Dr. Reddy’s Q4 & FY19 Financial Results

HYDERABAD, India–(BUSINESS WIRE)–Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY)
today announced its consolidated financial results for the fourth
quarter and full year ended March 31, 2019 under International Financial
Reporting Standards (IFRS).

Q4 Performance Summary

     

FY19 Performance Summary

Rs.4,017 Cr

Rs.15,385 Cr

Revenue

Revenue

[Up: 14% YoY] [Up: 8% YoY]
 

52.4%

54.2%

Gross Margin

Gross Margin

[Q4 FY18: 53.5%]

[FY18: 53.7%]
 

Rs.1,238 Cr

Rs.4,889 Cr

SGNA expenses

SGNA expenses

[Up: 3% YoY] [Up: 4% YoY]
 

Rs.366 Cr

Rs.1,561 Cr

R&D expenses

R&D expenses

[9.1% of Revenues] [10.1% of Revenues]
 

Rs.585 Cr

Rs.2,244 Cr

Profit before Tax

Profit before Tax

[14.6% of Revenues] [14.6% of Revenues]
 

Rs.434 Cr

Rs.1,880 Cr

Profit after Tax

Profit after Tax

[10.8% of Revenues] [12.2% of Revenues]
 

Commenting on the results, CEO and Co-chairman, G.V. Prasad said “It
has been a good year with a significant turnaround in the financial
performance and steady progress on the quality front.
Looking
ahead, we will focus on profitable growth, continue the emphasis on
operational excellence and drive innovation to deliver value to patients
and healthcare systems worldwide.”

All amounts in millions, except EPS
All US dollar amounts
based on convenience translation rate of I USD =
Rs. 69.16

Dr. Reddy’s Laboratories Limited and Subsidiaries
 
Consolidated Income Statement
 
Particulars   Q4 FY19   Q4 FY18   YoY
Gr %
  Q3 FY19   QoQ
Gr%
  ($)   (Rs.)   ($)   (Rs.)     ($)   (Rs.)  
Revenues 581   40,166 511   35,349 14 557   38,500 4
Cost of Revenues   276   19,113   238   16,454   16   257   17,748   8
Gross Profit   304   21,053   273   18,895   11   300   20,752   1
Operating Expenses
Selling, General & Administrative expenses 179 12,376 174 12,067 3 174 12,036 3
Research and Development expenses 53 3,662 63 4,348 (16) 53 3,668 (0)
Other operating (income)   (5)   (330)   (2)   (167)   97   (10)   (681)   (51)
Results from operating activities  

77

  5,345   38   2,647   102   83   5,729   (7)
Net finance (income) / expense (5) (349) (15) (1,032) (66) 0 13
Share of (profit) / loss of equity accounted investees   (2)   (157)   (1)   (69)   127   (1)   (89)   77
Profit before income tax   85   5,851   54   3,748   56   84   5,805   1
Income tax expense   22   1,507   11   726   107   14   953   58
Profit for the period   63   4,344   44   3,022   44   70   4,852   (10)
                           
Diluted Earnings Per Share (EPS)   0.38   26.16   0.26   18.18   44   0.42   29.21   (10)
               
As % to Revenues Q4 FY19 Q4 FY18 Q3 FY19
Gross Profit 52.4 53.5 53.9
SG&A 30.8 34.1 31.3
R&D 9.1 12.3 9.5
PBT 14.6 10.6 15.1
PAT 10.8 8.5 12.6
 

EBITDA Computation

           
Particulars Q4 FY19 Q4 FY18 Q3 FY19
($)   (Rs.) ($)   (Rs.) ($)   (Rs.)
Profit before Income Tax 85   5,851 54   3,748 84   5,805
Interest (income) net* (3) (215) (14) (1,001) (4) (260)
Depreciation # 31 2,136 31 2,109 30 2,073
Amortization # 15   1,047 13   921 15   1,035
EBITDA 128   8,819 84   5,777 125   8,653
EBITDA (% to revenues)     22.0     16.3     22.5

* – Includes income from Investments # includes
impairment charge

 

Revenue Mix by Segment

 
Particulars   Q4 FY19   Q4 FY18   YoY
Growth %
  Q3 FY19   QoQ
Growth %
  (Rs.)   (Rs.)     (Rs.)  
Global Generics   30,384   27,836   9   31,347   (3)
North America   14,957   14,487   3   14,832   1
Europe*   1,912   1,711   12   2,030   (6)
India   6,505   6,138   6   6,741   (4)

Emerging Markets #

  7,010   5,500   27   7,744   (9)

Pharmaceutical Services and Active Ingredients (PSAI)

  6,765   6,251   8   5,937   14
Proprietary Products & Others   3,017   1,262   139   1,216   148
Total   40,166   35,349   14   38,500   4

* Europe primarily includes Germany and UK

# Emerging Markets refers to Russia, other CIS countries, Romania
and Rest of the World markets

 
Dr. Reddy’s Laboratories Limited and Subsidiaries
 
Consolidated Income Statement
 
Particulars   FY 19   FY 18   Growth %
  ($)   (Rs.)   %  

($)

