Dr Reddy’s Laboratories (DRL) has posted a 76% decline in net profit to Rs 153.50 crore in the June quarter, against Rs 647.40 crore in the same quarter last financial year.
Dr Reddy’s Laboratories (DRL) has posted a 76% decline in net profit to R153.50 crore in the June quarter, against Rs 647.40 crore in the same quarter last financial year. The company attributed this to declining growth in North America, lower sales in Venezuela and price erosion of key molecules. Total income from operations declined by 14% from Rs 3,757.8 crore to Rs 3,234.5 crore because of fierce competition in the US market, which is the largest market for the company.
“It was a difficult quarter as there were no new launches in the North American market along with price erosion in key markets due to stiff competition,’” Saumen Chakraborty, president and CFO, said. Besides, there were zero sales in Venezuela with nil despatches despite having good orders.
“The profit decline was primarily due to lower sales in North America, thereby leading to 40% decline in topline and reducing the gross profits by 6%,” he said. Sales growth of the company was under pressure on the back of muted de-growth in all its major markets. Dr Reddy’s scrip fell 4.89% to Rs 3,305.05 on BSE.
“We have come through a very difficult first quarter, with our top and bottom lines impacted by a decline in volume growth, particularly in the US market and the loss of business in Venezuela. We also faced a number of challenges in the quarter including price erosion and delayed launches as a result of the warning letter, which significantly impacted our earnings. However, we continue to make actions that focus on remediation, strengthening our quality systems and executing on our strong product pipeline. We remain focused on generating long term, sustainable growth,” GV Prasad, co-chairman and CEO of Dr Reddy’s, said.
Revenues of the global generics segment from North America dipped 16% to Rs 1,552.3 crore from Rs 1,852 crore, as competition increased across key molecules. Europe also saw a fall of 16% to Rs 162 crore and 19% fall in emerging markets to Rs 409 crore as there were no sales in Venezuela. The company saw a 10% growth in the domestic market to Rs 522 crore from Rs 476 crore. In the pharmaceutical services and active ingredients (PSAI) segment, revenues saw a fall of 16% at Rs 460 crore from Rs 561 crore due to lower dispatches in API business on account of the ongoing remediation activities.
The company’s top priority for the year will be to fix quality control problems at three of its factories, which accounts for about 12% of its sales after the US regulators issued a warning letter highlighting quality compliance problems in November. “We have requested the USFDA for reinspection of our facilities and we expect it to happen in a few days,” Chakraborty said. While R&D expenses increased 9% to Rs 480.2 crore and selling, general & administrative (SG&A) costs rose 12% to Rs 1,228.4 crore on a yearly basis.