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Hyderabad, India, May 13, 2011  
 


Dr. Reddy’s Q4 FY11 & FY11 Financial Results
Q4 FY11 Revenues at Rs. 20.2 billion ($453 million), YoY growth of 23%
Q4 FY11 Adjusted* Profit after Tax at Rs. 3.1 billion ($69 million), YoY growth of 57%
FY11 Revenues at Rs. 74.7 billion ($1.7 billion), YoY growth of 6%
FY11 Adjusted* Profit after Tax at Rs. 10.8 billion ($242 million), YoY growth of 17%

Hyderabad, India, May 13, 2011: Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter and full year ended March 31, 2011 under International Financial Reporting Standards (IFRS).

Key Highlights

  • Consolidated revenues are at Rs. 74.7 billion ($1.7 billion) in FY11 versus Rs. 70.3 billion ($1.6 billion) in FY10, year-on-year growth of 6%. Good and sustained growth across all key formulation markets in FY11.
    • North America revenue growth of 18% in dollar terms and 11 new product launches. Sequential growth of 23% in Q4 FY11 over Q3 FY11 demonstrates the fifth consecutive quarter of sequential growth.
    • Russia revenue growth of 29% in dollar terms, on the back of volume growth and OTC initiatives.
    • India revenue growth of 15%, with sustained growth of key brands and new products introduction.
    • Germany revenue declines 17% in Euro terms, however significant improvement in profitability.
  • Adjusted* EBITDA of Rs. 16.4 billion ($369 million) in FY11, is at 22% of revenues with year-on-year growth of 4%. Adjusted* EBITDA for Q4 FY11 at Rs. 4.7 billion ($106 million), year-on-year growth of 34%.
  • Adjusted* Profit after Tax for FY11 is at Rs. 10.8 billion ($242 million), is at 14% of revenues with year-on-year growth of 17%. Adjusted* PAT for Q4 FY11 at Rs.3.1 billion ($69 million) year-on-year growth of 57%.
  • During the year, the company launched 135 new generic products, filed 107 new product registrations and filed 56 DMFs globally.
  • During the year, the company forayed into many strategic initiatives. Some of the key ones being:
    • Acquisition of a penicillin facility to fill our portfolio gap in the anti-bacterial segment in the US.
    • Collaboration with Valeant Pharma to market Cloderm® Cream in the dermatology space in the US.
    • Settlement of the ongoing litigation on esomeprazole with Astra Zeneca.
  • The Board of Directors of the Company have recommended a final dividend of Rs. 11.25 (225%) per equity share of Rs. 5/- face value, subject to the approval of shareholders at the ensuing Annual General Meeting.

*Note: Adjustments to FY10 include non-cash impairment charge of Rs. 8,603 million and betapharm restructuring costs of Rs. 905 million. Adjustments to FY11 include profit from sale of land of Rs. 292 million and benefit of negative goodwill of Rs. 73 million as per IFRS Purchase Price Allocation accounting on account of acquisition.
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 All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs 44.54

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

  FY 11   FY 10    
Particulars ($) (Rs.) % ($) (Rs.) (%) Growth %
Revenue 1,667 74,693 100 1,578 70,277 100 6
Cost of revenues 773 34,430 46 762 33,937 48 1
Gross Profit 904 40,263 54 816 36,340 52 11
Operating Expenses              
Selling, General &
Administrative Expenses		 532 23,690 32 505 22,505 32 5
Research & Development Expenses 114 5,060 7 85 3,793 5 33
Write down of intangible assets - - 0 78 3,456 5 -
Write down of goodwill - - 0 116 5,147 7 -
Other operating expenses/ (income) (25) (1,115) (1) (13) (569) (1) 96
Total Operating Expenses 620 27,635 37 771 34,332 49 (20)
Results from operating activities
 284 12,628 17 45 2,008 3 529
Finance Expenses/ (income) 4 189 0 0 3 0 -
Share of Profit/ (loss) of equity accounted investees. 0 3 0 1 48 0 (94)
Profit before tax 279 12,443 17 46 2,053 3 506
Income tax (expense)/ income (31) (1,403) (2) (22) (985) (1) 42
Profit after tax 248 11,040 15 24 1,068 2 934

               
Diluted EPS 1.5 65.0     0.1 6.3  
               

Notes:  
(a)
(a) Forex loss of Rs. 57 million ($1 million) in FY11 as against forex gain of Rs. 72 million ($2 million) in FY10.
(b)
(b) Depreciation of Rs. 2,961 million ($66 million) in FY11 as against Rs. 2,681 million ($60 million) in FY10.
(c)
 (c) Amortization of Rs. 1,186 million ($27 million) in FY11 as against Rs. 1,479 million ($33 million) in FY10.

