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Dr. Reddy's Q4 and FY17 Financial Results
[May 12, 2017]

Dr. Reddy's Q4 and FY17 Financial Results


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, 2017 under International Financial Reporting Standards (IFRS).

FY17: Key Highlights

  • Revenues at Rs. 140.8 billion: YoY decline: 9%
  • Gross Profit Margin at 55.6%
  • Research & Development (R&D) spend at Rs. 19.6 billion [13.9% of Revenues]
  • Selling, general & administrative (SG&A) expenses at Rs. 46.4 billion [YoY increase: 1%]
  • EBITDA at Rs. 25.5 billion [18.1% of Revenues]
  • Profit after tax at Rs. 12.0 billion [8.5% of Revenues]

Q4 FY17: Key Highlights

  • Revenues at Rs. 35.5 billion: QoQ decline: 4%; YoY decline: 5%
  • Gross Profit Margin at 51.2%
  • R&D spend at Rs. 4.6 billion [12.9% of Revenues]
  • SG&A expenses at Rs. 11.0 billion [YoY decline: 6%]
  • EBITDA at Rs. 6.3 billion [17.7% of Revenues]
  • Profit after tax at Rs. 3.1 billion [8.8% of Revenues]

Commenting on the results, Co-chairman and CEO, G V Prasad said, "FY17 has been a challenging year due to lack of new product approvals for the US market. However, our other geographies delivered good performances, with several new product launches. We are also seeing expanded global access to our Biosimilars, as a result of successful registrations in Emerging Markets. We will continue our focus on rationalisation of cost structures and building a sustainable quality culture across the organisation."

All amounts in millions, except EPS
All US dollar amounts based on convenience translation rate of I USD = Rs. 64.85



 

Dr. Reddy's Laboratories Limited and Subsidiaries

Consolidated Income Statement for Q4 FY 17

 
        Q4 FY17   Q4 FY16    
Particulars       ($)   (Rs.)   %   ($)   (Rs.)   %   Growth %
Revenues       548   35,542   100.0   579   37,562   100.0   (5 )
Cost of revenues       268     17,360     48.8     251     16,286     43.4     7  
Gross profit       280     18,182     51.2     328     21,276     56.6     (15 )
Operating Expenses
Selling, general & administrative expenses 169 10,973 30.9 179 11,632 31.0 (6 )
Research and development expenses 71 4,579 12.9 75 4,879 13.0 (6 )
Other operating (income) / expense       (8 )   (505 )   (1.4 )   (5 )   (307 )   (0.8 )   64  
Results from operating activities       48     3,135     8.8     78     5,072     13.5     (38 )
Net finance expense 1 48 0.1 41 2,646 7.0 (98 )
Share of (profit) / loss of equity accounted investees       (2 )   (102 )   (0.3 )   (1 )   (59 )   (0.2 )   72  
Profit before income tax       49     3,189     9.0     38     2,485     6.6     28  
Income tax expense       1     64     0.2     27     1,739     4.6     (96 )
Profit for the period       48     3,125     8.8     11     746     2.0     319  
            -             -          
Diluted EPS       0.29     18.83         0.07     4.36         332  

 

EBITDA Computation

 
Particulars       Q4 FY 17   Q4 FY 16
      $   Rs.   $   Rs.
Profit before income tax 49   3,189   38   2,485
Interest income, net* (1 ) (90 ) (11 ) (713 )
Depreciation# 36 2,338 32 2,062
Amortization       13     866     15     970  
EBITDA       97     6,303     74     4,804  
EBITDA% to Revenues           17.7 %       12.8 %

* Includes income from Investments; # Includes Impairment charge

 

Key Balance Sheet Items

 
Particulars       As on 31st Mar 17       As on 31st Dec 16
      ($)   (Rs.)       ($)   (Rs.)
Cash and cash equivalents and Other current Investments       280     18,136       311     20,145
Trade Receivables       587     38,065       634     41,119
Inventories       440     28,529       463     30,052
Property, plant and equipment       881     57,160       882     57,209
Goodwill and Other Intangible assets       751     48,677       771     49,977
Loans and borrowings (current & non-current)       758     49,185       894     57,999
Trade & other payables       207     13,417       205     13,308
Equity       1,913     1,24,044       1,866     121,040
 

