Dr. Reddy’s Q2 & H1 FY14 Financial Results

Thu Oct 31, 2013 6:40am EDT

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Dr. Reddy’s Q2 & H1 FY14 Financial Results

Q2 FY14 Revenues at Rs. 33.6 billion (YoY growth of 17%)
Q2 FY14 EBITDA at Rs. 9.5 billion (YoY growth of 27%)
H1 FY14 Revenues at Rs. 62.0 billion (YoY growth of 14%)
H1 FY14 EBITDA at Rs. 15.2 billion (YoY growth of 22%)

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter ended September 30, 2013 under International Financial Reporting Standards (IFRS).

Key Highlights (Q2 FY14)

  • Consolidated revenues at Rs. 33.6 billion, YoY growth of 17%.
    • Revenues from the Global Generics (GG) segment at Rs. 26.5 billion, YoY growth of 32%. Growth driven by North America, Russia & other Emerging Markets.
    • Revenues from the Pharmaceutical Services and Active Ingredients (PSAI) segment at Rs. 6.4 billion, YoY decline of 19%.
  • Research & Development (R&D) expenses at Rs. 3.0 billion, 9% to revenues versus 6.1% to revenues as in Q2 FY13.
  • Selling, general & administrative (SG&A) expenses at Rs. 9.7 billion, 29% to revenues versus 27.8% to revenues as in Q2 FY13.
  • EBITDA at Rs. 9.5 billion, 28.3% to revenues versus 25.9% to revenues as in Q2 FY13.
  • PAT at Rs. 6.9 billion, 20.6% to revenues versus 13.6% to revenues as in Q2 FY13.
  • During the quarter, the company launched 19 new generic products, filed 13 new product registrations and filed 8 DMFs globally.

Note: Q2 FY 13 Income Statement considered is as submitted to the US SEC in the form 6K.

 

All figures in millions, except EPS

 

All US dollar figures based on convenience translation rate of 1USD = Rs. 62.58

 

Dr. Reddy’s Laboratories Limited and Subsidiaries

 

Unaudited Consolidated Income Statement

   
Particulars Q2 FY14   Q2 FY13 Growth %
  ($)  

(Rs.)

  %   ($)  

(Rs.)

  %  
Revenues 537   33,575   100.0 460   28,809   100.0 17
Cost of revenues   225   14,106   42.0   219   13,708   47.6   3
Gross profit   311   19,469   58.0   241   15,101   52.4   29
Operating Expenses
Selling, general & administrative expenses 156 9,737 29.0 128 8,013 27.8 21
Research and development expenses 48 3,009 9.0 28 1,759 6.1 71
Impairment loss on intangible assets 8 507 1.8
Impairment loss on goodwill 3 181 0.6
Other operating income   (10)   (637)   (1.9)   (6)   (397)   (1.4)   60
Results from operating activities   118   7,360   21.9   80   5,038   17.5   46
Net finance income (5) (291) (0.9) (6) (371) (1.3) (22)
Share of profit of equity accounted investees   (1)   (44)   (0.1)   (0)   (28)   (0.1)   56
Profit before income tax   123   7,695   22.9   87   5,437   18.9   42
Income tax expense   13   792   2.4   24   1,512   5.2   (48)
Profit for the period   110   6,903   20.6   63   3,925   13.6   76
                             
Diluted Earnings per share   0.65   40.5       0.37   23.1       75
 
 

EBITDA Computation:

Particulars   Q2 FY14       Q2 FY13
  ($)  

(Rs.)

($)  

(Rs.)

Profit before income tax 123   7,695 87   5,437
Interest (income)/expense 1 71 (1) (31)
Depreciation 19 1,171 15 943
Amortization 9 562 7 433
Impairment   -   -   11   688
EBITDA   152   9,499   119   7,470
 

Segmental Analysis

Global Generics

Revenues from Global Generics segment for Q2 FY14 at Rs. 26.5 billion, YoY growth of 32% driven by North America, Russia and other Emerging Market territories.

