Dr. Reddy’s Q2 Results: Impairment Charges, Higher Raw Material Costs Hurt Profit
The Hyderabad-based drugmaker reported impairment charges of Rs 78 crore towards non-current assets.
Dr. Reddy’s Laboratories Ltd.’s quarterly profit fell as higher raw material costs and impairment charges offset the increase in sales across all major markets.
Net profit dropped 30% year-on-year to Rs 772 crore in the quarter ended September, according to an exchange filing. That compares with the Rs 641-crore consensus estimate of analysts tracked by Bloomberg.
The Hyderabad-based drugmaker reported impairment charges of Rs 78 crore towards non-current assets. Raw material costs increased 26% over the year ago to Rs 949 crore.
It reported a 21% increase in its India revenue, aided by benefits from the acquired Wockhardt business and contribution from new Covid-19 products such as Avigan or Favipiravir, and Remdesivir.
Dr. Reddy’s, in the three months ended March, had acquired select divisions of Wockhardt's branded generics business in India and a few other international territories like Nepal, Sri Lanka, Bhutan and the Maldives. The company, in the quarter ended June, said it has started integration of the acquired business—a portfolio of 62 brands in multiple therapy areas.
The drugmaker’s revenue in North America, its largest market, too, rose 28% over the year ago, helped by new launches and increase in volumes of existing products.
Dr. Reddy’s Q2 Results 2020: Other Highlights
- Overall revenue rose 2% year-on-year to Rs 4,911 crore, compared with the Rs 4,730-crore forecast.
- Operating profit, or earnings before interest, tax, depreciation and amortisation, increased 8.6% to Rs 1,156 crore.
- Margin expanded to 23.5% from 22% a year ago.
Segment-Wise Break-Up (Year-On-Year)
- Revenue from pharma services and APIs business rose 20% to Rs 851 crore.
- Global generics revenue increased 21% to Rs 3984 crore.
- Proprietary products revenue declined 92% to Rs 62 crore.
Geographic Break-Up (Year-On-Year)
- North America revenue rose 28% to Rs 1,833 crore
- Europe revenue increased 36% to Rs 375 crore
- India business revenue rose 21% to Rs 912 crore
- Emerging markets revenue rose 4% to Rs 864 crore
Shares of Dr. Reddy’s fell 1.3% after the quarterly results were announced, compared with a 1.2% drop in the benchmark Nifty 50 Index.