Dr. Reddy's Laboratories Limited and Subsidiaries

Consolidated Income Statement for FY 17

 
        FY17   FY16    
Particulars       ($)   (Rs.)   %     ($)   (Rs.)   %     Growth %
Revenues       2,171   1,40,809   100.0   2,386   1,54,708   100.0   (9 )
Cost of revenues       963     62,453     44.4     963     62,427     40.4     0  
Gross profit       1,208     78,356     55.6     1,423     92,281     59.6     (15 )
Operating Expenses
Selling, general & administrative expenses 715 46,372 32.9 705 45,702 29.5 1
Research and development expenses 301 19,551 13.9 275 17,834 11.5 10
Other operating (income) / expense       (16 )   (1,065 )   (0.8 )   (13 )   (874 )   (0.6 )   22  
Results from operating activities       208     13,498     9.6     457     29,619     19.1     (54 )
Net finance (income) / expense (12 ) (806 ) (0.6 ) 42 2,708 1.8 (130 )
Share of (profit) / loss of equity accounted investees       (5 )   (349 )   (0.2 )   (4 )   (229 )   (0.1 )   52  
Profit / (loss) before income tax       226     14,653     10.4     418     27,140     17.5     (46 )
Income tax (benefit) / expense       40     2,614     1.9     110     7,127     4.6     (63 )
Profit / (loss) for the period       186     12,039     8.5     309     20,013     12.9     (40 )
                        -          
Diluted EPS       1.11     72.09         1.80     116.98         (38 )
 

EBITDA Computation

 
Particulars       FY 17   FY 16
      $   Rs.   $   Rs.
Profit before income tax 226   14,653   418   27,140
Interest income, net* (14 ) (880 ) (22 ) (1,425 )
Depreciation# 122 7,931 106 6,874
Amortization#       59     3,791     56     3,663  
EBITDA       393     25,495     559     36,252  
EBITDA% to Revenues           18.1 %       23.4 %

* Includes income from Investments; # Includes Impairment charge

 

Key Balance Sheet Items

 
Particulars       As on 31st Mar 17       As on 31st Mar 16
      ($)   (Rs.)       ($)   (Rs.)
Cash and cash equivalents and Other current Investments       280     18,136       616     39,955
Trade Receivables       587     38,065       637     41,306
Inventories       440     28,529       394     25,578
Property, plant and equipment       881     57,160       832     53,961
Goodwill and Other Intangible assets       751     48,677       380     24,644
Loans and borrowings (current & non-current)       758     49,185       517     33,513
Trade & other payables       207     13,417       190     12,300
Equity       1,913     1,24,044       1,979     1,28,336
 

Revenue Mix by Segment [FY 17 vs FY 16]

 
Particulars       FY 17   FY 16   Growth %
      ($)   (Rs.)   %   ($)   (Rs.)   %  
Global Generics       1,780     1,15,409   82   1,975     1,28,062   83   (10 )
North America           63,601           75,445       (16 )
Europe*           7,606           7,732       (2 )
India           23,131           21,293       9  
Emerging Markets#           21,071           23,592       (11 )
PSAI       328     21,277   15   345     22,379   14   (5 )
North America           3,569           3,052       17  
Europe           8,410           9,313       (10 )
India           1,750           2,618       (33 )
Rest of World           7,548           7,396       2  
Proprietary Products & Others       64     4,123   3   66     4,267   3   (3 )
Total       2,171     1,40,809   100   2,386     1,54,708   100   (9 )
 

Revenue Mix by Segment [Q4 FY 17 vs Q3 FY 17]

 
Particulars       Q4 FY 17   Q3 FY 17   Growth %
      ($)   (Rs.)   %   ($)   (Rs.)   %  
Global Generics       449     29,138   82   472     30,638   83   (5 )
North America           15,349           16,595       (8 )
Europe*           2,066           2,148       (4 )
India           5,711           5,947       (4 )
Emerging Markets#           6,012           5,948       1  
PSAI       83     5,401   15   83     5,400   14   -  
North America           532           1,259       (58 )
Europe           2,539           1,828       39  
India           395           409       (3 )
Rest of World           1,935           1,904       2  
Proprietary Products & Others       15     1,003   3   16     1,027   3   (2 )
Total       548     35,542   100   572     37,065   100   (4 )
 

Revenue Mix by Segment [Q4 FY 17 vs Q4 FY 16]

 
Particulars       Q4 FY17   Q4 FY16   Growth %
      ($)   (Rs.)   %   ($)   (Rs.)   %  
Global Generics       449     29,138   82   475     30,774   82   (5 )
North America           15,349           18,950       (19 )
Europe*           2,066           1,759       17  
India           5,711           5,267       8  
Emerging Markets#           6,012           4,798       25  
PSAI       83     5,401   15   89     5,766   15   (6 )
North America           532           742       (28 )
Europe           2,539           2,586       (2 )
India           395           603       (35 )
Rest of World           1,935           1,835       5  

Proprietary Products & Others

      15     1,003   3   16     1,022   3   (2 )
Total       548     35,542   100   579     37,562   100   (5 )

* Europe primarily includes Germany, UK and out licensing sales business
# Emerging Markets refers to Russia, other CIS countries, Romania and Rest of the World markets including Venezuela

Segmental Analysis

Global Generics (GG)

Revenues from GG segment for FY 17 at Rs. 115.4 billion, year-on-year decline of 10%; primarily on account of lower contribution from North America and Emerging Markets. Revenues for fourth quarter declined by 5% on a year-on-year basis.