 

(In millions)FY11 Adjusted PAT Reconciliation
Particulars FY11 FY10
($) (Rs.) ($) (Rs.)
PAT Adjustments: 248 11,040 24 1,068
Write down of intangible assets - - 78 3,456
Write down of Goodwill - - 116 5,147
betapharm restructuring costs - - 20 905
Profit on sale of land (included in other income) (7) (292) - -
Negative Goodwill (benefit included in other income) (2) (73) - -
Tax effect on above 2 88 (31) (1,362)
Adjusted PAT 242 10,762 207 9,214

SEGMENTAL ANALYSIS

Global Generics

Revenues from Global Generics segment are at Rs. 53.3 billion ($1.2 billion) in FY11 registering growth of 10% over previous year, led by performance in North America and Emerging Markets. Revenues for Q4 FY11 are at Rs. 14.2 billion ($318 million) registering growth of 27% over previous year.

    • Revenues from North America at Rs. 19.0 billion ($426 million) in FY11 versus Rs. 16.8 billion ($378 million) in FY10. Dollar growth of 18% led by new product launches in the last twelve months.
      • 11 new products launched during the year. Some of the key launches being tacrolimus, lansoprazole and fexofenadine pseudoephedrine 180/240 mg.
      • 25 products of our prescription portfolio feature among the Top 3 ranks in market shares. (Source: IMS Sales Volumes March 2011)
      • During the year 20 ANDAs were filed. The cumulative ANDA filings as of 31st March, 2011 are 170. A total of 75 ANDAs are pending for approval with the USFDA of which 37 are Para IVs and 10 are FTFs.
      • Revenues for Q4 FY11 at Rs. 5.9 billion ($133 million), growth of 68% largely driven by the new product launch of fexofenadine pseudoephedrine 180/240 mg.
    • Revenues in Russia & Other CIS markets at Rs. 10.9 billion ($244 million) in FY11 versus Rs. 9.1 billion ($205 million) in FY10, year-on-year growth of 19%.
      • Revenues in Russia at Rs. 8.9 billion ($201 million) in FY11 versus Rs. 7.2 billion ($162 million) in FY10, year-on-year growth of 24%, largely driven by volume growth across existing business and new products contribution.
        • Significant growth in OTC portfolio representing 25% of overall portfolio.
        • Dr. Reddy’s year-on-year secondary prescription sales growth stands at 19% versus industry’s growth of 7.5%. (Source: Pharmexpert MAT March 2011)
      • Revenues in Other CIS markets increase by 2% to Rs. 1.9 billion ($43 million) in FY11 versus Rs. 1.9 billion ($42 million) in FY10.
      • Revenues in Russia & Other CIS markets for Q4 FY11 at Rs. 2.7 billion ($60 million) and recorded year-on-year growth of 26%.
    • Revenues in India at Rs. 11.7 billion ($262 million) in FY11 versus Rs. 10.2 billion ($228 million) in FY10, increase of 15% led by volume growth of 11% and contribution from new product launches of 4%.
      • 48 new products launched during the year including one biosimilar, darbepoetin alfa under the brand Cresp.
      • Strong growth in biosimilars portfolio representing 5% of overall sales.
      • Revenues for Q4 FY11 at Rs. 2.8 billion ($62 million) recorded a growth of 5%.
    • Revenues from Europe at Rs. 8.4 billion ($189 million) in FY11 versus Rs. 9.6 billion ($216 million) in FY10, decline of 13%.
      • Revenues from Germany decrease by 25% to Rs. 5.5 billion ($123 million) in FY11.
        • Decline of 17% in Euro currency terms largely due to the tender based pricing pressures.
        • Restructuring of betapharm helped significantly in rationalizing the cost structures.
      • Revenues from Rest of Europe grew by 27% to Rs. 3.0 billion ($67 million) in FY11 largely led by growth in out-licensing business.
      • Revenues from Europe for Q4 FY11 at Rs. 2.0 billion ($45 million) recorded decline of 5%.
        .

