Dr. Reddy’s Q2 & H1 FY21 Financial Results
Hyderabad, India, October 28, 2020: Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) today announced its consolidated financial results for the quarter and the half year ended September 30, 2020. The information mentioned in this release is on the basis of consolidated financial statements under International Financial Reporting Standards (IFRS).
| H1 Performance Summary
Rs. 9,314 Cr Revenue [Up: 8% YoY]
54.9% Gross Margin [H1 FY20: 54.9%]
Rs. 2,589 Cr SGNA expenses [Up: 2% YoY]
Rs. 834 Cr R&D expenses [9.0% of Revenues]
Rs. 2,430 Cr EBITDA [Down: 5% YoY]
Rs. 1,741 Cr Profit before Tax [Up: 8% YoY]
Rs. 1,342 Cr Profit after Tax [Down: 24% YoY]
|
| Q2 Performance Summary
Rs. 4,897 Cr Revenue [Up: 11% QoQ; 2% YoY]
53.9% Gross Margin [Q1 FY21: 56.0%; Q2 FY20: 57.5%]
Rs.1,311 Cr SGNA expenses [Up: 3% QoQ; Down: 1% YoY]
Rs. 436 Cr R&D expenses [8.9% of Revenues]
Rs. 1,267 Cr EBITDA [Up: 9% QoQ; Down: 12% YoY]
Rs. 862 Cr Profit before Tax [Down: 2% QoQ; Up: 12% YoY]
Rs. 762 Cr Profit after Tax [Up: 32% QoQ; Down: 30% YoY] |
*Q2 FY21 YoY sales growth of 20% adjusted for proprietary products out-licensing income in the previous year
Commenting on the results, Co-chairman & MD, G V Prasad said “We are pleased to report continued growth across all the markets and improved productivity which is reflected in the healthy EBITDA margin and RoCE. Our research teams are working on several potential remedies for COVID in addition to the already launched products.”
All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs. 73.54
Dr. Reddy’s Laboratories Limited and Subsidiaries
Consolidated Income Statement
| Particulars | Q2 FY21 | Q2 FY20 | YoY Gr % |
Q1 FY21 | QoQ Gr% |
|||
| ($) | (Rs.) | ($) | (Rs.) | ($) | (Rs.) | |||
| Revenues | 666 | 48,967 | 653 | 48,009 | 2 | 601 | 44,175 | 11 |
| Cost of Revenues | 307 | 22,558 | 277 | 20,389 | 11 | 264 | 19,420 | 16 |
| Gross Profit | 359 | 26,409 | 376 | 27,620 | (4) | 337 | 24,755 | 7 |
| Operating Expenses | ||||||||
| Selling, General & Administrative expenses | 178 | 13,107 | 180 | 13,217 | (1) | 174 | 12,786 | 3 |
| Research and Development expenses | 59 | 4,359 | 50 | 3,662 | 19 | 54 | 3,980 | 10 |
| Impairment of non-current assets | 11 | 781 | 48 | 3,560 | (78) | |||
| Other operating income | (2) | (149) | (2) | (135) | 10 | (2) | (118) | 26 |
| Results from operating activities | 113 | 8,311 | 99 | 7,316 | 14 | 110 | 8,107 | 3 |
| Net finance income | (3) | (237) | (3) | (231) | 3 | (8) | (605) | (61) |
| Share of profit of equity accounted investees | (1) | (73) | (2) | (117) | (38) | (1) | (77) | (5) |
| Profit before income tax | 117 | 8,621 | 104 | 7,664 | 12 | 120 | 8,789 | (2) |
| Income tax | 13 | 998 | (44) | (3,261) | (131) | 41 | 2,996 | (67) |
| Profit for the period | 104 | 7,623 | 149 | 10,925 | (30) | 79 | 5,793 | 32 |
| Diluted Earnings Per Share (EPS) | 0.62 | 45.83 | 0.90 | 65.82 | (30) | 0.47 | 34.86 | 31 |
| As a % to revenues | Q2 FY21 | Q2 FY20 | Q1 FY21 | ||||
| Gross Profit | 53.9 | 57.5 | 56.0 | ||||
| SG&A | 26.8 | 27.5 | 28.9 | ||||
| R&D | 8.9 | 7.6 | 9.0 | ||||
| EBITDA | 25.9 | 29.9 | 26.3 | ||||
| PBT | 17.6 | 16.0 | 19.9 | ||||
| PAT | 15.6 | 22.8 | 13.1 |
EBITDA Computation
| Particulars | Q2 FY21 | Q2 FY20 | Q1 FY21 | |||||
| ($) | (Rs.) | ($) | (Rs.) | ($) | (Rs.) | |||
| Profit before Income Tax | 117 | 8,621 | 104 | 7,664 | 120 | 8,789 | ||
