Mumbai News Network Latest News: Dr. Reddy’s Q4 & FY19 Financial Results

Photo caption : L _ R- Mr. Saumen Chakraborty, Chief Financial officer, Dr. Reddy’s Laboratories, Mr. G.V Prasad, Co-Chairman & CEO, Dr. Reddy’s Laboratories and Mr.Erez Israeli, Chief Operating officer, Dr. Reddy’s Laboratories

Hyderabad, India, May 17, 2019: 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

`4,017 Cr

`15,385 Cr

Revenue

[Up: 14% YoY]

[Up: 8% YoY]

52.4%

54.2%

Gross Margin

[Q4 FY18: 53.5%]

[FY18: 53.7%]

`1,238 Cr

`4,889 Cr

SGNA expenses

[Up: 3% YoY]

[Up: 4% YoY]

`366 Cr

`1,561 Cr

R&D expenses

[9.1% of Revenues]

[10.1% of Revenues]

`585 Cr

`2,244 Cr

Profit before Tax

[14.6% of Revenues]

`434 Cr

`1,880 Cr

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 = `69.16

Dr. Reddy’s Laboratories Limited and Subsidiaries

Consolidated Income Statement

Particulars		Q4 FY19				Q4 FY18				YoY		Q3 FY19				QoQ
		($)		(Rs.)		($)		(Rs.)		Gr %		($)		(Rs.)		Gr%


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	(2)		(157)		(1)		(69)		127		(1)		(89)		77
investees


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
Particulars			($)		(Rs.)		($)		(Rs.)		($)		(Rs.)
			($)		(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

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

Revenue Mix by Segment

Q4 FY19

Q4 FY18

YoY

Q3 FY19

QoQ

Growth

Particulars

(Rs.)

Growth %

(Rs.)

Global Generics

30,384

27,836

31,347

(3)

North America

14,957

14,487

14,832

Europe*

1,912

1,711

2,030

(6)

India

6,505

6,138

6,741

(4)

Emerging Markets #

7,010

5,500

7,744

(9)

Pharmaceutical Services and

6,765

6,251

5,937

Active Ingredients (PSAI)

Proprietary Products & Others

3,017

1,262

139

1,216

148

Total

40,166

35,349

38,500

Q4 FY19 Sales Mix

North America

	8%		Europe
17%		37%	India
		37%
			Emerging Markets
17%			PSAI
			PSAI
	16%	5%	Proprietary
		5%	Proprietary

* Europe primarily includes Germany and UK

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

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

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	(6)		(438)		(0.3)		(5)		(344)		(0.2)		27
investees, net of income tax

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
	Particulars		($)			(Rs.)			($)			(Rs.)
			($)			(Rs.)			($)			(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

			As on 31st Mar				As on 31st Dec			As on 31st Mar
	Particulars		2019					2018			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

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

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

North America

59,957

59,822

0.2

Europe*

7,873

8,217

(4)

India

26,179

23,322

Emerging Markets#

28,894

22,653

Pharmaceutical Services and

349

24,140

15.7

318

21,992

15.5

Active Ingredients (PSAI)

Proprietary Products & Others

6,808

4.4

6,022

4.2

Total

2,225

1,53,851

100

2,054

1,42,028

100

FY19 Sales Mix

	North America
4%
16%	Europe
16%
39%	India
19%	EM
19%

17%

PSAI

Proprietary Products &

Others

* 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 `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 `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 `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 `28.9 billion, YoY growth of 28%.

- Revenues from Russia for the year at `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 `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 `5.2 billion, YoY growth of 34%.

- Revenues from Rest of World (RoW) territories for the year at `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 `26.2 billion, YoY growth of 12%, with a growth in base business and new product launches. Revenues for Q4 at `6.5 billion, YoY growth of 6%.

Revenues from Europe for the year at `7.9 billion, YoY decline of 4% impacted by price erosion. Revenues for Q4 at `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 `24.1 billion, YoY growth of 10%. Growth driven by sales from key molecules and favorable forex. Revenues for the Q4 at `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 `4.7 billion, YoY growth of 12%. Revenues include `1.8 billion, realized from the sale of derma brands. In previous year, we had a milestone revenue of `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 `48.9 billion, YoY increase of 4%. SG&A expenses for the Q4 at `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 `15.6 billion. As % to Revenues - FY19: 10.1% | FY 18: 12.9%. Focus continues on building complex generics, bio-similars and differentiated products pipeline. R&D expenses for the Q4 at `3.7 billion, as % to revenues stood at 9.1%.

Net Finance income for the year at `1.1 billion compared to `2.1 billion in FY18. The decline is primarily on account of higher income from profit on sales of investments by `1.5 billion in previous year.

Profit after Tax at `18.8 billion. Effective tax rate at 16.3%. Profit after tax for the Q4 at `4.3 billion. Effective tax rate during the quarter at 25.8%.

Diluted earnings per share for the year is at `113.1. Diluted earnings per share for Q4 is at `26.2 Capital expenditure for FY19 is at `7.0 billion. Capital expenditure for Q4 FY18 is at `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.

Mumbai News Network Latest News

Friday, 17 May 2019

Dr. Reddy’s Q4 & FY19 Financial Results

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