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Dr. Reddy’s Q2 & H1 FY13 Financial Results

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter ended September 30, 2012 under International Financial Reporting Standards (IFRS).

Key Highlights (Q2 FY13)

  • Consolidated revenues for Q2 FY13 at Rs. 28.8 billion, recorded YoY growth of 27%. Consolidated revenues for H1 FY13 at Rs. 54.2 billion, recorded YoY growth of 28%.
    • Revenues from the Global Generics segment for Q2 FY13 at Rs. 20.1 billion, recorded YoY growth of 25% primarily driven by North America, India and other emerging markets.
    • Revenues from the PSAI segment for Q2 FY13 at Rs. 7.9 billion, recorded YoY growth of 33%.
  • EBITDA for Q2 FY13 at Rs. 7.7 billion, 27% of revenues, recorded YoY growth of 47%. EBITDA for H1 FY13 at Rs. 12.7 billion, 23% of revenues, recorded YoY growth of 35%.
  • PAT for Q2 FY13 at Rs. 4.1 billion, 14% of revenues, recorded YoY growth of 32%. PAT for H1 FY13 at Rs. 7.4 billion, 14% of revenues, recorded YoY growth of 30%.
  • *Adjusted PAT for Q2 FY13 at Rs. 4.9 billion, 17% of revenues, recorded YoY growth of 77%.
  • During the quarter, the company launched 18 new generic products, filed 11 new product registrations and filed 10 DMFs globally.

* Adjusted for (a) impairment charges in Q2 FY13 (b) the benefit on reversal of provision for voluntary retirement scheme (‘VRS’) in Q2 FY12 and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

** Adjusted for (a) impairment charges in Q2 FY13 (b) net charge for voluntary retirement scheme(‘VRS’) and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

All figures in millions, except EPS

   

All US dollar figures based on convenience translation rate of 1USD = Rs. 52.92

 
Dr. Reddy’s Laboratories Limited and Subsidiaries
Unaudited Consolidated Income Statement
       
Particulars Q2 FY13 Q2 FY12

 

    ($)    

(Rs.)

    %       ($)    

(Rs.)

    %      

Growth %

Revenues 544     28,809     100 429     22,678     100 27
Cost of revenues     255       13,504       47       198       10,473       46       29  
Gross profit     289       15,305       53       231       12,205       54       25  
Operating Expenses
Selling, general and administrative expenses 151 8,013 28 136 7,217 32 11
Research and development expenses 33 1,759 6 28 1,459 6 21
Impairment loss on goodwill and intangible assets 13 688 2
Other operating (income) / expense     (8 )     (397 )     (1 )     (4 )     (216 )     (1 )     85  
Results from operating activities     99       5,242       18       71       3,745       17       40  
Net finance (income) / expense (7 ) (371 ) (1 ) 1 50 0 (849 )
Share of (profit) / loss of equity accounted investees     (1 )     (28 )     (0 )     (0 )     (13 )     (0 )     115  
Profit before income tax (‘PBT’)     107       5,641       20       70       3,708       16       52  
Income tax expense     30       1,567       5       12       630       3       148  
Profit for the period     77       4,074       14       58       3,078       14       32  
                                           
Diluted EPS     0.5       23.9             0.3       18.1             32  
 

Profit Computation:

EBITDA Computation     Q2 FY13     Q2 FY12
    ($)    

(Rs.)

    ($)    

(Rs.)

PBT 107     5,641 70     3,708
Net Interest Expenses / (Income) (1 ) (32 ) 4 225
Depreciation 18 943 17 879
Amortization 8 433 7 389
Impairment     13       688              
Reported EBITDA     145       7,673       98       5,201  
Adjustments of exceptional items:
Part reversal of provision booked in Q1 FY12 for VRS                 (2 )     (94 )
Adjusted EBITDA     145       7,673       97       5,107  
 
 
PAT Computation Q2 FY13 Q2 FY12
    ($)    

(Rs.)

    ($)    

(Rs.)

