Hyderabad, July 29, 2019: Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) today announced its consolidated financial results for the quarter ended June 30, 2019 under International Financial Reporting Standards (IFRS).

Commenting on the results, CEO and Co-chairman, GV Prasad said “This quarter, we grew in most of our key markets and hope to continue this momentum with a sharper focus on performance. We will continue  our journey of operational excellence,  cost leadership and  innovation across our businesses”. 

All amounts in millions, except EPS                                                                   All US dollar amounts based on convenience translation rate of I USD = Rs.68.92 

Dr. Reddy’s Laboratories Limited and Subsidiaries 

Consolidated Income Statement 

 Particulars Q1 FY20 Q1 FY19 YoY
Gr %
Q4 FY19 QoQ
Gr%
($)  (Rs.)  ($)  (Rs.)  ($)  (Rs.)
Revenues 558 38,435 540 37,207 3 583 40,166 (4)
Cost of Revenues 270 18,576 239 16,479 13 277 19,113 (3)
Gross Profit 288 19,859 301 20,728 (4) 305 21,053 (6)
Operating Expenses                
Selling, General & Administrative expenses 175 12,065 176 12,106 (0) 180 12,376 (3)
Research and Development expenses 52 3,609 60 4,157 (13) 53 3,662 (1)
Other operating (income) (55) (3,759) (4) (303) 1141 (5) (330) 1038
Results from operating activities 115 7,944 69 4,768 67 78 5,345 49
Net finance (income) (6) (393) (2) (156) 152 (5) (349) 13
Share of (profit) / loss of equity accounted investees (2) (163) (1) (83) 96 (2) (157) 4
Profit before income tax 123 8,500 73 5,007 70 85 5,851 45
Income tax expense 27 1,872 6 446 320 22 1,507 24
Profit for the period 96 6,628 66 4,561 45 63 4,344 53
            –               –               –  
Diluted Earnings Per Share (EPS) 0.58 39.91 0.40 27.45 45 0.38 26.16 53

 

As % to Revenues Q1 FY20 Q1 FY19 Q4 FY19
Gross Profit 51.7 55.7 52.4
SG&A 31.4 32.5 30.8
R&D 9.4 11.2 9.1
EBITDA   29.5   21.7     22.0  
PBT 22.1 13.5 14.6
PAT 17.2 12.3 10.8

 

EBITDA Computation

Particulars  Q1 FY20 Q1 FY19  Q4 FY19
 ($)  (Rs.)  ($)  (Rs.)  ($)  (Rs.)
 Profit before Income Tax 123 8,500 73 5,007 85 5,851
Interest (income) net* (3) (239) (1) (46) (3) (215)
Depreciation# 31 2,124 32 2,214 31 2,136
Amortization# 14 958 13 896 15 1,047
EBITDA 165 11,343 117 8,071 128 8,819

 

* Includes income from Investments       # includes impairment charge 

All amounts in millions, except EPS                                                                   All US dollar amounts based on convenience translation rate of I USD = Rs.68.92 

Key Balance Sheet Items 

Particulars As on 30th June, 2019  As on 31st March, 2019 As on 30th June, 2018
 ($)  (Rs.)  ($)  (Rs.)  ($)  (Rs.)
Cash and cash equivalents and other investments 413 28,439 371 25,570 247 17,047
Trade receivables (current & non-current) 551 37,961 580 39,982 698 48,095
Inventories 510 35,137 487 33,579 457 31,498
Property, plant and equipment 785 54,083 785 54,088 827 57,020
Goodwill and Other Intangible assets 694 47,821 700 48,269 715 49,289
Loans and borrowings (current & non-current) 499 34,387 557 38,381 787 54,273
Trade payables 215 14,842 211 14,553 215 14,816
Equity 2,121 1,46,208 2,034 1,40,197 1,892 1,30,430

 Revenue Mix by Segment

                                                                           Particulars Q1 FY20 Q1 FY19 YoY
Growth %
Q4 FY19 QoQ
Growth %
 (Rs.)  (Rs.)  (Rs.)
Global Generics 32,982 30,636 8 30,384 9
    North America 16,322 15,903 3 14,957 9
    Europe 2,404 2,016 19 1,912 26
    India 6,960 6,074 15 6,505 7
    Emerging Markets 7,296 6,643 10 7,010 4
Pharmaceutical Services and Active Ingredients (PSAI) 4,539 5,409 (16) 6,765 (33)
Proprietary Products & Others 914 1,162 (21) 3,017 (70)
Total 38,435 37,207 3 40,166 (4)

 

Segmental Analysis 

Global Generics (GG)

Revenues from GG segment at Rs.33.0 billion. Year-on-year growth of 8%, primarily driven by Emerging Markets, India and Europe. Sequential growth is 9%.

