGENCIES AND COMMITMENTS TOTAL EQUITY AND LIABILITIES

4,405,553

The annexed notes 1 to 11 form an integral part of these interim condensed financial statements.

Syed Babar Ali

Chairman

Tariq Wajid Chief Executive

Karachi: April 26, 2012

Interim Condensed Profit and Loss Account

For the First quarter ended March 31, 2012 (Un-audited)

March 31, March 31, 2012 2011 Rupees in '000 NET SALES Cost of sales GROSS PROFIT Distribution and marketing expenses Administrative expenses Other operating expenses Other operating income 1,920,962 (1,359,579) 561,383 (384,999) (50,126) (49,275) 4,854 (479,546) 81,837 (29,924) 51,913 (36,174) (5,584) (41,758) 10,155 1,900,934 (1,367,983) 532,951 (375,792) (45,366) (48,589) 7,460 (462,287) 70,664 (24,476) 46,188 (28,096) (25,292) (53,388) (7,200)

OPERATING PROFIT Finance costs PROFIT BEFORE TAXATION Taxation - Current for the period - Deferred

NET PROFIT / (LOSS) FOR THE PERIOD BASIC EARNINGS / (LOSS) PER SHARE (Rs. per share)

1.05

(0.75)

The annexed notes 1 to 11 form an integral part of these interim condensed financial statements.

Syed Babar Ali

Chairman

Tariq Wajid Chief Executive

Karachi: April 26, 2012

Interim Condensed Statement of Comprehensive Income

For the First quarter ended March 31, 2012 (Un-audited)

March 31, March 31, 2012 2011 Rupees in '000 Net profit / (loss) for the period Other comprehensive income / (loss) for the period Total comprehensive income / (loss) for the period 10,155 (7,200)

10,155

(7,200)

The annexed notes 1 to 11 form an integral part of these interim condensed financial statements.

Syed Babar Ali

Chairman

Tariq Wajid Chief Executive

Karachi: April 26, 2012

Interim Condensed Cash Flow Statement

For the First quarter ended March 31, 2012 (Un-audited)

Note

March 31, March 31, 2012 2011 Rupees in '000

CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Finance costs paid Income tax paid Long-term loans (net) Retirement benefits paid 7 201,630 (10,461) (92,501) 696 (5,295) 94,069 395,160 (46,044) (80,110) 380 269,386

Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditure Sale proceeds from disposal of operating fixed assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of liability against asset subject to finance lease Dividends paid Net cash used in financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE PERIOD

(26,280) 616 (25,664)

(6,739) 1,400 (5,339)

(624) (35) (659)

(525) (525)

67,746

263,522

(912,630)

(236,634)

(844,884)

26,888

The annexed notes 1 to 11 form an integral part of these interim condensed financial statements.

Syed Babar Ali

Chairman

Tariq Wajid Chief Executive

Karachi: April 26, 2012

Interim Condensed Statement of Changes In Equity

For the First quarter ended March 31, 2012 (Un-audited)
Capital Reserves Difference of share capital under scheme of arrangement for amalgamation Revenue Reserves

Issued, subscribed and paid-up share capital

Long term liabilities forgone

Other Rupees in '000

General reserve

Unappropri ated Profit

Total

Balance as at January 1, 2011 Employee benefit cost under IFRS 2 Share based Payment Final dividend @ Rs. 10 per ordinary share of Rs. 10 each for the year ended December 31,2010 Transfer to general reserve Net loss for the period Other comprehensive income / (loss) for the period Total comprehensive loss for the period Balance as at March 31, 2011 Balance as at January 1, 2012 Employee benefit cost under IFRS 2 Share based Payment Transfer to general reserve Net profit for the period Other comprehensive income / (loss) for the period Total comprehensive income for the period Balance as at March 31, 2012

96,448

5,935

18,000

50,241 1,060,538

230,241 1,461,403

6,586

6,586

125,000 -

(96,448) (125,000) (7,200)

(96,448) (7,200)

(7,200)

(7,200)

96,448

5,935

18,000

56,827 1,185,538

1,593 1,364,341

96,448

5,935

18,000

78,808 1,185,538

216,606 1,601,335

6,357 -

100,000 -

(100,000) 10,155

6,357 10,155

10,155

10,155

96,448

5,935

18,000

85,165 1,285,538

126,761 1,617,847

The annexed notes 1 to 11 form an integral part of these interim condensed financial statements.

