Dr. Reddy’s Q3 and 9 Months FY15 Financial Results

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter and nine months ended December 31, 2014 under International Financial Reporting Standards (IFRS).

Key Highlights (Q3 FY15)

  • Consolidated revenues at Rs. 38.4 billion, year-on-year growth of 9%.
    • Revenues from the Global Generics (GG) segment at Rs. 31.7 billion, YoY growth of 8%.
    • Revenues from the Pharmaceutical Services and Active Ingredients (PSAI) segment at Rs. 6.1 billion. YoY growth of 21%.
  • Gross Profit Margin at 58.2% in Q3 FY15 versus 60.5% as in Q3 FY14.
  • Research & Development (R&D) expenses at Rs. 4.3 billion, 11.2% to revenues versus 8.4% to revenues as in Q3 FY14.
  • Selling, general & administrative (SG&A) expenses at Rs. 11.2 billion, 29.0% to revenues.
  • EBITDA at Rs. 10.5 billion, 27% to revenues.
  • Profit after tax at Rs. 5.7 billion, 15% to revenues.
  • During the quarter the company launched 13 new generic products, filed 18 new product registrations and 14 DMFs globally.

During the quarter, the Company completed the acquisition of Habitrol® franchise (an over-the-counter nicotine replacement therapy transdermal patch) from Novartis Consumer Health Inc. and began marketing the product in the U.S. Total consideration paid was U.S. $80 million.

All amounts in millions, except EPS

All US dollar amounts based on convenience translation rate of 1 USD = Rs. 63.04

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

Particulars

Q3 FY15Q3 FY14Growth %
($)(Rs.)%($)(Rs.)%
Revenues61038,43110056135,3381009
Cost of revenues 255 16,079 41.8 221 13,946 39.5 15
Gross profit35522,35258.233921,39160.54
Operating Expenses
Selling, general & administrative expenses 177 11,151 29.0 158 9,945 28.1 12
Research and development expenses 68 4,316 11.2 47 2,979 8.4 45
Other (income)/expense, net (5 ) (341 ) (0.9 ) (3 ) (177 ) (0.5 ) 93
Results from operating activities1157,22618.81378,64424.5(16)
Finance (expense)/income, net 16 1,013 2.6 0 15 0
Share of profit of equity accounted investees, net of tax 1 47 0.1 1 46 0.1 0
Profit before tax1318,28621.61388,70524.6(5)
Tax expense 40 2,541 6.6 40 2,521 7.1 1
Profit for the period915,74515986,18417.5(7)
Diluted Earnings Per Share (EPS)0.5333.610.5736.25 (7 )

EBITDA Computation

ParticularsQ3 FY15Q3 FY14
($)(Rs.)($)(Rs.)
Profit before tax 131 8,286 138 8,705
Interest (income) / expense net* (5 ) (347 ) 1 48
Depreciation 23 1,462 19 1,208
Amortization 9 579 9 586
Impairment / (reversal of impairment) adjustment 8 534 (8 ) (497 )
EBITDA16710,51515910,049
EBITDA (% to sales)27.328.4

* includes profit of sales of investments

All US dollar amounts based on convenience translation rate of 1 USD = Rs. 63.04

Segmental Analysis

Global Generics

Revenues are at Rs. 31.7 billion, year-on-year growth of 8%, primarily driven by Branded Markets.

