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Dr. Reddy’s Q4 & FY15 Financial Results

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Dr. Reddy’s Laboratories Ltd. (NYSE:RDY) (BSE: 500124) (NSE:DRREDDY) today announced its consolidated financial results for the fourth quarter and full year ended March 31, 2015 under International Financial Reporting Standards (IFRS).

FY15: Key Highlights

  • Three NDAs filed in our Proprietary Products business.
  • Consolidated revenues for FY15 at Rs. 148.2 billion, year-on-year growth of 12%.
  • Gross Profit Margin for FY15 at 57.6% versus 57.4% as in FY14.
  • Research & Development (R&D) expenses for FY15 at Rs. 17.4 billion, year-on-year increase of 41%.
  • Selling, general & administrative (SG&A) expenses for FY15 at Rs. 42.6 billion, year-on-year increase of 10%.
  • EBITDA for FY15 at Rs. 36.2 billion, 24% of revenues; year-on-year growth of 9%.
  • Profit after tax for FY15 at Rs. 22.2 billion, 15% of revenues; year-on-year growth of 3%

Q4 FY15: Key Highlights

  • Consolidated revenues for Q4 FY15 at Rs. 38.7 billion, year-on-year growth of 11%.
  • EBITDA for Q4 FY15 at Rs. 8.1 billion, 21% of revenues. During Q4 FY15 we have recorded a foreign exchange translation loss of Rs. 843 million on certain net monetary assets in Venezuela.
  • Profit after tax for Q4 FY15 at Rs. 5.2 billion, 13% of revenues.

Dr. Reddy’s Co-chairman and CEO, GV Prasad commented, “We are pleased with the progress on our financial and non-financial parameters, which we delivered despite currency volatility in some of our Emerging Market geographies. Our commitment to R&D continues to show results, with the filings of NDAs in our Proprietary Products business during the quarter and continued filings of complex generics assets. Overall, our results demonstrate our commitment to execute on our strategy, across businesses, as we constantly strengthen our focus on patients and providing them access to affordable medicines.”

All amounts in millions, except EPS

All US dollar amounts based on convenience translation rate of 1 USD = Rs. 62.31

Dr. Reddy’s Laboratories Limited and Subsidiaries
Consolidated Income Statement
Particulars FY15 FY14 Growth %
($) (Rs.) % ($) (Rs.) %
Revenues 2,378 148,189 100 2,121 132,170 100 12
Cost of revenues 1,008 62,786 42.4 905 56,369 42.6 11
Gross profit 1,371 85,403 57.6 1,217 75,801 57.4 13
Operating Expenses
Selling, general & administrative expenses 683 42,585 28.7 622 38,783 29.3 10
Research and development expenses 280 17,449 11.8 199 12,402 9.4 41
Other operating expense / (income) (15 ) (917 ) (0.6 ) (23 ) (1,416 ) (1 ) (35 )
Results from operating activities 422 26,286 17.7 418 26,032 19.7 1
Finance (expense)/income, net 27 1,682 1.1 6 400 0.3 321
Share of profit of equity accounted investees, net of income tax 3 195 0.1 3 174 0.1 12
Profit before income tax 452 28,163 19.0 427 26,606 20.1 6
Income tax expense 96 5,984 4.0 82 5,094 3.9 17
Profit for the year 356 22,179 15.0 345 21,512 16.3 3
Diluted EPS 2.08 129.8 2.02 126.0 3

EBITDA Computation

Particulars FY15 FY14
($) (Rs.) ($) (Rs.)
Profit before tax 452 28,163 427 26,606
Interest (income) / expense net (12 ) (725 ) (0 ) (24 )
Depreciation 92 5,722 77 4,804
Amortization 38 2,381 37 2,292
Impairment / (reversal of impairment) adjustment 10 629 (8 ) (497 )
EBITDA 580 36,170 532 33,180
EBITDA (% to sales) 24.4 25.1

Note:

Selling, general & administrative expenses, as above, includes an impairment charge Rs. 510 million [in FY15] and impairment reversal of Rs. 497 million [in FY14]

Research & Development expenses, as above, includes an impairment charge of Rs. 119 million in [FY15]

