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Hyderabad, India, July 30th, 2013  
 


Dr. Reddy’s Q1 FY14 Financial Results
Q1 FY14 Revenues at Rs.28.4 billion (YoY growth of 12%)
Q1 FY14 EBITDA at Rs.5.7 billion (20% of the revenues, with YoY growth of 13%)
Q1 FY14 Adjusted PAT* at Rs.3.2 billion (11% of the revenues, with YoY growth of 12%)

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

Key Highlights (Q1 FY14)

  • Consolidated revenues for Q1 FY14 at Rs.28.4 billion, recorded YoY 12%.
    • Revenues from the Global Generics segment for Q1 FY14 at Rs. 21.9 billion, YoY growth of 15%.
    • Revenues from the PSAI segment for Q1 FY14 at Rs. 5.9 billion, YoY growth of 6%.
  • R&D expenses for Q1 FY14 increased by 55% to reach Rs.2.4 billion, 8.5% of revenues as compared to 6.2% of revenues in Q1 FY13.
  • Selling, general & administrative (SG&A) expenses for Q1 FY14 increased by only 6% and stood at Rs.8.8 billion, 30.9% to revenues as compared to 32.6% to revenues in Q1 FY13.
  • EBITDA for Q1 FY14 at Rs.5.7 billion, 20% of revenues and has recorded a YoY growth of 13%.
  • PAT for Q1 FY14 at Rs.3.6 billion, 13% of revenues and has recorded a YoY growth of 7%.
  • Adjusted PAT* for Q1 FY14 at Rs.3.2 billion, 11% of revenues with a YoY growth of 12%
  • During the quarter, the company launched 23 new generic products, filed 12 new product registrations and filed 5 DMFs globally.

* Q1 FY14 normalized to the FY14 annual effective tax rate and Q1 FY13 normalized to the FY13 annual effective tax rate

 All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs. 59.52

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

Particulars Q1 FY14 Q1 FY13 Growth %
($) (Rs.) % ($) (Rs.) (%)
Revenue 478 28,449 100 427 25,406 100 12
Cost of revenues 226 13,430 47.2 199 11,865 46.7 13
Gross profit 252 15,019 52.8 228 13,541 53.3 11
Operating Expenses              
Selling, general & administrative expenses 148 8,794 30.9 139 8,278 32.6 6
Research and development expenses 41 2,430 8.5 26 1,564 6.2 55
Other operating income (6) (376) (1.3) (4) (218) (0.9) 73
Results from operating activities 70 4,171 14.7 66 3,917 15.4 6
Net finance expense 1 70 0.2 4 212 0.8 (67)
Share of profit of equity accounted investees (1) (36) (0.1) (0) (19) (0.1) 87
Profit before income tax (PBT) 70 4,137 14.5 63 3,725 14.7 11
Income tax expense 9 528 1.9 6 365 1.4 45
Profit for the period (PAT) 61 3,609 12.7 56 3,360 13.2 7

Diluted EPS 0.4 21.17   0.3 19.74   7


EBITDA Computation Q1 FY14 Q1 FY13
($) (Rs.) ($) (Rs.)
PBT 70 4,137 63 3,725
Interest (1) (61) 0 3
Depreciation 19 1,117 15 896
Amortization 8 496 7 400
EBITDA 96 5,689 84 5,024

Adjusted PAT Computation Q1 FY14 Q1 FY13
($) (Rs.) ($) (Rs.)
PAT 61 3,609 56 3,360
Adjustments:        
Tax adjustment* (6) (382) (8) (477)
Adjusted PAT 54 3,227 48 2,883

* Q1 FY14 normalized to the FY14 annual effective tax rate and Q1 FY13 normalized to the FY13 annual effective tax rate


SEGMENTAL ANALYSIS

Global Generics

Revenues from Global Generics segment at Rs.21.9 billion recorded a YoY growth of 15%. Growth was primarily driven by North America and Emerging market territories.