| Interest income (net)* | (0) | (1) | (3) | (226) | (4) | (306) | ||
| Depreciation | 30 | 2,188 | 31 | 2,306 | 29 | 2,120 | ||
| Amortization | 15 | 1,084 | 14 | 1,033 | 14 | 1,020 | ||
| Impairment | 11 | 781 | 48 | 3,560 | ||||
| EBITDA | 172 | 12,673 | 195 | 14,337 | 158 | 11,622 | ||
* Includes income from Investments
All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs. 73.54
Key Balance Sheet Items
| Particulars | As on 30th Sep 2020 | As on 30th Jun 2020 | As on 30th Sep 2019 | |||
| ($) | (Rs.) | ($) | (Rs.) | ($) | (Rs.) | |
| Cash and cash equivalents and other investments | 355 | 26,074 | 384 | 28,227 | 414 | 30,446 |
| Trade receivables (current & non-current) | 684 | 50,335 | 657 | 48,316 | 573 | 42,153 |
| Inventories | 559 | 41,134 | 532 | 39,148 | 476 | 35,033 |
| Property, plant and equipment | 748 | 55,026 | 737 | 54,183 | 721 | 53,008 |
| Goodwill and Other Intangible assets | 619 | 45,553 | 625 | 45,991 | 603 | 44,340 |
| Loans and borrowings (current & non-current) | 373 | 27,429 | 429 | 31,582 | 429 | 31,545 |
| Trade payables | 310 | 22,833 | 259 | 19,038 | 210 | 15,434 |
| Equity | 2,248 | 1,65,337 | 2,199 | 1,61,748 | 2,092 | 1,53,816 |
Revenue Mix by Segment
| Particulars | Q2 FY21 | Q2 FY20 | YoY Growth % | Q1 FY21 | QoQ Growth %
|
Cyber Attack Update
On 22nd October 2020, we experienced an information security incident and consequently isolated the impacted IT services. This incident involved a ransom-ware attack. We promptly engaged leading outside cybersecurity experts, launched a comprehensive containment and remediation effort and investigation to address the incident.
As of date, our investigation has not ascertained if any data breaches in the incident pertain to personally identifiable information stored in the Company’s systems.
Recovery and restoration of all applications and data is underway. All critical operations are being enabled in a controlled manner.
COVID-19 Update
We continue our fight ainst the current pandemic by ensuring health and safety of our employees and business partners by adopting adequate precautionary measures. We continued our operations across plants enabling us to serve our patients across markets.
During the quarter we saw gradual recovery in the market demand across India, Russia and other markets after a low demand in Q1 FY 21, although the demand is yet to fully recover to pre-covid levels.
We launched COVID-19 treatment drugs Avigan (Favipiravir) and Remdesivir. We further strengthened our development pipeline for COVID-19 treatment drugs including the vaccine candidate Sputnik V.
Revenue Analysis
Global Generics (GG)
Revenues from GG segment at Rs. 39.8 billion:
- Year-on-year growth of 21% and sequential quarter growth of 14%, were driven primarily on account of new product launches, volume traction in the base business and integration of the acquired business from Wockhardt in India.
North America
Revenues from North America at Rs. 18.3 billion:
- Year-on-year growth of 28%, driven by contribution from new products launched, increase in volumes of our base products and aided by a favorable forex rate, which was partially offset by price erosion.
- Sequential growth of 6%, on account of volume traction in the base business and new product launches, offset by adverse forex movement and price erosion.
- We launched nine new products including Ciprofloxacin & Dexamethasone Otic Suspension, Fulvestrant Injection, OTC Diclofenac and OTC Olapatadine.