PAT 77 4,074 58 3,078
Adjustments:
Part reversal of provision booked in Q1 FY12 for VRS (2 ) (94 )
Impairment loss on goodwill and intangible assets 13 688
Tax adjustment*     3       175       (4 )     (192 )
Adjusted PAT     93       4,937       53       2,792  
 

* Q2 FY13 normalized to the FY13 annual effective tax rate and Q2 FY12 normalized to the FY12 annual effective tax rate and the effect of the aforementioned adjustments

Segmental Analysis

Global Generics

Revenues from Global Generics segment for Q2 FY13 at Rs. 20.1 billion, recorded YoY growth of 25% driven by key markets of North America, India and other emerging markets.

  • Revenues from North America for Q2 FY13 at Rs. 9.3 billion, recorded YoY growth of 47%.
    • Growth is largely driven by key limited competition products of ziprasidone, tacrolimus, fondaparinux, clopidogrel, ramp-up in antibiotics portfolio and products from Shreveport facility.
    • 4 new products were launched during the quarter - atorvastatin, metoprolol, montelukast family and amoxicillin.
    • 30 products from the prescription portfolio are ranked among the Top 3 in their respective market shares. (Source: IMS Health Volumes, August 2012)
    • During the quarter, 4 ANDAs were filed. Cumulatively, 63 ANDAs are pending for approval with the USFDA of which 33 are Para IVs and 7 have ‘First To File’ status.
  • Revenues from Russia and Other CIS markets for Q2 FY13 at Rs. 3.8 billion recorded YoY growth of 14%.
    • Revenues from Russia for Q2 FY13 are at Rs. 3.2 billion.
    • Revenues from Other CIS markets for Q2 FY13 at Rs. 0.62 billion recorded YoY growth of 31%.
  • Revenues from India for Q2 FY13 at Rs. 3.9 billion recorded YoY growth of 12%.
    • Growth driven by volume increase across most key brands.
    • Biosimilars portfolio grew YoY by 24% during the quarter.
    • 4 new brands were launched during the quarter.
  • Revenues from Europe for Q2 FY13 at Rs. 1.8 billion declined YoY by 16%.
    • Revenues from Germany for Q2 FY13 at Rs. 1.1 billion declined YoY by 11%.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI for Q2 FY13 at Rs. 7.9 billion, recorded YoY growth of 33%.
  • During the quarter, 10 DMFs were filed globally, including 2 in Europe. The cumulative number of DMF filings as of September 30, 2012 is 552.

Income Statement Highlights:

  • Gross profit margin at 53.1% in Q2 FY13 marginally dropped by 0.7% versus Q2 FY12. Gross profit margin for Global Generics and PSAI business segments are at 59.4% and 35.8% respectively.
  • Selling, General and Administration (SG&A) expenses including amortization at Rs. 8 billion increased YoY by 11%.
  • Research & development expenses for Q2 FY13 at Rs. 1.8 billion is at 6% of revenues.
  • During the quarter, a non-recurring and non-cash impairment charge of Rs. 688 million pertaining to product intangibles in generics portfolio and a goodwill charge wrt Italian operations has been considered.
  • Net Finance income is at Rs. 371 million, in Q2 FY13 compared to the net finance cost of Rs. 50 million in Q2 FY12. The change is on account of:
    • Net incremental forex gain of Rs. 187 million, primarily on account of reversal of the loss on time value of options recorded in Q1 FY13, due to the recent appreciation in the rupee.
    • Net interest income of Rs. 33 million in Q2 FY13 compared to net interest expense of Rs. 225 million in Q2 FY12 primarily on account of higher interest income from Fixed Deposit and mutual funds.
  • EBITDA for Q2 FY13 is Rs. 7.7 billion, 27% of revenues and recorded YoY growth of 47%. This growth is supported by the increased operating leverage.
  • Profit after Tax in Q2 FY13 at Rs. 4.1 billion recorded YoY growth of 32%.
  • *Adjusted Profit after tax in Q2 FY13 at Rs. 4.9 billion recorded YoY growth of 77%.
  • Diluted earnings per share in Q2 FY13 are Rs. 23.9.
  • Capital expenditure for Q2 FY13 is Rs. 1.8 billion.

* Adjusted for (a) impairment charges in Q2 FY13 (b) the benefit on reversal of provision for voluntary retirement scheme (‘VRS’) in Q2 FY12 and (c) tax normalization on account of the annual effective tax rate and the aforementioned adjustments

All US dollar figures based on convenience translation rate of 1USD = Rs. 52.92

Appendix 1: Key Balance Sheet Items

(in millions)

Particulars     As on 30th Sep 12     As on 30th Jun 12
    ($)    

(Rs.)

