Market Overview

Dr. Reddy's Q1 FY19 Financial Results

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Dr. Reddy's Laboratories Ltd. ((BSE: 500124, NSE: DRREDDY, NYSE:RDY)
today announced its consolidated financial results for the quarter ended
June 30, 2018 under International Financial Reporting Standards (IFRS).

         

Revenues

  Rs.3,721 Cr
[YoY: 12% Up, QoQ: 5% Up]
 

Gross Margin

55.7%
[Q1 FY18: 51.6%; Q4 FY18: 53.5%]
 

SG&A expenses

Rs.1,211 Cr
[YoY: 3% Up, QoQ: Flat]
 

R&D expenses

Rs.416 Cr
[11.2% of Revenues]
 

Profit before Tax

Rs.501 Cr
[13.5% of Revenues]
 

Profit after Tax

Rs.456 Cr
[12.3% of Revenues]
 

Commenting on the results, Co-chairman and CEO, GV Prasad said "I am
pleased with our first quarter results, aided by the launch of
gSuboxone. Our focus on operational efficiencies has helped in
significantly improving our margin profile. Looking ahead, while we may
continue to experience price erosion in the North America Generics
market, we will also continue to drive growth and cost efficiencies, at
the same time, enhancing our quality management systems and building
healthy portfolios across the markets we serve
".

All amounts in millions, except EPS
All US dollar amounts
based on convenience translation rate of I USD =
Rs.68.46

 
Dr. Reddy's Laboratories Limited and Subsidiaries
 
Consolidated Income Statement
 
Particulars   Q1 FY19   Q1 FY18  

YoY
Gr %

  Q4 FY18   QoQ
Gr%
  ($)   (Rs.)   ($)   (Rs.)     ($)   (Rs.)  
Revenues 543   37,207   484   33,159 12   516   35,349 5

Cost of Revenues

 

241

 

16,479

 

235

 

16,062

 

3

 

240

 

16,454

 

0

Gross Profit   303   20,728   250   17,097   21   276   18,895   10
Operating Expenses

Selling, General & Administrative expenses

177 12,106 172 11,763 3 176 12,067 0.3

Research and Development expenses

61 4,157 74 5,075 (18) 63 4,348 (4)

Other operating (income) / expense

  (4)   (303)   (3)   (194)   56   (2)   (167)   80
Results from operating activities   70   4,768   7   453   952   39   2,647   80

Net finance (income) / expense

(2)

(156)

(3)

(221)

(30)

(15)

(1,032)

(85)

Share of (profit) / loss of equity accounted investees

(1)

(83)

(1)

(98)

(15)

(1)

(69)

20

Profit before income tax   73   5,007   11   772   548   55   3,748   34

Income tax expense

  7   446   3   181   146   11   726   (39)
Profit for the period   67   4,561   9   591   672   44   3,022   51
        -       -           -    
Diluted Earnings Per Share (EPS)   0.40   27.45   0.05   3.56   672   0.27   18.18   51
 
       
As % to Revenues Q1 FY19 Q1 FY18 Q4 FY18
Gross Profit 55.7 51.6 53.5
SG&A 32.5 35.5 34.1
R&D 11.2 15.3 12.3
PBT 13.5 2.3 10.6
PAT 12.3 1.8 8.5
 
 

EBITDA Computation

 
Particulars Q1 FY19   Q1 FY18   Q4 FY18
($)   (Rs.) ($)   (Rs.) ($)   (Rs.)
Profit before Income Tax 73   5,007 11   772 55   3,748
Interest (income) net* (1) (46) (3) (211) (15) (1,001)
Depreciation# 32 2,214 29 2,008 31 2,109
Amortization# 13   896 12   791 13   921
EBITDA 118   8,071 49   3,360 84   5,777

* Includes income from Investments # includes impairment charge

 
 

Key Balance Sheet Items

 
Particulars  

As on 30th June 2018

  As on 31st March 2018  

As on 30th June 2017

  ($) (Rs.)   ($) (Rs.)   ($) (Rs.)
Cash and cash equivalents and other investments   249 17,047   344 23,517   213 14,572
Trade receivables (current & non-current)   703 48,095   596 40,786   601 41,140
Inventories   460 31,498   425 29,089   410 28,095
Property, plant and equipment   833 57,020   845 57,869   842 57,611
Goodwill and Other Intangible assets   720 49,289   710 48,610   709 48,564
Loans and borrowings (current & non-current)   793 54,273   741 50,714   737 50,462
Trade payables   216 14,816   234 16,052   193 13,225
Equity   1,905 1,30,430   1,847 1,26,460   1,803 1,23,423
   

Revenue Mix by Segment

 
Particulars   Q1 FY19   Q1 FY18   YoY
Growth %
  Q4 FY18   QoQ
Growth %
  (Rs.)   (Rs.)     (Rs.)  
Global Generics   30,636   27,455   12   27,836   10
North America   15,903   14,946   6   14,487   10
Europe   2,016   2,075   (3)   1,711   18
India   6,074   4,687   30   6,138   (1)
Emerging Markets   6,643   5,747   16   5,500   21
Pharmaceutical Services and Active Ingredients (PSAI)   5,409   4,651   16   6,251   (13)
Proprietary Products & Others   1,162   1,053   10   1,262   (8)
Total   37,207   33,159   12   35,349   5
 

Segmental Analysis

Global Generics (GG)

Revenues from GG segment at Rs.30.6 billion. Year-on-year growth
of 12%, primarily driven by contributions from Emerging Markets, India
and launch of gSuboxone in the US. Sequential growth is 10%.

