Dr. Reddy’s Q2 & H1 FY14 Financial Results

  Dr. Reddy’s Q2 & H1 FY14 Financial Results

           Q2 FY14 Revenues at Rs. 33.6 billion (YoY growth of 17%)
            Q2 FY14 EBITDA at Rs. 9.5 billion (YoY growth of 27%)
           H1 FY14 Revenues at Rs. 62.0 billion (YoY growth of 14%)
            H1 FY14 EBITDA at Rs. 15.2 billion (YoY growth of 22%)

Business Wire

HYDERABAD, India -- October 31, 2013

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited
consolidated financial results for the quarter ended September 30, 2013 under
International Financial Reporting Standards (IFRS).

Key Highlights (Q2 FY14)

  *Consolidated revenues at Rs. 33.6 billion, YoY growth of 17%.

       *Revenues from the Global Generics (GG) segment at Rs. 26.5 billion,
         YoY growth of 32%. Growth driven by North America, Russia & other
         Emerging Markets.
       *Revenues from the Pharmaceutical Services and Active Ingredients
         (PSAI) segment at Rs. 6.4 billion, YoY decline of 19%.

  *Research & Development (R&D) expenses at Rs. 3.0 billion, 9% to revenues
    versus 6.1% to revenues as in Q2 FY13.
  *Selling, general & administrative (SG&A) expenses at Rs. 9.7 billion, 29%
    to revenues versus 27.8% to revenues as in Q2 FY13.
  *EBITDA at Rs. 9.5 billion, 28.3% to revenues versus 25.9% to revenues as
    in Q2 FY13.
  *PAT at Rs. 6.9 billion, 20.6% to revenues versus 13.6% to revenues as in
    Q2 FY13.
  *During the quarter, the company launched 19 new generic products, filed 13
    new product registrations and filed 8 DMFs globally.

Note: Q2 FY 13 Income Statement considered is as submitted to the US SEC in
the form 6K.

  All figures in    All US dollar figures based on convenience translation
 millions,        rate of 1USD = Rs. 62.58
  except EPS
  
  Dr. Reddy’s Laboratories Limited and Subsidiaries
  
  Unaudited Consolidated Income Statement
                                                                     
  Particulars       Q2 FY14                    Q2 FY13                 Growth
                   ($)     (Rs.)     %      ($)   (Rs.)   %      %
  Revenues          537     33,575    100.0   460   28,809  100.0   17
  Cost of          225     14,106    42.0   219   13,708  47.6   3
  revenues
  Gross profit     311     19,469    58.0   241   15,101  52.4   29
  Operating
  Expenses
  Selling,
  general &         156      9,737      29.0    128    8,013    27.8    21
  administrative
  expenses
  Research and
  development       48       3,009      9.0     28     1,759    6.1     71
  expenses
  Impairment loss
  on intangible                                 8      507      1.8
  assets
  Impairment loss                               3      181      0.6
  on goodwill
  Other operating  (10)    (637)     (1.9)  (6)   (397)   (1.4)  60
  income
  Results from
  operating        118     7,360     21.9   80    5,038   17.5   46
  activities
  Net finance       (5)      (291)      (0.9)   (6)    (371)    (1.3)   (22)
  income
  Share of profit
  of equity        (1)     (44)      (0.1)  (0)   (28)    (0.1)  56
  accounted
  investees
  Profit before    123     7,695     22.9   87    5,437   18.9   42
  income tax
  Income tax       13      792       2.4    24    1,512   5.2    (48)
  expense
  Profit for the   110     6,903     20.6   63    3,925   13.6   76
  period
                                                          
  Diluted
  Earnings per     0.65    40.5            0.37  23.1          75
  share
                                                                        

 EBITDA Computation:
  Particulars                Q2 FY14        Q2 FY13
                             ($)  (Rs.)       ($)  (Rs.)
  Profit before income tax    123  7,695       87   5,437
  Interest (income)/expense   1     71          (1)   (31)
  Depreciation                19    1,171       15    943
  Amortization                9     562         7     433
  Impairment                 -    -          11   688
  EBITDA                     152  9,499      119  7,470
                                                      

Segmental Analysis

Global Generics

Revenues from Global Generics segment for Q2 FY14 at Rs. 26.5 billion, YoY
growth of 32% driven by North America, Russia and other Emerging Market
territories.