  (Rs.)   %  
Revenues 2,225   1,53,851   100.0   2,054   1,42,028   100.0 8
Cost of Revenues   1,018   70,421   45.8   950   65,724   46.3   7
Gross Profit   1,206   83,430   54.2   1,103   76,304   53.7   9
Operating Expenses
Selling, General & Administrative expenses 707 48,890 31.8 678 46,910 33.0 4
Research and Development expenses 226 15,607 10.1 264 18,265 12.9 (15)
Other operating (income)   (28)   (1,955)   (1.3)   (11)   (788)   (0.6)   148
Results from operating activities   302   20,888   13.6   172   11,917   8.4   75
Finance (income), net (16) (1,117) (0.7) (30) (2,080) (1.5) (46)
Share of (profit) of equity accounted investees, net of income tax   (6)   (438)   (0.3)   (5)   (344)   (0.2)   27
Profit before income tax   325   22,443   14.6   207   14,341   10.1   56
Income tax expense   53   3,648   2.4   66   4,535   3.2   (20)
Profit for the period   272   18,795   12.2   142   9,806   6.9   92
                             
Diluted Earnings Per Share (EPS)   1.64   113.09       0.85   59.00       92
 

EBITDA Computation

 
Particulars   FY 19   FY 18
  ($)   (Rs.)   ($)   (Rs.)
Profit before income tax 325   22,443   207   14,341
Interest (income) / expense net* (9) (654) (29) (2,022)
Depreciation # 122 8,456 120 8,285
Amortization #   57   3,944   50   3,477
EBITDA   494   34,189   348   24,081
EBITDA (% to revenues)       22.2       17.0

* – Includes income from Investments # includes
impairment charge

 

Key Balance Sheet Items

 
Particulars   As on 31st Mar 2019   As on 31st Dec 2018   As on 31st Mar 2018
  ($) (Rs.)   ($) (Rs.)   ($) (Rs.)
Cash & cash equivalents and investments   370 25,570   370 25,593   340 23,517
Trade receivables (current & non-current)   578 39,982   539 37,302   590 40,786
Inventories   486 33,579   490 33,911   421 29,089
Property, plant and equipment   782 54,088   800 55,344   837 57,869
Goodwill and Other Intangible assets   698 48,269   711 49,205   703 48,610
Loans and borrowings (current & non-current)   555 38,381   634 43,836   733 50,714
Trade payables   210 14,553   230 15,939   232 16,052
Equity   2,027 1,40,197   1,962 1,35,708   1,829 1,26,460
   

Revenue Mix by Segment [Year on year]

 
Particulars   FY 19  

FY 18

  Growth %
  ($)   (Rs.)   %   ($)   (Rs.)   %  
Global Generics   1,777   1,22,903   79.9   1,649   1,14,014   80.3   8
North America       59,957           59,822       0.2
Europe*       7,873           8,217       (4)
India       26,179           23,322       12
Emerging Markets#       28,894           22,653       28
Pharmaceutical Services and Active Ingredients (PSAI)   349   24,140   15.7   318   21,992   15.5   10
Proprietary Products & Others   98   6,808   4.4   87   6,022   4.2   13
Total   2,225   1,53,851   100   2,054   1,42,028   100   8

* Europe primarily includes Germany and UK

# Emerging Markets refers to Russia, other CIS countries, Romania
and Rest of the World markets

 

Segmental Analysis [Full Year and Q4 FY 19]

Global Generics (GG)

Revenues from GG segment at Rs.123 billion. Year-on-year (YoY)
growth of 8%

Growth on account of higher contribution from Emerging Markets and
India; primarily due to volume gains, new launches and scale up of new
markets.

  • Revenues from North America for the year at Rs.60.0 billion,
    and remained flat on a YoY basis. The year was benefited by new
    launches, market share gains for existing products and a favorable
    forex rate, which was offset by price erosion in some of our key
    molecules.
  • Revenues for the Q4 at Rs.15.0 billion, YoY growth of 3% and
    sequential growth of 1%. During this quarter, we launched 5 new
    products – major ones being Propofol injection and Tadalafil (Adcirca
    and Cialis).

As of 31st March 2019, cumulatively 110 generic filings are
pending for approval with the USFDA (107 ANDAs and 3 NDAs under
505(b)(2) route). Of these 107 ANDAs, 60 are Para IVs out of which we
believe 34 have ‘First to File’ status.

  • Revenues from Emerging Markets for the year at Rs.28.9 billion,
    YoY growth of 28%.

