Dr. Reddy’s Q2 & H1 FY13 Financial Results

Q2 FY13 Revenues at   Rs. 28.8 billion (YoY growth of 27%) Q2 FY13 EBITDA at   Rs. 7.7 billion (YoY growth of 47%) *Adjusted Q2 FY13 PAT at   Rs. 4.9 billion   (YoY growth of 77%)

H1 FY13 Revenues at   Rs. 54.2 billion   (YoY growth of 28%) H1 FY13 EBITDA at   Rs. 12.7 billion   (YoY growth of 35%) **Adjusted H1 FY13 PAT at   Rs. 7.8 billion   (YoY growth of 56%)

Hyderabad, India, October 30 th , 2012:   Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter ended September 30, 2012 under International Financial Reporting Standards (IFRS).

Key Highlights (Q2 FY13)

• Consolidated revenues for Q2 FY13 at   Rs. 28.8 billion, recorded YoY growth of 27%. Consolidated revenues for H1 FY13 at Rs. 54.2 billion, recorded YoY growth of 28%.
• Revenues from the Global Generics segment for Q2 FY13 at   Rs. 20.1 billion, recorded YoY growth of 25% primarily driven by North America , India and other emerging markets.
• Revenues from the PSAI segment for Q2 FY13 at   Rs. 7.9 billion, recorded YoY growth of 33%.
• EBITDA for Q2 FY13 at   Rs. 7.7 billion, 27% of revenues, recorded YoY growth of 47%. EBITDA for H1 FY13 at   Rs. 12.7 billion, 23% of revenues, recorded YoY growth of 35%.
• PAT for Q2 FY13 at   Rs. 4.1 billion, 14% of revenues, recorded YoY growth of 32%. PAT for H1 FY13 at   Rs. 7.4 billion, 14% of revenues, recorded YoY growth of 30%.
• *Adjusted PAT for Q2 FY13 at   Rs. 4.9 billion, 17% of revenues, recorded YoY growth of 77%.
• During the quarter, the company launched 18 new generic products, filed 11 new product registrations and filed 10 DMFs globally.

* Adjusted for (a) impairment charges in Q2 FY13 (b) the benefit on reversal of provision for voluntary retirement scheme (‘VRS’)in Q2 FY 12 and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

** Adjusted for (a) impairment charges in Q2 FY13 (b) net charge for voluntary retirement scheme(‘VRS’) and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

  All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD =   Rs.   52.92

Dr. Reddy’s Laboratories Ltd. and Subsidiaries
Unaudited Consolidated Income Statement

Particulars	Q2 FY13			Q2 FY12			Growth %
($)	( Rs. )	%	($)	( Rs. )	(%)
Revenues	544	28,809	100	429	22,678	100	27
Cost of revenues	255	13,504	47	198	10,473	46	29
Gross profit	289	15,305	53	231	12,205	54	25
Operating Expenses
Selling, general & administrative expenses	151	8,013	28	136	7,217	32	11
Research and development expenses	33	1,759	6	28	1,459	6	21
Impairment loss on goodwill and intangible assets	13	688	2
Other operating (income) / expense	(8)	(397)	(1)	(4)	(216)	(1)	85
Results from operating activities	99	5,242	18	71	3,745	17	40
Net finance (income) / expense	(7)	(371)	(1)	1	50	0	(849)
Share of (profit) / loss of equity accounted investees	(1)	(28)	(0)	(0)	(13)	(0)	115
Profit before income tax (‘PBT’)	107	5,641	20	70	3,708	16	52
Income tax expense	30	1,567	5	12	630	3	148
Profit for the period	77	4,074	14	58	3,078	14	32

 

Diluted EPS

0.5

23.9

0.3

18.1

32

Profit Computation:

EBITDA Computation	Q2 FY13		Q2 FY12
($)	( Rs. )	($)	( Rs. )
PBT	107	5,641	70	3,708
Net Interest Expenses / (Income)	(1)	(32)	4	225
Depreciation	18	943	17	879
Amortization	8	433	7	389
Impairment	13	688
Reported EBITDA	145	7,673	98	5,201
Adjustments of exceptional items:
Part reversal of provision booked in Q1 FY12 for VRS			(2)	(94)
Adjusted EBITDA	145	7,673	97	5,107