  • Revenues from North America for Q2 FY14 at Rs. 13.2 billion, YoY growth of 43%. Growth largely driven by:-
    • Products launched in limited competition space namely finasteride 1mg, isotretinoin, zoledronic acid (5mg/100mL), zoledronic acid (4mg/5ml) etc during previous quarters post Sep. 2012 and 4 new products which were launched during the quarter - azacitidine, decitabine, donepezil 23mg, and divalproex ER tabs.
    • Significant traction in market share of key existing products namely fondaparinux, omeprazole DR etc
    • During the quarter, 4 ANDAs were filed. Cumulatively, 62 ANDAs are pending for approval with the USFDA of which 39 are Para IVs and we believe 9 have ‘First To File’ status.
  • Revenues from Emerging Markets (which include Russia, CIS countries and RoW territories) for Q2 FY14 at Rs. 7.3 billion, YoY growth of 42%.
    • Revenues from Russia at Rs. 4.6 billion, YoY growth of 44%. Growth was largely driven by volume uptake in the current quarter on account of seasonal impact.
    • Revenues from CIS markets at Rs. 0.9 billion, YoY growth of 39%. Growth was largely driven by volume uptake of existing products and introduction of new products in Ukraine.
    • Revenues from RoW territories stood at Rs. 1.8 billion, YoY growth of 36%.
  • Revenues from India for Q2 FY14 at Rs. 4.2 billion, YoY growth of 8.5%.
    • Resilient growth after considering trade disruptions and impact of the revised prices under new pharma pricing policy.
  • Revenues from Europe for Q2 FY14 at Rs. 1.8 billion, remained flat YoY.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI for Q2 FY14 at Rs. 6.4 billion, YoY decline of 19%. Degrowth on the back of lower number of ‘launch molecules’ to our customers during the quarter.
  • During the quarter, 8 DMFs were filed globally, including 1 in the US and 1 in Europe. The cumulative number of DMF filings as of September 30, 2013 is 590.

Income Statement Highlights:

  • Gross profit margin at 58% in Q2 FY14 improved by nearly 560 basis points versus Q2 FY13. Gross profit margin for Global Generics and PSAI business segments are at 66.1% and 24.6% respectively.

GG gross margin improved primarily on account of higher contribution from new product launches in North America, where as PSAI gross margin declined, primarily on the back of lower number of launch molecules to our customers and relatively higher overheads during the quarter.

  • SG&A expenses including amortization in Q2FY14 at Rs. 9.7 billion, YoY growth of 21%. The increase is primarily towards select brand building activities in the Emerging Market territories.
  • R&D expenses stood at Rs. 3.0 billion, YoY growth of 71%; 9% to revenues in Q2 FY14 as compared to 6.1% to revenues in Q2 FY13.
  • Net Finance income at Rs. 291 million in Q2 FY14 compared to the net finance income of Rs. 371 million in Q2 FY13. The change is on account of :
    • Net incremental forex impact of Rs. 23 million
    • Incremental net interest expense of Rs. 103 million
  • EBITDA for Q2 FY14 at Rs. 9.5 billion, YoY growth of 27%; 28.3% to revenues.
  • Profit after Tax in Q2 FY14 at Rs. 6.9 billion, YoY growth of 76%.
  • Diluted earnings per share in Q2 FY 14 at Rs. 40.5
  • Capital expenditure for Q2 FY14 is Rs. 3.8 billion.
 

All US dollar figures based on convenience translation rate of 1USD = Rs. 62.58

 

Appendix 1: Key Balance Sheet Items

(in millions)

Particulars   As on 30th Sep 2013   As on 30th June 2013
  ($)  

(Rs.)

  ($)  

(Rs.)