All amounts in millions, except EPS

All US dollar amounts based on convenience translation rate of 1 USD = Rs. 62.31

Appendix 1: Key Balance Sheet Items

Particulars As on 31st March 15 As on 31st Mar 14
($) (Rs.) ($) (Rs.)
Cash and cash equivalents and Other Investments 636 39,654 538 33,534
Trade receivables 654 40,755 530 33,037
Inventories 410 25,529 385 23,992
Property, plant and equipment 772 48,090 713 44,424
Goodwill and Other Intangible assets 264 16,430 236 14,697
Loans and borrowings (current & non-current) 692 43,125 718 44,741
Trade payables 171 10,660 169 10,503
Equity 1,786 111,302 1,457 90,801

Appendix 2: Revenue Mix by Segment

Particulars FY15 FY14 Growth %
($) (Rs.) % ($) (Rs.) %
Global Generics 1,935 120,556 81 1,688 105,164 80 15
North America 64,723 54 55,302 53 17
Europe 7,193 6 6,970 7 3
India 17,870 15 15,713 15 14
Russia & Other CIS 17,713 15 19,819 19 (11 )
Rest of World 13,057 11 7,359 7 77
PSAI 409 25,456 17 385 23,974 18 6
North America 4,605 18 4,354 18 6
Europe 10.507 41 8,770 37 20
India 3,288 13 3,787 16 (13 )
Rest of World 7,056 28 7,063 29 (0 )
Proprietary Products & Others 35 2,177 1 49 3,033 2 (28 )
Total 2,378 148,189 100 2,121 132,170 100 12

Segmental Analysis

Global Generics

Revenues from Global Generics segment for FY15 are at Rs. 120.6 billion, year-on-year growth of 15%, primarily driven by North America, Venezuela and India.

  • Revenues from North America for FY15 at Rs. 64.7 billion, year-on-year growth of 17%.
    • Current year growth is shaped by scale-up of the injectable franchise and market share gains in select molecules
    • 12 new products were launched during the financial year
    • Current year includes three months revenues from Habitrol(R)
    • 13 new product filings in the US during the year. Cumulatively, 68 ANDAs are pending for approval with the USFDA of which 43 are Para IVs out of which we believe 13 to have ‘First To File’ status.
  • Revenues from Emerging Markets for FY15 at Rs. 30.8 billion, year-on-year growth of 13%.
    • Revenues from Russia at Rs. 14.9 billion, year-on-year growth of 13% in local currency terms despite macro-economic uncertainty. After considering the impact of currency depreciation the rupee revenues declined by 9%.
    • Revenues from CIS markets at Rs. 2.8 billion, year-on-year decline of 20% primarily on account of currency depreciation.
    • Revenues from Rest of World (RoW) territories at Rs. 13.1 billion recorded year-on-year growth of 77%. Of this Venezuela delivered strong growth on the back of continuing volume uptake.
  • Revenues from India for FY15 at Rs. 17.9 billion, year-on-year growth of 14%.
    • Growth is driven by continued focus on new product launches and prescription growth.
  • Revenues from Europe for FY15 at Rs. 7.2 billion, year-on-year of 10% in local currency terms.
  • As per IMS Mar’15, Dr Reddy’s MQT Gr% at 21.4% versus market MQT Gr% of 15.4%.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI for FY15 at Rs. 25.5 billion, year-on-year growth of 6%.
  • During the year, 77 DMFs were filed globally, including 12 in the US and 16 in Europe. The cumulative number of DMF filings as of March 31, 2015 is 735.

Income Statement Highlights:

