Dr. Reddy's Q1 FY16 Financial Results

HYDERABAD, India--(BUSINESS WIRE)--

Dr. Reddy's Laboratories Ltd. RDY (BSE: 500124) DRREDDY today announced its consolidated financial results for the quarter ended June 30, 2015 under International Financial Reporting Standards (IFRS).

Q1 FY16: Key Highlights

• Consolidated revenues at Rs. 37.6 billion, year-on-year growth of 7%
• Gross Profit Margin at 61.1%, improved by 180 bps over last year
• Research & Development (R&D) spend at Rs. 4.4 billion. Continued focus on building complex and differentiated pipeline.
• Selling, general & administrative (SG&A) expenses at Rs. 11.0 billion. Marginal year-on-year increase.
• EBITDA for Q1 FY 16 at Rs. 9.9 billion, 26% of revenues, year-on-year growth of 12%.
• Profit after tax for Q1 FY 16 at Rs. 6.3 billion, 17% of revenues, year-on-year growth of 14%

Commenting on the results, Dr. Reddy's co-chairman and CEO, GV Prasad said, "Our first quarter results, with YoY growth of 7% in topline and 14% in bottom line, reflects healthy performance. We were able to achieve these results despite limited new launches and headwinds in the form of currency devaluation in key emerging markets. As we continue to further strengthen our product portfolio and drive new launches, we are well positioned for the next phase of our growth."

All amounts in millions, except EPS		All US dollar amounts based on convenience translation rate of 1 USD = Rs. 63.59
Dr. Reddy's Laboratories Limited and Subsidiaries
Consolidated Income Statement
Particulars		Q1 FY 16									Q1 FY 15									Growth %
		($)			(Rs.)			%			($)			(Rs.)			%
Revenues		591			37,578			100.0			553			35,175			100.0			7
Cost of revenues		230			14,631			38.9			225			14,331			40.7			2
Gross profit		361			22,947			61.1			328			20,844			59.3			10
Operating Expenses
Selling, general & administrative expenses		173			10,973			29.2			168			10,679			30.4			3
Research and development expenses		69			4,387			11.7			61			3,875			11.0			13
Other operating expense / (income)		(2	)		(125	)		(0.3	)		(3	)		(185	)		(0.5	)		(32	)
Results from operating activities		121			7,712			20.5			163			6,475			18.4			19
Finance (expense) / income, net		3			216			0.6			8			481			1.4			(55	)
Share of profit of equity accounted investees, net of income tax		1			49			0.1			1			53			0.2			(8	)
Profit before income tax		125			7,977			21.2			171			7,009			19.9			14
Income tax expense		27			1,720			4.6			24			1,505			4.3			14
Profit for the year		98			6,257			16.6			147			5,504			15.6			14
Diluted EPS		0.58			36.6						0.51			32.2						13

EBITDA Computation
Particulars			Q1 FY 16								Q1 FY 15
			($)				(Rs.)				($)				(Rs.)
Profit before tax			125				7,977				110				7,009
Interest (income) / expense net*			(5	)			(304	)			(0	)			(5	)
Depreciation			24				1,547				21				1,317
Amortization			11				721				9				555
EBITDA			156				9,941				140				8,876
EBITDA (% to sales)							26.5								25.2
* Includes dividend and profit on sale of investments

All amounts in millions, except EPS		All US dollar amounts based on convenience translation rate of 1 USD = Rs. 63.59
Key Balance Sheet Items
Particulars			As on 30th Jun 15							As on 31st Mar 15
			($)				(Rs.)			($)				(Rs.)
Cash and cash equivalents and Other current Investments			552				35,117			624				39,654
Trade receivables			661				42,030			641				40,755
Inventories			411				26,149			401				25,529
Property, plant and equipment			777				49,386			756				48,090
Goodwill and Other Intangible assets			379				24,106			258				16,430
Loans and borrowings (current & non-current)			651				41,400			678				43,125
Trade payables			180				11,448			168				10,660
Equity			1,870				118,885			1,750				111,302

Revenue Mix by Segment
Particulars			Q1 FY 16										Q1 FY 15										Growth %
			($)				(Rs.)			%			($)				(Rs.)			%
Global Generics			487				30,961			82			452				28,739			82			8
North America							18,515			60							16,205			56			14
Europe*							1,912			6							1,334			5			43
India							4,756			15							3,999			14			19
Emerging Markets#							5,776			19							7,201			25			(20	)
PSAI			88				5,614			15			87				5,538			15			1
North America							664			12							547			10			21
Europe							2,352			42							2,681			48			(12	)
India							587			10							775			14			(24	)
Rest of World							2,011			36							1,534			28			31
Proprietary Products & Others			16				1,003			3			14				899			3			12
Total			591				37,578			100			553				35,175			100			7
* Europe referred above primarily includes Germany, UK and out licensing sales business
# Emerging Markets refers to Russia, other CIS countries, Romania and Rest of the World markets including Venezuela

Note: During the quarter ended 30 June 2015, there has been a change in the monitoring of performance of one product from Global Generics to Proprietary Products. Consequently, revenues and related costs of this product for the previous periods have been reclassified to conform to such change.

Segmental Analysis

Global Generics

Revenues from Global Generics segment for Q1 FY16 are at Rs. 31.0 billion, year-on-year growth of 8%, primarily driven by North America, Europe, Venezuela and India.