    • Revenues from Russia for the year at Rs.15.3 billion, YoY
      growth of 21%. Growth was majorly driven by scale up of Nasivin
      launched during FY 18 and improvement in base business, partially
      offset by adverse exchange rate movement.
    • Revenues for the Q4 at Rs.3.6 billion, YoY growth of 41%. Growth
      primarily driven by better volume traction as previous year was
      impacted by lower volume off-take by the channel.
    • Revenues from other CIS countries and Romania for the year
      at Rs.5.2 billion, YoY growth of 34%.
    • Revenues from Rest of World (RoW) territories for the year
      at Rs.8.4 billion, YoY growth of 36%. Growth primarily on account
      of new launches and volume traction in key products.
  • Revenues from India for the year at Rs.26.2 billion, YoY
    growth of 12%, with a growth in base business and new product
    launches. Revenues for Q4 at Rs.6.5 billion, YoY growth of 6%.
  • Revenues from Europe for the year at Rs.7.9 billion, YoY
    decline of 4% impacted by price erosion. Revenues for Q4 at Rs.1.9
    billion, YoY growth of 12%, primarily on account of new launches.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI for the year at Rs.24.1 billion, YoY growth
    of 10%. Growth driven by sales from key molecules and favorable forex.
    Revenues for the Q4 at Rs.6.8 billion, YoY growth of 8%
  • During the quarter, we have filed 4 DMFs in the US.

Proprietary Products (PP)

  • Revenues from PP for the year at Rs.4.7 billion, YoY growth of
    12%. Revenues include Rs.1.8 billion, realized from the sale of derma
    brands. In previous year, we had a milestone revenue of Rs.1.5 billion.

Income Statement Highlights [Full Year and Q4 FY 19]

  • Gross profit margin for the year at 54.2%: Improved by ~50 bps over
    previous year primarily on account of new launches, leverage on
    manufacturing overheads, favorable forex rates, offset largely by
    higher price erosions in the US and Europe markets. Gross profit
    margin for GG and PSAI business segments are at 58.5% and 25.4%
    respectively.
  • Gross profit margin for the Q4 at 52.4% (GG: 56.0%, PSAI: 21.0%).

    • YoY basis the gross margin declined by ~100 bps, primarily on
      account of price erosion, partially offset by new launches and
      favorable forex rates
    • QoQ basis the gross margin declined by ~150 bps, primarily on
      account of adverse forex rate from Q3 to Q4, change in the
      business mix, higher manufacturing overheads due to certain
      one-off charges and overhead impact on inventory movement. The
      decline in gross margin was partially offset due to revenue
      recognition on PP Derma products.
  • SG&A expenses at Rs.48.9 billion, YoY increase of 4%. SG&A expenses
    for the Q4 at Rs.12.4 billion, year-on-year increase at 3%. We
    continue to focus on cost optimization and productivity improvement.
  • Research & development (R&D) expenses at Rs.15.6 billion. As % to
    Revenues – FY19: 10.1% | FY 18: 12.9%. Focus continues on building
    complex generics, biosimilars and differentiated products pipeline.
    R&D expenses for the Q4 at Rs.3.7 billion, as % to revenues stood at
    9.1%.
  • Net Finance income for the year at Rs.1.1 billion compared to Rs.2.1
    billion in FY18. The decline is primarily on account of higher income
    from profit on sales of investments by Rs.1.5 billion in previous year.
  • Profit after Tax at Rs.18.8 billion. Effective tax rate at 16.3%.
    Profit after tax for the Q4 at Rs.4.3 billion. Effective tax rate
    during the quarter at 25.8%.
  • Diluted earnings per share for the year is at Rs.113.1. Diluted
    earnings per share for Q4 is at Rs.26.2
  • Capital expenditure for FY19 is at Rs.7.0 billion. Capital expenditure
    for Q4 FY18 is at Rs.1.8 billion.

The Board has recommended payment of a dividend of Rs.20 per equity
share of face value Rs.5/- each (400% of face value) for the year ended
March 31, 2019 subject to approval of members.

Other Matters

As a subsequent event, the company has entered into a settlement
agreement with Celgene, pursuant to which the Company received a
one-time payment of USD 50 million in settlement of any claim the
Company or its affiliates may have had for damages under section 8 of
the Canadian Patented Medicines (Notice of Compliance) Regulations in
regard to the Company’s ANDS for a generic version of REVLIMID brand
capsules, (Lenalidomide) pending before Health Canada.

Earnings Call Details (06:00 pm IST, 08:30 am EDT, May 17, 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:
 

Universal Access Number:

   

+91 22 6280 1219

Secondary number:

+91 22 7115 8120

 
Local Access number:

+91 70456 71221

(Available all over India)

 

International Toll Free Number

USA

1 866 746 2133

UK

0 808 101 1573

Singapore

800 101 2045

Hong Kong

800 964 448

 
 
Playback of call:

+91 22 7194 5757, +91 22 6663 5757

Conference ID:

04147

 

Transcript of the event will be available at www.drreddys.com.
Playback will be available for a few days.

 

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
gastro-intestinal, cardiovascular, diabetology, oncology, pain
management and dermatology. Dr. Reddy’s operates in markets across the
globe. Our major markets include – USA, India, Russia and other CIS
countries. 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
MITALI SARKAR
mitali.sarkar@drreddys.com
(Ph:
+91-40-4900 2121)

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