  • Revenues from North America at Rs. 16.8 billion, year-on-year growth of 4%. Sequential growth in constant currency at 17%, primarily on account of:
    • Sustained performance of FY14 ‘limited competition’ launches, namely decitabine, azacitidine, and divalproex sodium ER.
    • Progress on market share expansion of key molecules, namely ziprasidone, amlodipine-atorvastatin and sumatriptan auto injector.
    • 6 new products launched during the quarter.
    • 2 ANDA filings during the quarter. Cumulatively, 68 ANDAs are pending for approval with the USFDA of which 43 are Para IVs, and we believe 13 to have ‘First To File’ status.
  • Revenues from Emerging Markets at Rs. 8.6 billion, year-on-year growth of 16%.
    • Revenues from Russia at Rs. 4.0 billion, year-on-year decline of 9% primarily on account of the Rouble depreciation. In constant currency, the growth is ~27% on the back of healthy sales.
    • Emerging Markets, Ex-Russia at Rs. 4.6 billion recorded year-on-year growth of 51% primarily driven by strong performance in Venezuela on the back of continued volume upsides.
  • Revenues from India for at Rs. 4.3 billion, year-on-year growth of 11%.
    • Growth is driven by continued focus on new product launches and prescription growth.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI at Rs. 6.1 billion, year-on-year growth of 21%.
  • During the quarter 14 DMFs were filed globally, filed 9 in the ROW and 5 in Europe. The cumulative number of DMF filings as of December 31, 2014 is 720.

Income Statement Highlights:

  • Gross profit margin at 58.2% registered ~230 basis points decline vs Q3 FY14 primarily on account of unfavourable currency impact. Gross profit margin for GG and PSAI business segments are at 65.9% and 17.2% respectively.
  • SG&A expenses, excluding impairment adjustments, marginally grew by 2%. This increase is largely due to annual increments, additional manpower deployment in the past 12 months and other sales and marketing spend for events specific to this quarter offset by the favourable impact of Emerging Market currency depreciation.
  • R&D expenses at Rs. 4.3 billion, year-on-year growth of 45%. 11.2% of revenues in Q3 FY15 as compared to 8.4% of revenues in Q3 FY14. The increase is in line with our planned scale-up in development activities.
  • Consequent to the decline in the recoverable amounts of certain product / customer contracts related intangible assets, an impairment charge of Rs. 534 million was recorded during the quarter.
  • Net Finance income at Rs. 1,013 million compared to Rs. 15 million in Q3 FY14. The increase is on account of:
    • Incremental forex benefit of Rs. 604 million
    • Incremental profit on sales of investments of Rs. 174 million
    • Net increase in interest income of Rs. 221 million
  • EBITDA at Rs. 10.5 billion, year-on-year growth of 5%; 27% of revenues.
  • Profit after Tax at Rs. 5.7 billion, year-on-year decline of 7%; 15% of revenues.
  • Diluted earnings per share in Q3 FY15 at Rs. 33.61
  • Capital expenditure for Q3 FY15 is Rs. 2.65 billion.

Appendix 1: Key Balance Sheet Items

ParticularsAs on 31st Dec 14As on 30th Sep 14
($)(Rs.)($)(Rs.)
Cash and cash equivalents and Other current investments 456 28,736 456 28,737
Trade receivables 638 40,224 598 37,722
Inventories 461 29,038 446 28,123
Property, plant and equipment 760 47,887 739 46,559
Goodwill and Other Intangible assets 283 17,820 216 13,648
Loans and borrowings (current & non-current) 629 39,656 616 38,854
Trade payables 196 12,333 204 12,843
Equity 1,667 105,107 1,570 99,004

Appendix 2: Revenue Mix by Segment

ParticularsQ3 FY15Q3 FY14Growth %
($)(Rs.) % ($)(Rs.) %
Global Generics50331,6928246629,396838
North America 16,819 53 16,223 55 4
Europe 1,947 6 1,862 6 5
India 4,328 14 3,913 13 11
Russia & Other CIS 4,766 15 5,296 18 (10 )
Rest of World 3,832 12 2,102 7 82
PSAI976,11216805,0621421
North America 1,360 22 780 15 74
Europe 2,055 34 1,948 38 5
India 948 16 945 19 0
Rest of World 1,749 29 1,388 27 26
Proprietary Products & Others106262148802(29)
Total61038,43110056135,3381009

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.

Contacts:

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
Ashish Girotra (USA), +1 609-375-9805
ashishg@drreddys.com
or
Media:
Shilpi Lathia, +91-40-49002447
shilpil@drreddys.com

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