- We filed two new ANDAs during the quarter. As of 30th September 2020, cumulatively 94 generic filings are pending for approval with the USFDA (92 ANDAs and 2 NDAs under 505(b)(2) route). Of the 92 ANDAs, 50 are Para IVs and we believe 26 have ‘First to File’ status.
Europe
Revenues from Europe at Rs. 3.8 billion:
- Year-on-year growth of 36% and sequential growth of 6%, primarily on account of new product launches and favorable forex movement.
- We also forayed into a new country Austria, beyond our EU5 markets.
India
Revenues from India at Rs. 9.1 billion:
- Year-on-year growth of 21% and sequential growth of 46% is primarily on account of revenues from the acquired business of Wockhardt and contribution from new products including the Avigan (Favipiravir) and Remdesivir launched for treatment of Covid-19.
Emerging Markets
Revenues from Emerging Markets at Rs. 8.6 billion. Year-on-year growth of 4%. Sequential growth of 8%:
- Revenues from Russia at 4.0 billion. Year-on-year decline of 3% is primarily on account of weakening Ruble. Sequential growth of 22% contributed by increased volumes with a gradual recovery in market demand after Q1 was impacted due to COVID-19.
- Revenues from other CIS countries and Romania market at 2.0 billion. Year-on-year growth of 19% and sequential growth of 43% driven by both base business and new product launches.
- Revenues from Rest of World (RoW) territories at 2.7 billion. Year-on-year growth of 7% driven by new products. Sequential decline of 20% is on account of lower volumes sold for existing products.
Pharmaceutical Services and Active Ingredients (PSAI)
Revenues from PSAI at Rs. 8.5 billion:
- Year-on-year growth of 20% driven by new products, growth in the services business and favorable forex rate.
- Sequential decline of 1% on account of lower volumes of certain products, partially offset by new products and growth in the services business.
- During the quarter we filed DMF for one product in the US.
Proprietary Products (PP) & Others
Revenues from PP & Others at Rs. 622 million:
- Year-on-year decline of 92%. Q2 FY 20 was higher due to income from sale of the US and select territory rights for two of Neurology franchise products pertaining to PP.
- Sequential growth of 14%.
Income Statement Highlights:
- Gross profit margin at 53.9%:
Decline of 360 bps over previous year, which was impacted due to inclusion of revenue from sale of Neurology franchise products in the previous year, partially offset by improvement in productivity and favorable forex rates.
- Sequentially the margin reduced by 210 bps, primarily on account of lower export incentives, adverse forex and product mix.
- Gross profit margin for GG and PSAI business segments are at 59.4% and 26.8% respectively.
- SG&A expenses at 13.1 billion, reduced by 1% year-on-year due to certain one-off expenses last year, which was partly offset by incremental costs post the integration of the acquired divisions from Wockhardt in this year. Sequentially it increased by 3% primarily due to the integration of the acquired divisions from Wockhardt and pickup in sales & marketing activities post un-lock.
- R&D expenses at 4.4 billion. As % to revenues these are: Q2 FY21: 8.9% | Q1 FY 21: 9.0% | Q2 FY20: 7.6%. Our focus continues on building a healthy pipeline of new products across our markets including development of products pertaining to COVID-19 treatment.
- Other operating income at Rs. 149 million compared to Rs. 135 million in Q2 FY20.
- Net Finance income at 237 million compared to Rs. 231 million in Q2 FY20.
- Profit before Tax at Rs. 8.6 billion, increased by 12% year-on-year and reduced by 2% sequentially.
- Profit after Tax at 7.6 billion. The effective tax rate is ~ 11.6% for the quarter, which is lower primarily due to recognition of deferred tax assets for one of our subsidiaries.
- Diluted earnings per share is at 45.83.
Other Highlights:
- EBITDA at Rs. 12.7 billion and the EBITDA margin is 25.9%
- Capital expenditure is at 2.5 billion.
- Free cash-flow generated during the quarter stood at Rs. 6.0 billion.
- Net debt of the company is at Rs. 1.4 billion as on September 30, 2020. Consequently, net debt to equity ratio is 0.01.Earnings Call Details (05:30 pm IST, 08:00 am EDT, Oct 28, 2020)The management of the Company will host an earnings call to discuss the Company’s financial performance and answer any questions from the participants.
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Transcript: Transcript of the Earnings call will be available on the Company’s website: www.drreddys.com