  *Revenues from North America for Q2 FY14 at Rs. 13.2 billion, YoY growth of
    43%. Growth largely driven by:-

       *Products launched in limited competition space namely finasteride
         1mg, isotretinoin, zoledronic acid (5mg/100mL), zoledronic acid
         (4mg/5ml) etc during previous quarters post Sep. 2012 and 4 new
         products which were launched during the quarter - azacitidine,
         decitabine, donepezil 23mg, and divalproex ER tabs.
       *Significant traction in market share of key existing products namely
         fondaparinux, omeprazole DR etc
       *During the quarter, 4 ANDAs were filed. Cumulatively, 62 ANDAs are
         pending for approval with the USFDA of which 39 are Para IVs and we
         believe 9 have ‘First To File’ status.

  *Revenues from Emerging Markets (which include Russia, CIS countries and
    RoW territories) for Q2 FY14 at Rs. 7.3 billion, YoY growth of 42%.

       *Revenues from Russia at Rs. 4.6 billion, YoY growth of 44%. Growth
         was largely driven by volume uptake in the current quarter on account
         of seasonal impact.
       *Revenues from CIS markets at Rs. 0.9 billion, YoY growth of 39%.
         Growth was largely driven by volume uptake of existing products and
         introduction of new products in Ukraine.
       *Revenues from RoW territories stood at Rs. 1.8 billion, YoY growth of
         36%.

  *Revenues from India for  Q2 FY14 at Rs. 4.2 billion, YoY growth of 8.5%.

       *Resilient growth after considering trade disruptions and impact of
         the revised prices under new pharma pricing policy.

  *Revenues from Europe for Q2 FY14 at Rs. 1.8 billion, remained flat YoY.

Pharmaceutical Services and Active Ingredients (PSAI)

  *Revenues from PSAI for Q2 FY14 at Rs. 6.4 billion, YoY decline of 19%.
    Degrowth on the back of lower number of ‘launch molecules’ to our
    customers during the quarter.
  *During the quarter, 8 DMFs were filed globally, including 1 in the US and
    1 in Europe. The cumulative number of DMF filings as of September 30, 2013
    is 590.

Income Statement Highlights:

  *Gross profit margin at 58% in Q2 FY14 improved by nearly 560 basis points
    versus Q2 FY13. Gross profit margin for Global Generics and PSAI business
    segments are at 66.1% and 24.6% respectively.

GG gross margin improved primarily on account of higher contribution from new
product launches in North America, where as PSAI gross margin declined,
primarily on the back of lower number of launch molecules to our customers and
relatively higher overheads during the quarter.

  *SG&A expenses including amortization in Q2FY14 at Rs. 9.7 billion, YoY
    growth of 21%. The increase is primarily towards select brand building
    activities in the Emerging Market territories.
  *R&D expenses stood at Rs. 3.0 billion, YoY growth of 71%; 9% to revenues
    in Q2 FY14 as compared to 6.1% to revenues in Q2 FY13.
  *Net Finance income at Rs. 291 million in Q2 FY14 compared to the net
    finance income of Rs. 371 million in Q2 FY13. The change is on account of
    :

       *Net incremental forex impact of Rs. 23 million
       *Incremental net interest expense of Rs. 103 million

  *EBITDA for Q2 FY14 at Rs. 9.5 billion, YoY growth of 27%; 28.3% to
    revenues.
  *Profit after Tax in Q2 FY14 at Rs. 6.9 billion, YoY growth of 76%.
  *Diluted earnings per share in Q2 FY 14 at Rs. 40.5
  *Capital expenditure for Q2 FY14 is Rs. 3.8 billion.

 All US dollar figures based on convenience translation rate of 1USD = Rs.
  62.58
                                                        
  Appendix 1: Key Balance Sheet Items                     (in millions)
  Particulars                      As on 30th Sep 2013  As on 30th June 2013
                                   ($)        (Rs.)    ($)        (Rs.)
  Cash and cash equivalents and    435        27,202   478        29,907
  current investments
  Trade receivables                532        33,291   466        29,168
  Inventories                      381        23,874   360        22,536
  Property, plant and equipment    679        42,477   629        39,393
  Goodwill and Other Intangible    244        15,274   236        14,787
  assets
  Loans and borrowings (current &  786        49,200   702        43,937
  non-current)
  Trade payables                   173        10,828   161        10,076
  Total Equity                     1,248      78,086   1,199      75,051
                                                                 