  • Revenues from North America at Rs.16.3 billion. Year-on-year growth is 3%.  Sequential growth of 9%, is driven by contribution from new products and increase in volumes, partly offset by price erosion coupled with adverse foreign exchange movement. We launched five new products (Daptomycin, Testosterone gel, Tobramycin, Vitamin K & OTC calcium carbonate) and re-launched Isotretinoin during the quarter.

As of 30th June 2019, cumulatively 107 generic filings are pending for approval with the USFDA (104 ANDAs and 3 NDAs under 505(b)(2) route). Of these 104 ANDAs, 58 are Para IVs out of which we believe 34 have ‘First to File’ status.

  • Revenues from Emerging Markets at Rs.7.3 billion. Year-on-year growth is 10%.  Sequential growth is 4%.

–          Revenues from Russia at Rs.4.0 billion. Year-on-year growth of 5%. Growth primarily driven by new launches and better realizations in some of the key molecules.

–          Revenues from other CIS countries and Romania market at Rs.1.2 billion. Year-on-year growth of 2%.

–          Revenues from Rest of World (RoW) territories at Rs.2.1 billion. Year-on-year growth of 27%, primarily driven by new products, traction in new markets and volume traction in base business.

  • Revenues from India at Rs.7.0 billion. Year-on-year growth of 15%, driven by volume traction and improved realizations in base business and new product launches. Sequential growth is 7%.
  • Revenues from Europe at Rs.2.4 billion. Year-on-year growth of 19%, primarily on account of new products and volume traction on account of improvement in supplies. Sequential growth is 26%.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI at Rs.4.5 billion. Year-on-year decline of 16% and sequential decline is 33% due to decline in the sales volume of certain products. 

Proprietary Products (PP)

  • Revenues from PP at Rs.281 million. Year-on-year decline of 61% due to absence of the derma products sales (which were divested in the previous year). 

Income Statement Highlights:

  • Gross profit margin at 51.7%.

–          declined by ~70 bps sequentially and ~400 bps over that of previous year

–          sequentially – excluding the impact of one-time out licensing income of Rs.1.8 billion realized from the sale of derma brands, the gross margins have witnessed improvement of 150 bps on a sequential basis

–          YoY impacted by price erosion due to increased competitive intensity in some of our key molecules in the US and Europe, and lower sales from PSAI business

–          Gross profit margin for GG and PSAI business segments are at 57.6% and 7.2% respectively.

  • SG&A expenses at Rs.12.1 billion, remained flat on a year-on-year basis and declined by 3% sequentially.
  • R&D expenses at Rs.3.6 billion. As % to Revenues- Q1 FY20: 9.4% | Q4 FY 19: 9.1% | Q1 FY19: 11.2%. Focus continues on building complex generics, bio-similars and differentiated products pipeline.
  • Other operating income at Rs.3.8 billion; includes Rs.3.5 billion received from Celgene pursuant to an agreement entered towards settlement of any claim the Company or its affiliates may have had for damages under section 8 of the Canadian Patented Medicines (Notice of Compliance) Regulations in regard to the Company’s ANDS for a generic version of REVLIMID brand capsules, (Lenalidomide) pending before Health Canada.
  • Net Finance income at Rs.393 million compared to Rs.156 million in Q1 FY19. The increase is primarily on account of higher profit on sales of investments by Rs.202 million during the quarter.
  • Profit after Tax at Rs.6.6 billion.  The effective tax rate is around 22% for the quarter.
  • Diluted earnings per share is at Rs.39.91
  • Capital expenditure is at Rs.1.1 billion.

Organizational Update:

With effect from August 1, 2019, Erez Israeli will be elevated as Chief Executive Officer (CEO) of             Dr. Reddy’s Laboratories Limited. GV Prasad will continue as the Co-Chairman and Managing Director and Erez Israeli will continue to report to him.

Since joining Dr. Reddy’s as Chief Operating Officer (COO) in April 2018, Erez has spear-headed the transformation agenda of the organization by ensuring clear focus and strategy, setting foundations for a sustainable financial growth and leading business delivery. His appointment will help to propel the organization’s growth agenda forward. 

Earnings Call Details (06:30 pm IST, 09:00 am EDT, July 29, 2019)

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:

Universal Access Number:                                                                +91 22 6280 1219

Secondary number:                                                                        +91 22 7115 8120

Local Access number:                                                                        +91 70456 71221

(Available all over India)

International Toll Free Number           USA                                       1 866 746 2133

UK                                          0 808 101 1573

Singapore                            800 101 2045

Hong Kong                          800 964 448

Playback of call:                          +91 22 7194 5757, +91 22 6663 5757

Conference ID:                           20718

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

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