• Revenues from North America for Q1 FY16 at Rs. 18.5 billion, year-on-year growth of 14%. Primarily on account of:
  • Sustained performance of the injectable franchise and market share gains in key molecules
  • Contribution from products launched subsequent to quarter ended June 30, 2014, majorly being valganciclovir, sirolimus, Habitrol^®, etc.
  • 6 new product filings in the US during the quarter. Cumulatively, 73 ANDAs are pending for approval with the USFDA of which 47 are Para IVs out of which we believe 16 to have ‘First to File' status.
• Revenues from Emerging Markets for Q1 FY16 at Rs. 5.8 billion, year-on-year decline of 20%.
  • Revenues from Russia at Rs. 2.3 billion, year-on-year decline of 45% primarily on account of the ongoing macro-economic uncertainties and the consequent depreciation of rouble. In constant currency revenues declined by 22%.
  • Revenues from CISR markets at Rs. 0.8 billion, and remained flat on a year-on-year basis. Growth was affected primarily on account of currency depreciation.
  • Revenues from Rest of World (RoW) territories at Rs. 2.7 billion recorded year-on-year growth of 21%. Of this Venezuela delivered strong growth of 42% on the back of continuing volumes uptake.
• Revenues from India for Q1 FY16 at Rs. 4.8 billion, year-on-year growth of 19%.
  • Growth is driven by continued focus on new product launches and prescription growth.
  • As per IMS Jun'15, Dr Reddy's MAT Gr% at 16.8% versus market Gr% of 13.9%.
  • Integration of the UCB products portfolio completed during the quarter
• Revenues from Europe for Q1 FY16 at Rs. 1.9 billion, year-on-year growth of 43%. Growth was primarily driven by new products (aripiprazole and pregabalin) launched during the fourth quarter of fiscal 2015.

Pharmaceutical Services and Active Ingredients (PSAI)

• Revenues from PSAI for FY15 at Rs. 5.6 billion, and remained flat on a year-on-year basis.
• During the quarter, 9 DMFs were filed globally. The cumulative number of DMF filings as of June 30, 2015 is 747.

Income Statement Highlights:

• Gross profit margin at 61.1% and registered an improvement of ~180 bps over that of previous year. Gross profit margin for Global Generics (GG) and PSAI business segments are at 67.6% and 23.7% respectively.
• Selling, General and Administration (SG&A) expenses at Rs. 11.0 billion, year-on-year increase of 3%. SG&A as % to sales improved by ~120 bps over previous year.
• Research & development expenses at Rs. 4.4 billion, year-on-year increase of 13%. 11.7% of revenues in Q1 FY16 as compared to 11.0% of revenues in Q1 FY15. The increase is in line with our planned scale-up in development activities.
• Net Finance income at Rs. 216 million compared to Rs. 481 million in Q1 FY15. The net decrease in Finance income is on account of:
  • Net forex gain of Rs. 12 million in the current quarter vs Rs. 476 million in the previous year
  • Certain monetary assets and liabilities of the Venezuelan subsidiary that may not qualify for translation at the CENCOEX rate of VEF 6.3 per USD, have been translated at the SIMADI rate of VEF 197 per USD and the resultant charge of Rs. 100 million has been recorded as foreign exchange loss.
  • Incremental profit on sales of investments of Rs. 179 million.
  • Net increase in interest income of Rs. 120 million.
• Profit after Tax at Rs. 6.3 billion, 17% of revenues, year-on-year growth of 14%.
• Diluted earnings per share is at Rs. 36.6
• Capital expenditure is at Rs. 2.6 billion.

Earnings Call Details (06.30 pm IST, July 30, 2015)

The Company will host an earnings call at 06.30 pm IST on July 30, 2015, to discuss the performance and answer any questions from participants. This call will be accessible through an audio dial-in and a web-cast.

Audio conference Participants can dial-in on the numbers below.

Primary number:			91 22 3960 0616
Secondary number:			91 22 6746 5826
Playback of call:			91 22 3065 2322, 91 22 6181 3322 Conference ID: 375#
Web-cast			More details will be provided through our website, www.drreddys.com

Transcript of the event will be available at www.drreddys.com. Playback will be available for a few days.

About Dr. Reddy's: Dr. Reddy's Laboratories Ltd. RDY is an integrated pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services & Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy's offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars and differentiated formulations. Our major therapeutic areas of focus are gastro-intestinal, cardiovascular, diabetology, oncology, pain management and anti-infectives. Dr. Reddy's operates in markets across the globe. Our major markets include – USA, Russia & CIS, Venezuela and India. For more information, log on to: www.drreddys.com

Disclaimer: This press release may include statements of future expectations and other forward-looking statements that are based on the management's current views and assumptions and involve known or unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words "may," "will," "should," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to without limitation, (i) general economic conditions such as performance of financial markets, credit defaults, currency exchange rates, interest rates, persistency levels and frequency/severity of insured loss events, (ii) mortality and morbidity levels and trends, (iii) changing levels of competition and general competitive factors, (iv) changes in laws and regulations and in the policies of central banks and/or governments, (v) the impact of acquisitions or reorganisation, including related integration issues.

The company assumes no obligation to update any information contained herein.

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