Dr. Reddy’s Q3 FY19 Financial Results

HYDERABAD, India--()--Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) today announced its consolidated financial results for the quarter ended December 31, 2018 under International Financial Reporting Standards (IFRS).

Q3 Performance Summary

                 

9M Performance Summary

 

Rs.3,850 Cr

Rs.11,369 Cr

Revenue

Revenue

[Up: 1% QoQ; 1% YoY] [Up: 7% YoY]
 

53.9%

54.9%

Gross Margin

Gross Margin

[Q2 FY19: 55.0%; Q3 FY18: 56.3%] [9M FY18: 53.8%]
 

Rs.1,204 Cr

Rs.3,651 Cr

SGNA expenses

SGNA expenses

[Dc: 3% QoQ; Flat: YoY] [Up: 5% YoY]
 

Rs.367 Cr

Rs.1,195 Cr

R&D expenses

R&D expenses

[9.5% of Revenues]

[10.5% of Revenues]
 

Rs.581 Cr

Rs.1,659 Cr

Profit before Tax

Profit before Tax

[Flat: QoQ; Dc: 2% YoY] [Up: 57% YoY]
 

Rs.485 Cr

Rs.1,445 Cr

Profit after Tax

Profit after Tax

[Dc: 4% QoQ; Up: 45% YoY] [Up: 113% YoY]
 
 

Commenting on the results, CEO and Co-chairman, G.V. Prasad said “We continued to improve our performance in the third quarter of FY 19, supported by significant growth in emerging markets and India, pickup in new product launches, and improvements in cost structure. We are on track towards delivering sustainable & profitable growth.”

All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs.69.58

 
Dr. Reddy’s Laboratories Limited and Subsidiaries
 
Consolidated Income Statement
               
Particulars Q3 FY19 Q3 FY18

YoY
Gr %

Q2 FY19 QoQ
Gr%
($)     (Rs.)     ($)     (Rs.)         ($)     (Rs.)    
Revenues 553     38,500 547     38,060 1 546     37,978 1
Cost of Revenues 255     17,748     239     16,649     7     245     17,081     4
Gross Profit 298     20,752     308     21,411     (3)     300     20,897     (1)
Operating Expenses
Selling, General & Administrative expenses 173 12,036 173 12,048 (0) 178 12,372 (3)
Research and Development expenses 53 3,668 67 4,667 (21) 59 4,120 (11)
Other (income) / expense net (10)     (681)     (4)     (313)     118     (9)     (641)     6
Results from operating activities 82     5,729     72     5,009     14     73     5,046     14
Net finance (income) / expense 0 13 (12) (851) (102) (9) (625) (102)
Share of (profit) / loss of equity accounted investees, net of tax (1)     (89)     (1)     (85)     5     (2)     (109)     (18)
Profit before income tax 83     5,805     85     5,945     (2)     83     5,780     0
Income tax expense 14     953     37     2,601*     (63)     11     742     28
Profit for the period 70     4,852     48     3,344     45     72     5,038     (4)
                                             
Diluted Earnings Per Share (EPS) 0.42     29.21     0.29     20.13     45     0.44     30.31     (4)

* ~ Rs. 930 million impact on account of reforms in US tax laws

                             
As % to Revenues

Q3
FY19

Q3
FY18

Q2
FY19

Gross Profit 53.9 56.3 55.0
SG&A 31.3 31.7 32.6
R&D 9.5 12.3 10.8
EBITDA 22.5 21.2 22.8
PBT 15.1 15.6 15.2
PAT 12.6 8.8 13.3

 

EBITDA Computation

 
Particulars     Q3 FY19           Q3 FY18           Q2 FY19
    ($)     (Rs.) ($)     (Rs.) ($)     (Rs.)
Profit before Income Tax 83     5,805 85     5,945 83     5,780
Interest (income) net* (4) (260) (13) (881) (2) (132)
Depreciation 30 2,073 30 2,089 29 2,033
Amortization     15     1,035 13     902 14     965
EBITDA     124     8,653

116

    8,055 124     8,646

* Includes income from Investments

All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs.69.58

 

Key Balance Sheet Items

           
Particulars

As on 31st Dec,
2018

   

As on 30th Sep,
2018

   

As on 31st Dec,
2017

    ($)     (Rs.)     ($)     (Rs.)     ($)     (Rs.)
Cash and cash equivalents and other investments     368     25,593     299     20,837     360     25,032
Trade receivables (current & non-current)     536     37,302     666     46,317     612     42,593
Inventories     487     33,911     467     32,490     386     26,825
Property, plant and equipment     795     55,344     814     56,640     836     58,189
Goodwill and Other Intangible assets     707     49,205     737     51,290     692     48,182
Loans and borrowings (current & non-current)     630     43,836     798     55,522     789     54,911
Trade payables     229     15,939     202     14,073     209     14,575
Equity     1,950     1,35,708     1,889     1,31,446     1,778     1,23,685

 

Revenue Mix by Segment

                   
Particulars   Q3 FY19     Q3 FY18  

YoY
Growth %

Q2 FY19 QoQ
Growth %
    (Rs.)     (Rs.)         (Rs.)    
Global Generics     31,347     30,105     4     30,536     3
North America     14,832     16,073     (8)     14,265     4
Europe     2,030     2,006     1     1,915     6
India     6,741     6,126     10     6,864     (2)
Emerging Markets     7,744     5,900     31     7,492     3
Pharmaceutical Services and Active Ingredients (PSAI)     5,937     5,436     9     6,029     (2)
Proprietary Products & Others     1,216     2,519     (52)     1,413     (14)
Total     38,500     38,060     1     37,978     1
 
 

Segmental Analysis

Global Generics (GG)

Revenues from GG segment at Rs.31.3 billion. Year-on-year growth of 4%, primarily driven by contributions from Emerging Markets, India and favorable forex. Sequentially the sales grew by 3%.

