Dr Reddy's Q1 net profit sees six-fold growth to Rs 4.76 billion

Dr Reddy's Laboratories Limited has reported more than a six-fold increase in consolidated net profit at Rs 4.56 billion for the quarter ended June 30, 2018, over an exceptionally lower base of Rs 0.6 billion in the corresponding quarter previous year. The profit came on the back of a turnaround helped by a combination of revenue growth and cost control.

Revenues grew 12 percent at Rs 37.21 billion as compared to Rs 33.16 billion in the year-ago period due to a healthy 30 per cent growth in Indian sales and a 16 per cent rise in revenue contribution from emerging markets led by Russia in global generics.

North-American business, which has accounted for 43 per cent of the total revenues, saw a 6 per cent rise at Rs 15.90 billion in global generics on the back of a brief 2-3 day sale of generic Suboxone drug, which had to be withdrawn from the market owing to court orders. Revenues from Europe declined 3 per cent at Rs 2 billion, primarily on account of higher price erosion in some of the key molecules, according to the company.

Dr Reddy's co-chairman G V Prasad said the focus on operational efficiencies had helped in significantly improving the company's margin profile and hoped to maintain the trend going forward. “While we continue to experience price erosion in the North America Generics market, we will also continue to drive growth and cost efficiencies,” he said.

The company has maintained visible control over the costs from manufacturing costs to general selling and R&D expenses for the second consecutive quarter. This has contributed to the improved gross profit margins. The overall costs remained flat compared to the corresponding quarter. The company's gross profit margins improved by 410 basis points to 55.7 per cent.

Though the benefit of Suboxone is not expected to be back in the next few quarters, the company hopes to keep the momentum by making 15-20 new product launches during this financial year, its chief financial officer Saumen Chakraborty said.

On rising costs drug intermediates being imported from China, Dr Reddy's chief operating officer Erez Israeli said the company was de-risking the rise in import costs with steps like bringing the manufacturing of some of these inputs to India and talking to the suppliers.