 

PAT Computation	Q2 FY13		Q2 FY12
($)	( Rs. )	($)	( Rs. )
PAT	77	4,074	58	3,078
Adjustments:
Part reversal of provision booked in Q1 FY12 for VRS			(2)	(94)
Impairment loss on goodwill and intangible assets	13	688
Tax adjustment*	3	175	(4)	(192)
Adjusted PAT	93	4,937	53	2,792

* Q2 FY13 normalized to the FY13 annual effective tax rate and Q2 FY12 normalized to the FY12 annual effective tax rate and the effect of the aforementioned transactions  

SEGMENTAL ANALYSIS

Global Generics

Revenues from Global Generics segment for Q2 FY13 at   Rs. 20.1 billion, recorded YoY growth of 25% driven by key markets of North America , India and other emerging markets..

• Revenues from North America for Q2 FY13 at   Rs. 9.3 billion, recorded YoY growth of 47%.
• Growth is largely driven by key limited competition products of ziprasidone, tacrolimus, fondaparinux, clopidogrel, ramp-up in antibiotics portfolio and products from Shreveport facility.
• 4 new products were launched during the quarter – atorvastatin, metoprolol, montelukast family and amoxicillin.
• 30 products from the prescription portfolio are ranked among the Top 3 in their respective market shares.  (Source: IMS Health Volumes, August 2012)
• During the quarter, 4 ANDAs were filed. Cumulatively, 63 ANDAs are pending for approval with the USFDA of which 33 are Para IVs and 7 have ‘First To File’ status.
• Revenues from Russia and Other CIS markets for Q2 FY13 at   Rs. 3.8 billion recorded YoY growth of 14%.
• Revenues from Russia for Q2 FY13 are at   Rs. 3.2 billion.
• Revenues from Other CIS markets for Q2 FY13 at   Rs. 0.62 billion recorded YoY growth of 31%.
• Revenues from India for Q2 FY13 at   Rs. 3.9 billion recorded YoY growth of 12%.
• Growth driven by volume increase across most of key brands.
• Biosimilars portfolio grew YoY by 24% during the quarter.
• 4 new brands were launched during the quarter.
• Revenues from Europe for Q2 FY13 at   Rs. 1.8 billion declined YoY by 16%.
• Revenues from Germany for Q2 FY13 at   Rs.   1.1 billion declined YoY by 11%.

Pharmaceutical Services and Active Ingredients (PSAI)

• Revenues from PSAI for Q2 FY13 at   Rs. 7.9 billion, recorded YoY growth of 33%.
• During the quarter, 10 DMFs were filed globally, including 2 in Europe . The cumulative number of DMF filings as of September 30. 2012 is 552.

Income Statement Highlights:

• Gross profit margin at 53.1% in Q2 FY13 marginally dropped by 0.7% versus Q2 FY12. Gross profit margin for Global Generics and PSAI business segments are at 59.4% and 35.8% respectively.
• Selling, General and Administration (SG&A) expenses including amortization at   Rs. 8.0 billion increased YoY by 11%.
• Research & development expenses for Q2 FY13 at   Rs. 1.8 billion is at 6% of revenues.
• During the quarter, a non-recurring and non-cash impairment charge of `688 million pertaining to product intangibles in generics portfolio and a goodwill charge wrt Italian operations has been considered.
• Net Finance income is at   Rs. 371 million, in Q2 FY13 compared to the net finance cost of `50 million in Q2 FY12. The change is on account of :
• Net incremental forex gain of   Rs. 187 million, primarily on account of reversal of the loss on time value of options recorded in Q1 FY13, due to the recent appreciation of the rupee.
• Net interest income of   Rs. 33 million in Q2 FY13 compared to net interest expense of   Rs. 225 million in Q2 FY12 primarily on account of higher interest income from Fixed Deposit and mutual funds.
• EBITDA for Q2 FY13 is   Rs. 7.7 billion, 27% of revenues and recorded YoY growth of 47%. This growth is supported by the increased operating leverage.
• Profit after Tax in Q2 FY13 at   Rs. 4.1 billion recorded YoY growth of 32%.
• *Adjusted Profit after tax in Q2 FY13 at   Rs 4 .9 billion recorded YoY growth of 77%.
• Diluted earnings per share in Q2 FY 13 are   Rs. 23.9.
• Capital expenditure for Q2 FY13 is   Rs. 1,8 billion.

