Dr Reddy's Q1 net profit up 45% at Rs 663 cr on rise in generics business

A combination of factors, including an 8% growth in global generics business and the other operating income drove the growth in net profit of Dr Reddy's during the first quarter ended June, 2019

Drug major Dr Reddy's Laboratories Limited has reported a 45.31 per cent jump in consolidated net profit at Rs 662.8 crore for the quarter ended June, 2019 as compared to Rs 456.1 crore in the same quarter previous year. 

The revenues of the company grew by 3 per cent to Rs 3,843.5 crore for the quarter under review, from Rs 3720.7 crore in the corresponding previous quarter

A combination of factors, including an 8 per cent growth in global generics business and the other operating income drove the growth in net profit of Dr Reddy's during the first quarter ended June, 2019 even though the gross profit margin of the company declined by 400 basis points to 51.7 per cent as compared to the year ago period.

"This quarter, we grew in most of our key markets and hope to continue this momentum with a sharper focus on performance. We will continue our journey of operational excellence, cost leadership and innovation across our businesses," Dr Reddy's co-chairman and CEO G V Prasad said.

 The company was able to maintain a flat growth in SGA (selling, general and administrative expenses) expenses at Rs 1,206 crore even as the manufacturing costs saw a 13 per cent increase at Rs 1,857.6 crore during this quarter as compared to Rs 1647.9 crore in the corresponding quarter previous year.

The global generics segment, which accounted for 85.81 per cent of the revenues for the period, grew 8 per cent, mainly driven by the double digit growth in Europe(19 per cent), India(15 per cent) and the emerging markets(10 per cent). However North America, which is the single largest market for the company, saw only a 3 per cent growth in global generics revenues, up 9 per cent sequentially, at Rs 1,632.2 crore as compared with Rs 1,590.3 crore in the year ago period.

Dr Reddy's said the revenue growth in the US market was driven by contribution from new products and increase in volumes, partly offset by price erosion coupled with adverse foreign exchange movement. It launched five new products and re-launched Isotretinoin during the quarter.

India revenues touched Rs 696 crore on the back of 15 per cent revenue growth driven by volume traction and improved realisations in base business and new product launches, according to the company. Europe business saw a 19 per cent growth at Rs 240 crore on a relatively smaller revenue base.

Revenues from PSAI (pharmaceutical services and active ingredients) and proprietary products division declined 16 per cent and 61 per cent to Rs 450 crore and Rs 28 crore respectively during the three month period.

The company has received other operating income of Rs 375.9 crore, which include Rs 350 crore received from Celgene pursuant to an agreement entered towards settlement of possible claims.

When it comes to the gross profit margin of the company, the year on year performance was impacted by price erosion due to increased competitive intensity in some of the company's key molecules in the US and Europe, and lower sales from PSAI business, according to the company. Sequentially excluding the impact of one-time out licensing income of Rs 180 crore realised from the sale of derma brands, the gross margins have witnessed improvement of 150 basis points on a sequential basis, it said.