Syed Babar Ali

Chairman

Tariq Wajid Chief Executive

Karachi: April 26, 2012

Notes to the Interim Condensed Financial Statement

For the First quarter ended March 31, 2012 (Un-audited)
1. THE COMPANY AND ITS OPERATIONS The Company was incorporated in Pakistan in 1967 under the Companies Act, VII of 1913, as a Public Limited Company. The shares of the Company are listed on Karachi, Lahore and Islamabad Stock Exchanges. It is currently engaged in the manufacturing and selling of pharmaceutical products. The registered office of the Company is located at Plot 23, Sector 22, Korangi Industrial Area, Karachi. 2. STATEMENT OF COMPLIANCE These interim condensed financial statements of the Company for the first quarter ended March 31, 2012 have been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34 - Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, 1984. In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. These are required to be presented to the shareholders under Section 245 of the Companies Ordinance, 1984. These interim condensed financial statements are unaudited and do not include all the information and disclosures as required in the annual financial statements and should be read in conjunction with the Company's annual financial statements for the year ended December 31, 2011. 3. ACCOUNTING POLICIES SIGNIFICANT ACCOUNTING POLICIES The accounting policies and the methods of computation adopted in the preparation of these interim condensed financial statements are the same as those applied in the preparation of the financial statements for the year ended December 31, 2011. Note March 31, December 31, 2012 2011 Rupees in '000 (Un-audited) (Audited)

4.

PROPERTY, PLANT AND EQUIPMENT Operating fixed assets Capital work-in-progress 4.1 1,251,263 255,112 1,506,375 1,281,457 249,614 1,531,071

4.1 Operating fixed assets Following were the additions and disposals of fixed assets during the current period:
Disposals Accumulated Cost Depreciation

Additions

Rupees in '000 Building Plant and Machinery Furniture and fixtures Factory and office equipment Motor vehicles - owned 875 3,045 3,530 4,555 8,777 20,782 176 3,976 1,859 6,011 176 3,724 1,239 5,139

Note

March 31, December 31, 2012 2011 Rupees in '000 (Un-audited) (Audited)

5.

LONG-TERM FINANCING Term finance loan Current maturity shown under current liabilities 300,000 (300,000) 300,000 (175,000) 125,000

Notes to the Interim Condensed Financial Statement

For the First quarter ended March 31, 2012 (Un-audited)
This represents a long-term loan, obtained from a commercial bank, which is repayable in four equal semi-annual installments commencing from October 2, 2011 and is secured by way of an equitable mortgage of Rs.1.67million over all present and future assets of the Company. The Loan carries mark-up at the rate of 1.15% over 6 months Karachi Interbank Offer Rate (KIBOR) payable on semiannual basis, without any floor or cap. 6. CONTINGENCIES AND COMMITMENTS Contingencies 6.1 Claims not acknowledged as debt amounted to Rs.6.200 (December 31, 2011: Rs.6.200) million at the end of the current period. 6.2 There is no change in the status of contingencies in respect of income tax assessments, as set out in note 22.1 (c) to the annual financial statements of the Company for the year ended December 31, 2011. Commitments 6.3 Commitments in respect of capital expenditure contracted for amounted to Rs.162.065 million (December 31, 2011: Rs.125.893 million) at the end of the first quarter. 6.4 Post dated cheques aggregating to Rs. 21.142 million (2011: Nil) at the end of the current period have been given to Collector of Customs in respect of exemption of levies on import of machine accessories. March 31, December 31, 2012 2011 Rupees in '000 (Un-audited) (Audited) 6.5 Outstanding letters of credit 6.6 Outstanding bank contracts 115,814 477,698 61,495 938,162

Note

March 31, March 31, 2012 2011 Rupees in '000 (Un-audited) (Audited)

7.

