Dr. Reddy’s Q1 net slides 36% on impairment charge

Pharma major Dr. Reddy’s Laboratories on Tuesday reported first-quarter consolidated net profit declined 36% to ₹380.4 crore, from ₹594.6 crore in the year-earlier period.

Revenue from operations rose almost 12% to ₹4,945.1 crore in the three months ended June (₹4,426.5 crore), with net sales also increasing by a similar extent to ₹4,826.2 crore (₹4,324.4 crore).

Total income at ₹5,053 crore (₹4,513.6 crore) was an increase of almost 12%, according to the results prepared as per Indian Accounting Standards (Ind AS).

Profit was weighed down by the recognition, during the quarter, of an additional expense of ₹193 crore in the wake of the drugmaker losing an arbitration award in the U.S. under which one of the company's subsidiaries was required to pay $46.25 million (₹340.1 crore) to Hatchtech Pty Limited.

“As the company was carrying $20 million (₹147.1 crore) as provision towards this litigation, an additional expense of $26.25 million (₹193 crore), comprising $25 million (₹183.8 crore) as impairment and $1.25 million (₹9.2 crore) as other expenses was recognised during the three months ended June 30,” the company said in the notes accompanying the results.

However, under results prepared as per the International Financial Reporting Standards (IFRS), the company reported a net profit of ₹570.8 crore (₹579.3 crore), with ₹191.1 crore additional charges related to the arbitration award being recognised by the company as an adjustment to the financial statements for 2020-21.

Co-Chairman and MD G.V.Prasad said the first quarter's financial performance had been driven by 'healthy sales growth'.

“I am confident about improving our margins in the upcoming quarters which will be led by the scale up of recent launches, new product launches and productivity. While we continue to sharpen execution in our core business, we are also conducting pilots in areas such as Nutrition, Direct-to-Customer, and Digital Health and Wellness, which can be future growth drivers,” he said in a statement.

The mainstay Global Generics dominated segment revenue with ₹4,125.1 crore (₹3,509.2 crore) even as Pharmaceutical Services and Active Ingredients (PSAI) revenue declined to ₹898 crore (₹1,016.5 crore).

Dr. Reddy’s said the growth in Global Generics was driven primarily by branded markets (India and Emerging Markets) and Europe. “The overall growth was on account of new product launches and volume traction in the base business, partly offset by price erosion in some of our products and adverse forex rates,” the company said. The growth in the all important North America market was flat, year-on-year, “driven by launch of new products and increase in volumes of certain of our existing products, which was offset by price erosion in some molecules and adverse forex rates.”

The company attributed the decline in PSAI revenue to a decrease in both sales volumes as well as prices of existing products, which was partially offset by new product introductions.

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Printable version | Sep 25, 2021 7:25:31 PM |

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