  • o Revenues from North America at Rs.10.9 billion, recorded a YoY growth of 37%. Growth was primarily driven by:
    • Key difficult to synthesize products with limited competition launched during rest of the quarters of the previous year i.e. montelukast granules, finasteride 1mg, isotretinoin, zoledronic acid (4mg/5mL), metoprolol succinate extended release etc.
    • Two new products which have been launched during the quarter – zoledronic acid (5mg/100mL) injection and lamotrigine XL.
    • Significant traction in market shares of products such as tacrolimus, fondaparinux etc on a YoY basis.
    • During the quarter, 2 ANDAs were filed. Cumulatively, 64 ANDAs are pending for approval with the USFDA of which 38 are Para IVs and we believe 8 to have ‘First To File’ status.
  • Revenues from Emerging Markets (which include Russia, CIS countries and RoW territories) for Q1 FY14 at Rs.6.0 billion, YoY growth of 9%.
    • Revenues from Russia at Rs.3.7 billion, YoY growth of 4%. Growth was muted primarily on account of high base effect of the previous year and inventory adjustments in the market
    • Revenues from CIS markets at Rs.0.8 billion, YoY growth of 28%. Growth was largely driven by volume uptake of existing products and introduction of new products in Ukraine.
    • Revenues from RoW territories stood at Rs.1.5 billion, YoY growth of 12% despite the devaluation impact in Venezuela.
  • Revenues from India for Q1 FY14 at Rs.3.5 billion remained flat YoY.
    • The impending NPPP notifications (DPCO-2013) leading to lower inventories in the channel coupled with the Maharashtra trade strike has an adverse affect on the primaries for the quarter.
  • Revenues from Europe for Q1 FY14 at Rs.1.6 billion declined YoY by 28%.
    • Revenues from Germany for Q1 FY14 at Rs.1.1 billion declined YoY by 26%. However, revenues are in line with management’s expectations basis the change in business model.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI for Q1 FY14 at Rs.5.9 billion, YoY growth of 6%. Muted growth on the back of lower number of ‘launch molecules’ to our customers during the quarter.
  • During the quarter, 5 DMFs were filed globally, including 3 in the US. The cumulative number of DMF filings as of June 30, 2013 is 581.

Income Statement Highlights:

  • Gross profit margin for Q1 FY14 stood at 52.8%, marginal drop of 50 basis points compared to Q1 FY13. Corresponding values for Global Generics and PSAI segments for the year are at 61.6% and 19% respectively. GG gross margin improved primarily on account of higher contribution from new product launches in North America Generics, 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.
  • Selling, general and administration (SG&A) expenses including amortization at Rs.8.8 billion increased YoY by only 6%. SG&A expenses for Q1 FY14 stood at 30.9% to sales as compared to 32.6% to sales in Q1 FY13.
  • Research & development expenses stood at Rs.2.4 billion, YoY growth of 55%; 8.5% of revenues as compared to 6.2% of revenues in Q1 FY13. The increase is in line with the increased focus in complex formulations, differentiated portfolio and biosimilars.
  • Net Finance expense is at Rs.70 million in Q1 FY14 compared to Rs.212 million in Q1 FY13. The change is on account of :
    • Net forex loss of Rs.131 million in Q1 FY14 as compared to Rs.209 million in Q1 FY13.
    • Net interest income of Rs.61 million in Q1 FY14 compared to net interest expense of Rs.3 million in Q1 FY13, primarily on account of higher interest income from fixed deposit.
  • EBITDA for Q1 FY14 at Rs.5.7 billion, 20% of revenues with a YoY growth of 13%.
  • Profit after Tax in Q1 FY14 at Rs.3.6 billion, 13% of revenues with a YoY growth of 7%.
  • *Adjusted Profit after tax in Q1 FY14 at Rs.3.2 billion, YoY growth of 12%.
  • Diluted earnings per share in Q1 FY 14 are Rs.21.17
  • Capital expenditure for Q1 FY14 is Rs.2.0 billion.

* Adjusted for tax normalization on account of the annual effective tax rates

(in millions)Appendix 1: Key Balance Sheet Items

Particulars As on 30th Jun 13 As on 31st Mar 13
($) (Rs.) ($) (Rs.)
Cash and cash equivalents 502 29,907 371 22,099
Trade receivables 490 29,168 537 31,972
Inventories 379 22,536 363 21,600
Property, plant and equipment 662 39,393 635 37,814
Goodwill and other intangible assets 248 14,787 236 14,021
Loans and borrowings (current & non-current) 738 43,937 616 36,678
Trade payables 169 10,076 199 11,862
Equity 1,261 75,035 1,223 72,785


(in millions)Appendix 2: Revenue Mix by Segment

  Q1FY14 Q1FY13 Growth %
($) (Rs.) % ($) (Rs.) %
Global Generics 368 21,903 77 320 19,066 75 15
North America   10,871 50   7,920 42 37
Europe   1,573 7   2,178 11 (28)
India   3,493 16   3,482 18 0
Russia & Other CIS   4,489 20   4,167 22 8
RoW   1,477 7   1,319 7 12
PSAI 99 5,868 21 93 5,527 22 6
North America   1,093 19   1,064 19 3
Europe   2,093 36   2,233 40 (6)
India   791 13   611 11 29
RoW   1,891 32   1,619 29 17
Proprietary Products and Others 11 679 2 14 813 3 (16)
Total 478 28,449 100 427 25,406 100 12


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
 

Contact Information

Investors and Financial Analysts:

Kedar Upadhye at kedaru@drreddys.com / +91-40-66834297
Saunak Savla at saunaks@drreddys.comm / +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.