Pharmaceutical Services and Active Ingredients

Revenues from PSAI are at Rs. 19.6 billion ($441 million) in FY 11 versus Rs. 20.4 billion ($458 million) in FY10 decline of 4% in rupees terms.

    • Modest growth in Active Ingredients business led by new product launches offset by decline in Pharmaceutical Services due to lower customer orders.
    • During the year, 56 DMFs were filed globally, with 19 in US, 7 in Europe and 30 in rest of the markets. The cumulative DMF filings as of Mar 11 are 486.
    • Revenues from PSAI for Q4 FY11 are at Rs. 5.6 billion ($125 million), growth of 13% over previous year largely led by Active Ingredients business.

Income Statement Highlights:

  • Gross profit at Rs. 40.3 billion ($904 million) in FY11, margin of 54% to revenue versus gross profit of Rs. 36.3 billion ($816 million) in FY10, margin of 52% to revenues. This improved margin is largely due to a favorable mix of high margin new products in North America Generics in FY11.
  • Selling, General & Administration (SG&A) expenses including amortization at Rs. 23.7 billion ($532 million) increased by 5% over FY10. This increase was largely due to higher legal expenses in the US, OTC related marketing spend in Russia & CIS and new field force related expenditure in India. This increase is partly offset by the benefit of lower employee related costs in Germany on account of restructuring of betapharm done in FY10.
  • Other Operating Income of Rs. 1,115 million ($25 million) in FY11 versus Rs. 569 million ($13 million) in FY10. The increase in net other income was primarily on account of profit from sale of land of Rs. 292 million. A benefit of Rs. 73 million ($1.6 million) was recorded towards negative goodwill as per IFRS Purchase Price Allocation accounting on account of acquisition.
  • R&D expenses at Rs. 5.1 billion ($114 million) in FY11, increase of 33% over FY10. The increase in R&D expenses is in line with the planned scale up in our R&D activities across all business segments.
  • Finance costs are at Rs. 189 million ($4 million) versus Rs. 3 million in FY10. The change is on account of :
    • Net forex loss of Rs. 57 million ($1 million) versus net forex gain of Rs. 72 million ($2 million) in FY10.
    • Net interest expense of Rs. 199 million ($4 million) in FY11 versus Rs. 123 million ($3 million) in FY10.
    • Profit on sale of investments of Rs. 68 million ($2 million) in FY11 versus Rs. 48 million ($1 million) in FY10.
  • Adjusted* EBITDA of Rs. 16.4 billion ($369 million) in FY11, is at 22% of revenues with year-on-year growth of 4%.
    • Adjusted* EBITDA for Q4 FY11 at Rs. 4.7 billion ($106 million), year-on-year growth of 34%.
  • Adjusted* Profit after Tax for FY11 is at Rs. 10.8 billion ($242 million), is at 14% of revenues with year-on-year growth of 17%.
    • Adjusted* Profit after Tax for Q4 FY11 at Rs.3.1 billion ($69 million), year-on-year growth of 57%.
  • The effective tax rate is at 11% in FY11 versus 20% in FY10. This decline in tax rate reflects the benefit of higher weighted deduction on R&D expenditure granted in 2010 Union Budget of India.
  • Capital expenditure for FY11 is at Rs. 8.8 billion ($198 million).

*Note: Adjustments to FY10 include non-cash impairment charge of Rs. 8,603 million and betapharm restructuring costs of Rs. 905 million. Adjustments to FY11 include profit from sale of land of Rs. 292 million and benefit of negative goodwill of Rs. 73 million as per IFRS Purchase Price Allocation accounting on account of acquisition.

(In millions)Key Balance Sheet Items
Particulars As on 31st Mar 11 As on 31st Mar 10
($) (Rs.) ($) (Rs.)
Cash and cash equivalents 129 5,729 148 6,584
Trade receivables 395 17,615 269 11,960
Inventories 361 16,059 300 13,371
Property, plant and equipment 666 29,642 504 22,459
Goodwill and Other Intangible assets 342 15,246 314 13,973
Loans and borrowings (current & non-current)(a) 529 23,572 330 14,695
Trade payables 190 8,480 209 9,322
Equity 1,033 45,990 964 42,915

Note: (a) Includes issue of bonus debentures of Rs. 5,078 million in FY11.