* * Adjusted for (a) impairment charges in Q2 FY13 (b) the benefit on reversal of provision for voluntary retirement scheme (‘VRS’)in Q2 FY 12 and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

    All dollar figures based on convenience translation rate of 1USD =   Rs.   52.92

(in millions) Appendix 1: Key Balance Sheet Items

Particulars	As on 30 th   Sep 12		As on 30 th   June 12
($)	( Rs. )	($)	( Rs. )
Cash and cash equivalents	390	20,641	403	21,353
Trade receivables	496	26,247	472	24,975
Inventories	414	21,885	389	20,580
Property, plant and equipment	667	35,300	653	34,550
Goodwill and other   intangible assets	233	12,297	257	13,597
Loans and borrowings (current & non-current)	660	34,901	670	35,430
Trade payables	197	10,412	165	8,750
Equity	1,197	63,354	1,127	59,664

 

(in millions) Appendix 2: Revenue Mix by Segment

	Q2FY13			Q2FY12			Growth %
($)	( Rs. )	as a %	($)	( Rs. )	as a %
Global Generics	380	20,103	70	305	16,136	71	25
North America		9,270	46		6,287	39	47
Europe		1,777	9		2,117	13	(16)
India		3,879	19		3,459	21	12
Russia & Other CIS		3,841	19		3,380	21	14
RoW		1,336	7		893	6	50
PSAI	149	7,876	27	112	5,933	26	33
North America		1,353	17		1,068	18	27
Europe		2,906	37		2,303	39	26
India		1,148	15		752	13	53
RoW		2,469	31		1,810	31	36
Proprietary Products and Others	16	830	3	12	610	3	36
Total	544	28,809	100	429	22,678	100	27

  All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD =   Rs.   52.92

Appendix 3: Consolidated Income Statement

Particulars	H1 FY13			H1 FY12			Growth %
($)	( Rs. )	%	($)	( Rs. )	(%)
Revenues	1,024	54,215	100	802	42,461	100	28
Cost of revenues	479	25,369	47	372	19,701	46	29
Gross profit	545	28,846	53	430	22,760	54	27
Operating Expenses
Selling, general & administrative expenses	308	16,291	30	264	13,972	33	17
Research and development expenses	63	3,322	6	50	2,656	6	25
Impairment loss on goodwill and intangible assets	13	688	1
Other operating (income) / expense	(12)	(615)	(1)	(8)	(402)	(1)	54
Results from operating activities	173	9,160	17	123	6,534	15	40
Net finance (income) / expense	(3)	(159)	(0)	2	96	0	(266)
Share of (profit) / loss of equity accounted investees	(1)	(47)	(0)	(0)	(17)	(0)	176
Profit before income tax	177	9,366	17	122	6,455	15	45
Income tax expense	37	1,932	4	14	750	2	157
Profit for the period	140	7,434	14	108	5,705	13	30

 

Diluted EPS

0.8

43.6

0.6

33.5

30

Appendix 4: Profit Computation

EBITDA Computation	H1 FY13		H1 FY12
($)	( Rs. )	($)	( Rs. )
PBT	177	9,366	122	6,455
Net Interest Expenses / (Income)	0	12	8	446
Depreciation	35	1,839	32	1,708
Amortization	16	833	15	794
Impairment	13	688
Reported EBITDA	241	12,738	178	9,403
Adjustments of exceptional items:
One-time charge of Voluntary Retirement Scheme			1	42
Adjusted EBITDA	241	12,738	178	9,445

 

PAT Computation	H1 FY13		H1 FY12
($)	( Rs. )	($)	( Rs. )
PAT	140	7,434	108	5,705
Adjustments:
One-time charge of Voluntary Retirement Scheme			1	42
Impairment loss on goodwill and intangible assets	13	688
Tax adjustment*	(5)	(280)	(14)	(729)
Adjusted PAT	148	7,842	95	5,018

*   H1 FY13 normalized to the FY13 annual effective tax rate and H1 FY12 normalized to the FY12 annual effective tax rate and the effect of the aforementioned transactions

Source