CASH GENERATED FROM OPERATIONS Profit before taxation Adjustment for non-cash charges and other items: Depreciation / amortization Loss / (gain) on disposal of operating fixed assets Expenses arising from equity settled share based payment plans Retirement benefits Finance costs Working capital changes 7.1 51,913 46,188

64,142 255 6,357 6,371 29,924 42,668 201,630

45,230 (1,400) 6,586 2,936 24,476 271,144 395,160

10

Notes to the Interim Condensed Financial Statement

For the First quarter ended March 31, 2012 (Un-audited)
March 31, March 31, 2012 2011 Rupees in '000 (Un-audited) (Audited) 7.1 Working capital changes Decrease / (increase) in current assets: Stores and spares Stock-in-trade Trade debts Short-term loans and advances Trade deposits and short-term prepayments Other receivables - net (Decrease) / increase in current liabilities: Trade and other payables - net (excluding unclaimed dividend) 209 (114,136) 80,416 (7,514) 14,883 91,177 65,035 (133) (38,725) (398,631) (13,580) 24,957 50,473 (375,639)

(22,367) 42,668

646,783 271,144

8.

CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise of the following items: Cash and bank balances Running finance utilized under mark-up arrangements 3,035 (847,919) (844,884) 31,842 (4,954) 26,888

9.

TRANSACTIONS WITH RELATED PARTIES Related parties comprise of associated undertakings, employees' provident fund, employees' gratuity fund, employees' pension fund, directors and key management personnel of the Company. The Company in the normal course of business carries out transactions with various related parties. There are no transactions with key management personnel other than under the terms of employment. Details of transactions with related parties during the period are as follows:
March 31, 2012 Related parties By virtue of RetireKey common ment manageGroup Directorbenefits ment Companies ship plans personnel Rupees in '000 March 31, 2011 Related parties By virtue of RetireKey common ment manageGroup Directorbenefits ment Companies ship plans personnel Rupees in '000

Total

Total

i) Net sales ii) Purchase of goods iii) Purchase of services iv) Recovery of service charges and other expenses v) License fee of land received vi) Contribution paid - Provident Fund

9,537 656,043 -

5,884

9,537 656,043 5,884

12,271 734,246 -

138 6,031

12,271

- 734,384 6,031

2,254

2,254

1,648

1,648

2,229

2,229

1,968

1,968

6,649

6,649

5,227

5,227

vii) Remuneration of key - management personnel -

38,265

38,265

23,850

23,850

11

Notes to the Interim Condensed Financial Statement

For the First quarter ended March 31, 2012 (Un-audited)
Further, the impact of benefits available to the Chief Executive and others recognized by the Company in the expenses during the period on account of share-based payment plans aggregated to Rs.0.724 (2011: Rs.0.641) million and Rs. 5.633 (2011: Rs.5.945) million, respectively. 10. DATE OF AUTHORISATION FOR ISSUE These interim condensed financial statements were authorized for issue on April 26, 2012 by the Board of Directors of the Company. 11. GENERAL Figures presented in these interim condensed financial statements have been rounded off to the nearest thousand rupees, unless otherwise stated.

Syed Babar Ali

Chairman

Tariq Wajid Chief Executive

Karachi: April 26, 2012

12

Book Post
Under certificate of Posting

If undelivered please return to: sanofi-aventis Pakistan limited Plot No. 23, Sector 22, Korangi Industrial Area, Karachi-74900 POSTAL ADDRESS P.O. Box No. 4962, Karachi-74000