(In millions)FY11 Revenue Mix by Segment
  FY11 as a % FY10 as a % Growth %
$ INR $ INR
Global Generics 1,198 53,340 71 1,091 48,606 69 10
North America 426 18,996   378 16,817   13
Europe 189 8,431   216 9,638   (13)
India 262 11,690   228 10,158   15
Russia & Other CIS 244 10,858   205 9,119   19
RoW 76 3,365   65 2,873   17
PSAI 441 19,648 26 458 20,404 29 (4)
North America 71 3,170   82 3,673   (14)
Europe 158 7,020   149 6,652   6
India 59 2,619   59 2,646   (1)
RoW 154 6,838   167 7,433   (8)
Proprietary Products & Others 38 1,705 3 28 1,267 2 35
Total 1,677 74,693 100 1,578 70,277 100 6

(In millions)FY11 Revenue Mix by Geography
  FY11 as a % FY10 as a % Growth %
$ INR $ INR
North America 522 23,260 31 478 21,269 30 9
Europe 361 16,058 21 377 16,774 24 (4)
India 321 14,314 19 288 12,808 18 12
Russia & Other CIS 244 10,858 15 205 9,119 13 19
Others 229 10,203 14 231 10,306 15 (1)
Total 1,677 74,693 100 1,578 70,277 100 6


All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs 44.54

Dr. Reddy’s Laboratories Limited and Subsidiaries
Q4 FY11 Consolidated Income Statement

  Q4 FY 11   Q4 FY 10    
Particulars ($) (Rs.) % ($) (Rs.) (%) Growth %
Revenues 453 20,173 100 369 16,424 100 23
Cost of revenues 207 9,224 46 175 7,784 47 19
Gross Profit 246 10,949 54 194 8,640 53 27
Operating Expenses              
Selling, General &
Administrative Expenses		 138 6,125 30 130 5,811 35 5
Research and development expenses 33 1,491 7 21 953 6 56
Other operating expenses/ (income) (11) (512) (3) (5) (238) (1) 115
Total Operating Expenses
 160 7,105 35 147 6,526 40 9
Results from Operating activities 86 3,844 19 47 2,114 13 82
Finance expenses/ (income)(a) (2) (72) (0) 1 26 0 -
Share of profit/ (loss) of equity accounted investees (0) (4) (0) 0 20 0 -
Profit before tax 88 3,912 19 47 2,108 13 86
Income tax (expense)/ income (13) (567) (3) (10) (441) (3) 29
Profit after tax 75 3,345 17 37 1,667 10 101

Diluted EPS 0.4 19.7   0.2 9.8  

Note: (a) Forex gain of Rs. 171 million ($4 million) in Q4 FY11 as against forex loss of Rs. 45 million ($1 million) in Q4 FY10.
(b) Depreciation of Rs. 787 million ($18 million) in Q4 FY11 as against Rs. 732 million ($16 million) in Q4 FY10.
(c) Amortization of Rs. 274 million ($6 million) in Q4 FY11 as against Rs. 269 million ($6 million) in Q4 FY10.

(In millions)Q4FY11 Adjusted PAT Reconciliation
Particulars Q4FY11 Q4FY10
($) (Rs.) ($) (Rs.)
PAT Adjustments: 75 3,345 37 1,667
betapharm restructuring costs - - 9 409
Profit on sale of land (7) (292) - -
Negative Goodwill (2) (73) - -
Tax effect on above 2 88 (3) (127)
Adjusted PAT 69 3,068 44 1,949


About Dr. Reddy's
Established in 1984, Dr. Reddy’s Laboratories (NYSE: RDY) is an emerging global pharmaceutical company. We fulfill our purpose of providing affordable and innovative medicines through three core businesses: Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products. Our products are marketed globally, with focus on India, US, UK, Germany and Russia.
 
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.

Contact Information

Investors and Financial Analysts:

Kedar Upadhye at kedaru@drreddys.com / +91-40-66834297
Raghavender R at raghavenderr@drreddys.com / +91-40-49002135
Milan Kalawadia (USA) at mkalawadia@drreddys.com / +1 908-203-4931

Media

S Rajan at rajans@drreddys.com / +91-40- 49002445

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