 Appendix 2: Revenue Mix by Segment              (in millions)
                            Q2 FY14             Q2 FY13             Growth
                             ($)  (Rs.)   %    ($)  (Rs.)   %    %
  Global Generics            424  26,548  79   321  20,103  70   32
  North America                  13,244  50       9,270   46   43
  Europe                         1,761   6        1,777   9    (1)
  India                          4,207   16       3,879   19   8
  Russia & Other CIS             5,516   21       3,841   19   44
  RoW                            1,820   7        1,336   7    36
  PSAI                       102  6,403   19   126  7,875   27   (19)
  North America                  944     15       1,353   17   (30)
  Europe                         2,358   37       2,906   37   (19)
  India                          1,071   17       1,148   15   (7)
  RoW                            2,030   31       2,468   31   (18)
  Proprietary Products &     10   624     2    13   831     3    (25)
  Others
  Total                      536  33,575  100  460  28,809  100  17
                                                             

  All figures in    All US dollar figures based on convenience translation
 millions,        rate of 1USD = Rs. 62.58
  except EPS
                    
  Appendix 3: Consolidated Income Statement
  Particulars       H1 FY14                    H1 FY13                Growth
                   ($)     (Rs.)     %      ($)   (Rs.)   %      %
  Revenues          991     62,024    100.0   866   54,215  100.0   14
  Cost of          440     27,536    44.4   409   25,574  47.2   8
  revenues
  Gross profit     551     34,488    55.6   458   28,641  52.8   20
  Operating
  Expenses
  Selling,
  general &         296      18,530     29.9    260    16,291   30.0    14
  administrative
  expenses
  Research and
  development       87       5,438      8.8     53     3,322    6.1     64
  expenses
  Impairment loss
  on intangible                                 8      507      0.9
  assets
  Impairment loss                               3      181      0.3
  on goodwill
  Other operating  (16)    (1012)    (1.6)  (10)  (615)   (1.1)  65
  income
  Results from
  operating        184     11,532    18.6   143   8,956   16.5   29
  activities
  Net finance       (4)      (221)      (0.4)   (3)    (159)    (0.3)   39
  income
  Share of profit
  of equity        (1)     (79)      (0.1)  (1)   (47)    (0.1)  69
  accounted
  investees
  Profit before    189     11,832    19.1   146   9,162   16.9   29
  income tax
  Income tax       21      1,320     2.1    30    1,877   3.5    (30)
  expense
  Profit for the   168     10,512    17.0   116   7,285   13.4   44
  period
                                                          
  Diluted EPS      0.98    61.6            0.68  42.8          44
                                                                        

 Appendix 4: EBITDA Computation:
  Particulars                  H1 FY14         H1 FY13
                                ($)  (Rs.)        ($)  (Rs.)
  Profit before income tax      189  11,832       146  9,163
  Interest (income) / expense   0     11           (0)   (29)
  Depreciation                  37    2,288        29    1,839
  Amortization                  17    1,058        13    833
  Impairment                                   11   688
  EBITDA                       243  15,189       200  12,494
                                                         

Disclaimer

This press release includes forward-looking statements, as defined in the U.S.
Private Securities Litigation Reform Act of 1995. We have based these
forward-looking statements on our current expectations and projections about
future events. Such statements involve known and unknown risks, uncertainties
and other factors that may cause actual results to differ materially. Such
factors include, but are not limited to, changes in local and global economic
conditions, our ability to successfully implement our strategy, the market
acceptance of and demand for our products, our growth and expansion,
technological change and our exposure to market risks. By their nature, these
expectations and projections are only estimates and could be materially
different from actual results in the future.

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 and differentiated
formulations. Major therapeutic focus is on gastro-intestinal, cardiovascular,
diabetology, oncology, pain management and anti-infective. Major markets
include India, USA, Russia-CIS and Europe apart from other select geographies
within Emerging Markets.

For more information, log on to: www.drreddys.com

Note: All discussions in this release are based on unaudited consolidated IFRS
financials.

Contact:

Dr. Reddy’s Laboratories Ltd.
Investors and Financial Analysts:
Kedar Upadhye, +91-40-66834297
kedaru@drreddys.com
or
Saunak Savla, +91-40-49002135
saunaks@drreddys.com
or
Milan Kalawadia (USA), +1 908-203-4931
mkalawadia@drreddys.com
or
Media:
S Rajan, +91-40-49002445
rajans@drreddys.com
 
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