  • Gross profit margin in FY15 stood at 57.6% and registered marginal improvement over previous year. Gross profit margin for Global Generics (GG) and PSAI business segments for FY15 are at 65.2% and 22.4% respectively.
  • Selling, General and Administration (SG&A) expenses at Rs. 42.6 billion, year-on-year increase of 10%. The increase is primarily on account of annual increments, additional manpower deployment in select areas, sales & marketing spend for events specific to the year, marginally offset by currency devaluation in EM markets.
  • Research & development expenses at Rs. 17.4 billion, year-on-year growth of 41%. 11.8% of revenues in FY15 as compared to 9.4% of revenues in FY14. The increase is in line with our planned scale-up in development activities.
  • Net Finance income at Rs. 1,682 million compared to Rs. 400 million in FY15. The increase is on account of:
    • Incremental forex benefit of Rs. 1,430 million
    • During Q4 FY15, pursuant to the modification of the currency exchange systems by the government of Venezuela in February 2015, the Company re-evaluated its economic position and determined that it is appropriate to use the SIMADI rate (which is bolivars 193 per USD) to translate the surplus monetary assets and liabilities, other than those which qualify for the CENCOEX rate of 6.3 bolivars per USD. Accordingly, during the quarter ended 31 March 2015, an amount of Rs. 843 million was recorded as foreign exchange loss.
    • Incremental profit on sales of investments of Rs. 539 million
    • Net increase in interest income of Rs. 158 million primarily due to reduction in Interest expense by Rs. 182 million offset set by decline in interest income by Rs. 24 million.
  • EBITDA for FY15 at Rs. 36.2 billion, year-on-year growth of 9%; 24% of revenues.
  • Profit after Tax in FY15 at Rs. 22.2 billion, year-on-year growth of 3%; 15% of revenues.
  • Diluted earnings per share in FY15 at Rs. 130
  • Capital expenditure for FY15 is Rs. 9.3 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, 2015, subject to approval of members.

All amounts in millions, except EPS

All US dollar amounts based on convenience translation rate as on 31st March, 2015 USD = Rs. 62.31

Appendix 3: Q4 FY15 Consolidated Income Statement

Particulars Q4 FY15 Q4 FY14 Growth %
($) (Rs.) % ($) (Rs.) %
Revenues 621 38,704 100.0 559 34,809 100.0 11
Cost of revenues 281 17,483 45.2 239 14,887 42.8 17
Gross profit 341 21,221 54.8 320 19,922 57.2 7
Operating Expenses
Selling, general & administrative expenses 162 10,082 26.0 165 10,307 29.6 (2 )
Research and development expenses 83 5,144 13.3 64 3,985 11.4 29
Other operating expense / (income) (2 ) (125 ) (0.3 ) (4 ) (226 ) (0.7 ) (45 )
Results from operating activities 98 6,120 15.8 94 5,857 16.8 4
Finance (expense)/income, net (4 ) (233 ) (0.6 ) 3 163 0.5 (243 )
Share of profit of equity accounted investees 1 44 0.1 1 48 0.1 10
Profit before income tax 95 5,931 15.3 97 6,068 17.4 (2 )
Income tax expense 12 742 1.9 20 1,252 3.6 (41 )
Profit for the period 83 5,189 13.4 77 4,816 13.8 8
Diluted EPS 0.49 30.35 0.45 28.22 8

Appendix 4: EBITDA Computation

Particulars Q4 FY15 Q4 FY14
($) (Rs.) ($) (Rs.)
Profit before income tax 95 5,931 97 6,068
Interest income (3 ) (194 ) (1 ) (82 )
Depreciation 25 1,533 21 1,308
Amortization 11 699 10 648
Impairment 2 95
EBITDA 129 8,064 127 7,942

All amounts in millions, except EPS

All US dollar amounts based on convenience translation rate as on 31st March, 2015 USD = Rs. 62.31

Appendix 5: Revenue Mix by Segment

Q4 FY15 Q4 FY14 Growth %
($) (Rs.) % ($) (Rs.) %
Global Generics 497 30,993 80 438 27,318 78 13
North America 17,154 55 14,964 55 15
Europe 2,341 8 1,774 6 32
India 4,744 15 4,101 15 16
Russia & Other CIS 3,289 11 4,519 17 (27 )
Rest of World 3,465 11 1,960 7 77
PSAI 119 7,415 19 107 6,641 19 12
North America 1,400 19 1,538 23 (9 )
Europe 3,223 43 2,370 36 36
India 668 9 979 15 (32 )
Rest of World 2,124 29 1,754 26 21
Proprietary Products & Others 5 296 1 14 851 2 (65 )
Total 621 38,704 100 559 34,809 100 11

About Dr. Reddy’s: Dr. Reddy’s Laboratories Ltd. (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 anti-infectives. Dr. Reddy’s operates in markets across the globe. Our major markets include – USA, Russia & CIS, Venezuela and India. 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.

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