    ($)    

(Rs.)

Cash and cash equivalents     390       20,641     403       21,353
Trade receivables     496       26,247     472       24,975
Inventories     414       21,885     389       20,580
Property, plant and equipment     667       35,300     653       34,550
Goodwill and Other Intangible assets     233       12,297     257       13,597
Loans and borrowings (current & non current)     660       34,901     670       35,430
Trade payables     197       10,412     165       8,750
Equity     1,197       63,354     1,127       59,664
       

Appendix 2: Revenue Mix by Segment

   

(in millions)

      Q2 FY13 Q2 FY12     Growth %
    ($)    

(Rs.)

    %     ($)    

(Rs.)

    %    
Global Generics     380       20,103     70     305       16,136     71     25  
North America           9,270     46           6,287     39     47  
Europe           1,777     9           2,117     13     (16 )
India           3,879     19           3,459     21     12  
Russia & Other CIS           3,841     19           3,380     21     14  
RoW           1,336     7           893     6     50  
PSAI     149       7,876     27     112       5,933     26     33  
North America           1,353     17           1,068     18     27  
Europe           2,906     37           2,303     39     26  
India           1,148     15           752     13     53  
RoW           2,469     31           1,810     31     36  
Proprietary Products & Others     16       830     3     12       610     3     36  
Total     544       28,809     100     429       22,678     100     27  
               

All figures in millions, except EPS

   

All US dollar figures based on convenience translation rate of 1USD = Rs. 52.92

       
Appendix 3: Consolidated Income Statement
Particulars H1 FY13 H1 FY12 Growth %
    ($)    

(Rs.)

    %       ($)    

(Rs.)

    %      
Revenues 1,024     54,215     100 802     42,461     100 28
Cost of revenues     479       25,369       47       372       19,701       46       29  
Gross profit     545       28,846       53       430       22,760       54       27  
Operating Expenses
Selling, general and administrative expenses 308 16,291 30 264 13,972 33 17
Research and development expenses 63 3,322 6 50 2,656 6 25
Impairment loss on goodwill and intangible assets 13 688 1
Other operating (income) / expense     (12 )     (615 )     (1 )     (8 )     (402 )     (1 )     54  
Results from operating activities     173       9,160       17       123       6,534       15       40  
Net finance (income) / expense (3 ) (159 ) (0 ) 2 96 0 (266 )
Share of (profit) / loss of equity accounted investees     (1 )     (47 )     (0 )     (0 )     (17 )     (0 )     176  
Profit before income tax     177       9,366       17       122       6,455       15       45  
Income tax expense     37       1,932       4       14       750       2       157  
Profit for the period     140       7,434       14       108       5,705       13       30  
                                           
Diluted EPS     0.8       43.6             0.6       33.5             30  
 

Appendix 4: Profit Computation:

EBITDA Computation     H1 FY13     H1 FY12
    ($)    

(Rs.)

    ($)    

(Rs.)

PBT 177     9,366 122     6,455
Net Interest Expenses / (Income) 0 12 8 446
Depreciation 35 1,839 32 1,708
Amortization 16 833 15 794
Impairment     13       688              
Reported EBITDA     241       12,738       178       9,403  
Adjustments of exceptional items:
One-time charge of Voluntary Retirement Scheme                 1       42  
Adjusted EBITDA     241       12,738       178       9,445  
 
 
PAT Computation H1 FY13 H1 FY12
    ($)    

(Rs.)

    ($)    

(Rs.)

PAT 140 7,434 108 5,705
Adjustments:
One-time charge of Voluntary Retirement Scheme 1 42
Impairment loss on goodwill and intangible assets 13 688
Tax adjustment*     (5 )     (280 )     (14 )     (729 )
Adjusted PAT     148       7,842       95       5,018  

* H1 FY13 normalized to the FY13 annual effective tax rate and H1 FY12 normalized to the FY12 annual effective tax rate and the effect of the aforementioned transactions

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, differentiated formulations and NCEs. Therapeutic focus is on gastro-intestinal, cardiovascular, diabetology, oncology, pain management, anti-infective and pediatrics. Major markets include India, USA, Russia and CIS, Germany, UK, Venezuela, S. Africa, Romania and New Zealand.

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