  • Revenues from North America at Rs.14.8 billion. Year-on-year decline of 8%. Sequential growth of 4%, aided by higher volume offtake, new launches and favorable forex offset by higher price erosion in some of the key molecules.

    During the quarter, 10 new products were launched and we have filed 3 ANDAs with the USFDA.

    As of 31st Dec 2018, cumulatively 103 generic filings are pending for approval with the USFDA (100 ANDAs and 3 NDAs under 505(b)(2) route). Of these 100 ANDAs, 59 are Para IVs, and we believe 33 have ‘First to File’ status.
  • Revenues from Emerging Markets at Rs.7.7 billion. Year-on-year growth is 31%, primarily on account of new launches, traction in new markets and improved volume offtake in our existing markets. Sequential growth is 3%.
    • Revenues from Russia at Rs.4.1 billion. Year-on-year growth of 22%, driven by both new launches and improvement in base business, marginally offset by unfavorable forex.
    • Revenues from other CIS countries and Romania market at Rs.1.4 billion. Year-on-year growth of 45%, driven by new products and volume uptake in the base business.
    • Revenues from Rest of World (RoW) territories at Rs.2.2 billion. Year-on-year growth of 43%, primarily driven by new products, traction in new markets and volume uptake in base business.
  • Revenues from India at Rs.6.7 billion. Year-on-year growth of 10%, primarily driven by volume traction and new products. Sequentially the revenues declined by 2%.
  • Revenues from Europe at Rs.2.0 billion. Year-on-year growth of 1%, primarily on account of new products and volume uptake largely offset by higher price erosion in some of the key molecules. Sequential growth is 6%.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI at Rs.5.9 billion, with year-on-year growth of 9% and sequential decline of 2%. The YoY growth is largely driven by custom pharmaceutical services business.

Proprietary Products (PP)

  • Revenues from PP at Rs.735 million, with year-on-year decline of 66% and sequential decline of 5%. The YoY decline is largely due to one-time milestone income of Rs.1.3 billion recorded during Q3 FY18.

Income Statement Highlights:

  • Gross profit margin at 53.9%.
    • Declined by ~240 bps over that of previous year and by ~110 bps sequentially
    • Decline in gross profit margins both year-on-year and sequentially is largely on account of price erosion in some of our key molecules in the US partly offset by favorable foreign exchange and better manufacturing overhead leverage.
    • Gross profit margin for GG and PSAI business segments are at 57.6% and 30.8% respectively.
  • SG&A expenses at Rs.12.0 billion, remained flat on a year-on-year basis and declined by 3% sequentially. Spend control is largely on account of cost optimization and productivity improvement initiatives.
  • R&D expenses at Rs.3.7 billion, year-on-year decline of 21%. Decline is largely on account of timing variation in development related activities coupled with productivity improvement measures. As % to revenues- Q3 FY19: 9.5% | Q2 FY 19: 10.8% | Q3 FY18: 12.3%.
  • Other (income)/expense, net includes gain of Rs.423 million on account of sale of the API business manufacturing unit located at Jeedimetla, Hyderabad.
  • Net finance expense at Rs.13 million compared to net finance income of Rs.851 million in Q3 FY18. The movement is largely due to higher income from investments, in the previous year.
  • Profit after Tax at Rs.4.9 billion. Effective tax rate for the quarter is 16.4%. Lower rate is primarily on account of reduction of the federal income tax rate from 35% to 21% in the United States and claim of deduction of an item in the current quarter, which was previously disallowed for tax purpose.
  • Diluted earnings per share is at Rs.29.21
  • Capital expenditure is at Rs.1.5 billion.


Earnings Call Details (06:30 pm IST, 08:00 am EST, February 1, 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
 
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 7194 5757, 91 22 6663 5757

Conference ID:

37176

 
Playback will be available after the earnings call, through February 7th, 2019.
 

Transcript of the call will be available at www.drreddys.com.

 
 

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.

Contacts

INVESTOR RELATIONS
AMIT AGARWAL
amita@drreddys.com
(Ph: +91-40-4900 2135)

MEDIA RELATIONS
CALVIN PRINTER
calvinprinter@drreddys.com
(Ph: +91-40-4900 2121)

Contacts

INVESTOR RELATIONS
AMIT AGARWAL
amita@drreddys.com
(Ph: +91-40-4900 2135)

MEDIA RELATIONS
CALVIN PRINTER
calvinprinter@drreddys.com
(Ph: +91-40-4900 2121)