Cash and cash equivalents and current investments   435   27,202   478   29,907
Trade receivables   532   33,291   466   29,168
Inventories   381   23,874   360   22,536
Property, plant and equipment   679   42,477   629   39,393
Goodwill and Other Intangible assets   244   15,274   236   14,787
Loans and borrowings (current & non-current)   786   49,200   702   43,937
Trade payables   173   10,828   161   10,076
Total Equity   1,248   78,086   1,199   75,051
   
 

Appendix 2: Revenue Mix by Segment

 

(in millions)

    Q2 FY14   Q2 FY13  

Growth
%

  ($)  

(Rs.)

  %   ($)  

(Rs.)

  %  
Global Generics   424   26,548   79   321   20,103   70   32
North America       13,244   50       9,270   46   43
Europe       1,761   6       1,777   9   (1)
India       4,207   16       3,879   19   8
Russia & Other CIS       5,516   21       3,841   19   44
RoW       1,820   7       1,336   7   36
PSAI   102   6,403   19   126   7,875   27   (19)
North America       944   15       1,353   17   (30)
Europe       2,358   37       2,906   37   (19)
India       1,071   17       1,148   15   (7)
RoW       2,030   31       2,468   31   (18)
Proprietary Products & Others   10   624   2   13   831   3   (25)
Total   536   33,575   100   460   28,809   100   17
       
 

All figures in millions, except EPS

 

All US dollar figures based on convenience translation rate of 1USD = Rs. 62.58

 

Appendix 3: Consolidated Income Statement

Particulars H1 FY14   H1 FY13  

Growth
%

  ($)  

(Rs.)

  %   ($)  

(Rs.)

  %  
Revenues 991   62,024   100.0 866   54,215   100.0 14
Cost of revenues   440   27,536   44.4   409   25,574   47.2   8
Gross profit   551   34,488   55.6   458   28,641   52.8   20
Operating Expenses
Selling, general & administrative expenses 296 18,530 29.9 260 16,291 30.0 14
Research and development expenses 87 5,438 8.8 53 3,322 6.1 64
Impairment loss on intangible assets 8 507 0.9
Impairment loss on goodwill 3 181 0.3
Other operating income   (16)   (1012)   (1.6)   (10)   (615)   (1.1)   65
Results from operating activities   184   11,532   18.6   143   8,956   16.5   29
Net finance income (4) (221) (0.4) (3) (159) (0.3) 39
Share of profit of equity accounted investees   (1)   (79)   (0.1)   (1)   (47)   (0.1)   69
Profit before income tax   189   11,832   19.1   146   9,162   16.9   29
Income tax expense   21   1,320   2.1   30   1,877   3.5   (30)
Profit for the period   168   10,512   17.0   116   7,285   13.4   44
                             
Diluted EPS   0.98   61.6       0.68   42.8       44
 
 

Appendix 4: EBITDA Computation:

Particulars   H1 FY14       H1 FY13
($)  

(Rs.)

($)  

(Rs.)

Profit before income tax 189   11,832 146   9,163
Interest (income) / expense 0 11 (0) (29)
Depreciation 37 2,288 29 1,839
Amortization 17 1,058 13 833
Impairment         11   688
EBITDA   243   15,189 200   12,494
 

Disclaimer

This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

About Dr. Reddy's

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and 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. Major therapeutic focus is on gastro-intestinal, cardiovascular, diabetology, oncology, pain management and anti-infective. Major markets include India, USA, Russia-CIS and Europe apart from other select geographies within Emerging Markets.

For more information, log on to: www.drreddys.com

Note: All discussions in this release are based on unaudited consolidated IFRS financials.

Dr. Reddy’s Laboratories Ltd.
Investors and Financial Analysts:
Kedar Upadhye, +91-40-66834297
kedaru@drreddys.com
or
Saunak Savla, +91-40-49002135
saunaks@drreddys.com
or
Milan Kalawadia (USA), +1 908-203-4931
mkalawadia@drreddys.com
or
Media:
S Rajan, +91-40-49002445
rajans@drreddys.com

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