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Dr. Reddy’s Q4 Results: Net Profit Down 83% On One-Time Impairment Losses

Dr. Reddy’s net profit stood at Rs 97 crore in the three months ended March, down 83% over a year ago.

<div class="paragraphs"><p>Dr. Reddy's building. (Source: Company)</p></div>
Dr. Reddy's building. (Source: Company)

Dr. Reddy’s Laboratories Ltd.’s fourth-quarter after-tax profit slumped on account of one-time impairment losses.

The Hyderabad-based drugmaker’s net profit stood at Rs 97 crore in the three months ended March, down 83% over a year ago, according to its exchange filing. That compares with the Rs 640-crore consensus estimate of analysts tracked by Bloomberg.

During the quarter, the company charged Rs 756 crore toward impairment losses on non-current assets due to significant changes in market conditions. These relate to product impairment of a tablet on account of a decrease in market potential and impairment relating to Shreveport plant assets and goodwill and other intangibles.

Dr. Reddy’s Q4 FY22 Highlights (YoY)

  • Revenue rose 15% to Rs 5,475 crore, compared with the Rs 5,154-crore estimate.

  • Ebitda was up 13% to Rs 1,193 crore, against the Rs 1,136-crore forecast.

  • Margin narrowed 30 basis points at 21.8%. Analysts had projected it at 22%.

  • Revenue from the mainstay North America market rose 14%. Three new products were launched in the quarter.

  • European business rose 12%.

  • India revenue rose 15% while emerging markets sales were up 36%.

  • Pharmaceutical services and active ingredients segment fell 5%.

  • Revenue from proprietary products grew 10%.

  • Expenditure on selling, administration and distribution rose 9% to Rs 1,570 crore.

Selling and distribution expenses in the quarter were up due to a provision of Rs 100 crore made towards a litigation in Texas, U.S.

The board of directors recommended payment of final dividend of Rs 30 apiece of face value Rs 5 each.

GV Prasad, co-chairman and managing director at Dr. Reddy’s, said the company has delivered healthy growth in revenue, though profits were impacted by impairment charges.

“In spite of multiple external challenges, our core business performed well driven by an increase in market share, strong launches and productivity improvement,” he was quoted as saying in the filing.

FY22 Highlights (YoY)

  • After-tax profits rose 12% to Rs 2,183 crore.

  • Revenue increased 13% to Rs 21,545 crore.

  • Operating profit was up 3%, while the operating margin stood at 21.8% versus 23.9% a year ago.

  • EPS stood at Rs 131.57 apiece against Rs 117.67.

  • Selling expenses were up 15%.

  • Revenue from the mainstay North America market, which contributes 35% of the total sales, rose 6%. This was driven by new product launches (17 new launches in FY22) and scale up of existing products, though partially offset by price erosion.

  • European business rose 8% on volume traction in base business and new product launches, partially offset by price erosion. The region contributes 8% to the total sales.

  • India revenue rose 26% on account of new products (20 new brands and Sputnik-V vaccine) and increase in sales prices and volumes of existing products. This portfolio contributes 20% to the revenue.

  • Emerging market sales rose 30%, contributing 21% to the top line.

  • Pharmaceutical services and active ingredients segment fell 4%, majorly driven by new product launches, making up 14% of the revenue. The decline was due to price erosion in some products.

  • Revenue from proprietary products expanded 34%. This is attributable to licence fee associated with the sale of U.S. and Canada territory rights for an oral solution drug.

  • Research and development expenses stood at 8.2% of revenue against 8.7% a year ago.

  • The company has a net cash surplus of Rs 1,550 crore as on March 31.

Shares of Dr. Reddy’s were trading 1.78% higher after the results were announced compared with a 2.56% decline in the benchmark Nifty 50.