  • Revenues from North America for FY 17 at Rs. 63.6 billion, year-on-year decline of 16%. This is primarily on account of increased competition in our key products namely valganciclovir, decitabine, azacitidine etc. coupled with discontinuation of the McNeil business. Revenues for fourth quarter at Rs. 15.3 billion.

    During the year, we filed 26 ANDAs with USFDA. Of these 13 ANDAs filed in the fourth quarter.

    As of 31st March, 2017, cumulatively 101 generic filings are pending for approval with the USFDA (99 ANDAs and 2 NDAs under 505(b)(2) route). Of these 99 ANDAs, 62 are Para IVs out of which we believe 21 have 'First to File' status.
  • Revenues from Emerging Markets for FY 17 at Rs. 21.1 billion, year-on-year decline of 11%, primarily on account of constrained operations in Venezuela. Revenues for fourth quarter at Rs. 6 billion. Gradual sequential improvement through the year is backed by improving macro economic environment across geographies coupled with focused foray into the institutional business in some countries.
    • Revenues from Russia for FY 17 at Rs. 11.5 billion, year-on-year growth of 9%. In constant currency it has grown by 8%. Revenues the fourth quarter at Rs. 3.4 billion and grew 26% year-on-year in constant currency.
    • Revenues from other CIS countries and Romania for FY 17 at Rs. 3.7 billion, year-on-year growth of 4%.
    • Revenues from Rest of World (RoW) territories for FY 17 at Rs. 5.8 billion, year-on-year decline of 38%. This is primarily on account of constrained operations in Venezuela.
  • Revenues from India at Rs. 23.1 billion, year-on-year growth of 9%. Revenues for fourth quarter at Rs. 5.7 billion and grew 8% year-on-year.
  • Revenues from Europe at Rs. 7.6 billion, year-on-year decline of 2%, impacted due to weak GBP.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI at Rs. 21.3 billion, year-on-year decline of 5%. Revenues for fourth quarter at Rs. 5.4 billion declined by 6%.
  • During the year, 82 DMFs were filed globally of which 9 were in the US. Cumulative number of DMF filings as of 31st March, 2017 was 754.

Proprietary Products (PP)

Zembrace™Sym Touch ™(Suma 3 mg) injection and Sernivo™ (betamethasone dipropionate) Spray, 0.05% are gradually gaining traction, with an improvement in the sales volumes.

Income Statement Highlights:

  • Gross profit margin for FY 17 is at 55.6% and declined ~400 bps over that of previous year. This decline is primarily on account of high price erosion in our North America Generics Business, impairment charge taken at our Bristol plant, provision towards new product inventory and higher manufacturing overheads. Gross profit margin for GG and PSAI business segments are at 61.6% and 21.0% respectively. Gross profit margin for the fourth quarter at 51.2%.
  • SG&A expenses for FY 17 at Rs. 46.4 billion. Marginal increase of 1%. SG&A expenses for fourth quarter at Rs. 11 billion.
  • R&D expenses for FY 17 at Rs. 19.6 billion, 13.9% of Revenues, against 11.5% in FY 16. R&D expense for the fourth quarter at Rs. 4.6 billion, 12.9% of Revenues. Focus continues to build a sustainable revenue stream through a mix of simple and complex generics, biosimilars and differentiated products pipeline.
  • Net finance income for FY 17 is Rs. 806 million compared to net finance expense of Rs. 2,708 million in FY 16. This is on account of:
    • Net foreign exchange loss of Rs. 74 million in the current year vs net foreign exchange loss of Rs. 4,133 million in the previous year primarily related to the Venezuela adjustment.
    • Increase in profit on sales of investments by Rs. 105 million; offset by
    • Net decrease in interest income of Rs. 650 million.
  • Profit after Tax for FY 17 at Rs. 12.0 billion. PAT for fourth quarter at Rs. 3.1 billion.
  • Diluted earnings per share for FY 17 is at Rs. 72.1 and Rs. 18.8 for fourth quarter.
  • Capital expenditure for FY 17 is at Rs. 11.7 billion and Rs. 2.4 billion for fourth quarter.

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, 2017 subject to approval of members

Earnings Call Details (06:00 pm IST, 08:30 am EDT, May 12, 2017)

The Company will host an earnings call to discuss the performance and answer any questions from participants. This call will be accessible through an audio dial-in and a web-cast.

Audio conference Participants can dial-in on the numbers below

Primary number:

       

91 22 3960 0616

International Toll Free Number USA 18667462133
      UK 08081011573
Singapore 8001012045
Hong Kong 800964448
Playback of call: 91 22 3065 2322, 91 22 6181 3322
Conference ID: 375#
Web-cast

More details will be provided through our website, www.drreddys.com

 

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.


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