  • Revenues from North America at Rs.15.9 billion. Year-on-year
    growth is 6%. Sequential growth of 10%, driven by contribution from
    new products, primarily gSuboxone, and partly offset by competitive
    pressures on some of the key molecules.

As of 30th June 2018, cumulatively 112 generic filings are
pending for approval with the USFDA (109 ANDAs and 3 NDAs under
505(b)(2) route). Of these 109 ANDAs, 61 are Para IVs out of which we
believe 30 have ‘First to File' status.

  • Revenues from Emerging Markets at Rs.6.6 billion. Year-on-year
    growth is 16%. Sequential growth is 21%.
    • Revenues from Russia at Rs.3.8 billion. Year-on-year growth
      of 9%. Constant currency growth is 14%. Growth primarily driven by
      new launches and volume traction in some of the key molecules.
    • Revenues from other CIS countries and Romania market at
      Rs.1.2 billion. Year-on-year growth of 37%, primarily driven by
      new launches across markets.
    • Revenues from Rest of World (RoW) territories at Rs.1.7
      billion. Year-on-year growth of 17%, primarily driven by new
      markets and volume traction in base business.
  • Revenues from India at Rs.6.1 billion. Year-on-year
    growth of 30%. Q1FY18 was impacted due to GST transition.
  • Revenues from Europe at Rs.2.0 billion. Year-on-year decline of
    3%, primarily on account of higher price erosion in some of the key
    molecules.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI at Rs.5.4 billion. Year-on-year growth of
    16%. Sequential decline is 13%
  • During the quarter, we filed two DMFs with the USFDA.

Proprietary Products (PP)

  • Revenues from PP at Rs.726 million. Year-on-year growth of 42%,
    majorly driven by volume traction coupled with better realizations in
    some of the key molecules. Sequential decline is 14%. Q4FY18 had a
    one-time out licensing income of Rs.160 million, received from Encore
    Dermatology Inc.

Income Statement Highlights:

  • Gross profit margin at 55.7%.
    • Improved by ~230 bps sequentially and ~410 bps over that of
      previous year
    • Improvement primarily aided by contribution from new launches
      including gSuboxone, leverage benefit, better product mix coupled
      with favorable foreign exchange. This was partially offset by
      higher price erosions due to channel consolidation and increased
      competitive intensity in some of our key molecules in the US.
    • Gross profit margin for GG and PSAI business segments are at 61.2%
      and 21.9% respectively.
  • SG&A expenses at Rs.12.1 billion, marginal increase of 3% on a
    year-on-year basis and remained flat sequentially.
  • R&D expenses at Rs.4.2 billion. As % to Revenues- Q1 FY19: 11.2% | Q4
    FY 18: 12.3% | Q1 FY18: 15.3%. Decrease is primarily on account of
    quarterly variation in the milestone related payments and other spend
    activities. Focus continues on building complex generics, biosimilars
    and differentiated products pipeline.
  • Net Finance income at Rs.156 million compared to Rs.221 million in
    Q1FY18.
  • Profit after Tax at Rs.4.6 billion. The effective tax rate is 8.9% for
    the quarter. This is lower primarily on account of profit mix and
    favourable resolutions of certain tax related litigations pertaining
    to earlier years. The effective tax rate in Q1FY18 was 23.5%
  • Diluted earnings per share is at Rs.27.45
  • Capital expenditure is at Rs.2.3 billion.

Earnings Call Details (06:30 pm IST, 09:00 am EDT, July 26, 2018)

           

The Company will host an earnings call to discuss the performance
and answer any questions from participants.

 

Audio conference Participants can dial-in on the numbers below

 
Primary number:    

91 22 6280 1219

Secondary number:

91 22 7115 8120

The numbers listed above are universally accessible from all
networks and all countries.

 
Local Access number (India):

91 70456 71221

 
International Toll Free Number

USA

18667462133

UK

08081011573

Singapore

8001012045

Hong Kong

800964448

 
Playback of call:

91 22 7 194 5757, 91 22 6663 5757

Conference ID:

375#

 

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. (BSE: 500124,
NSE: DRREDDY, NYSE: 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 gastrointestinal,
cardiovascular, diabetology, oncology, pain management and dermatology.
Dr. Reddy's operates in markets across the globe. Our major markets
include – USA, India, Russia & CIS countries, and Europe. 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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