Dr Reddy’s Q1 Profit Jumps 45% on One-time Gains, Revenue Grows Just 3%

Dr Reddy’s Laboratories announced on Monday, after market hours, that its consolidated profit after tax (PAT) for the first quarter ended June (Q1) climbed 45% year-on-year to Rs 662.80 crore compared with Rs 456.10 crore in the year-ago quarter.

The sharp increase in net profit is mainly due to a one-off receipt of Rs 350 crore from Celgene, pursuant to settlement agreement related to Revlimid brand capsules in Canada.

The pharmaceutical company’s consolidated revenue for the June quarter, meanwhile, climbed by a tepid 3% to Rs 3,844 crore compared with Rs 3,721 crore a year ago. A CNBC TV18 poll was expecting Dr Reddy’s to post revenue growth of around 10%.

Global generics revenue, which contributed little over 80% to the total income, grew 8% to Rs 3,298.2 crore. Revenue from emerging markets grew 10% to Rs 730 crore, with much of that accruing from Russia (5%). North America, which is largely the US generics business, grew 3% to Rs 1,632.2 crore.

Sales from India business grew 15% to Rs 700 crore in the June quarter, mainly driven by volume traction and improved realizations in base business and new product launches.

“This quarter, we grew most of our key markets and hope to continue this momentum with a sharper focus on performance,” said G.V. Prasad, co-chairman and CEO at Dr. Reddy’s. “We will continue our journey of operational excellence, cost leadership and innovation across our businesses,” Prasad added.

Among other metrics, the company’s gross margins fell to 51.7% in the June quarter compared with 52.45% in the preceding March quarter and 55.7% in the year-ago quarter.

Dr Reddy’s Laboratories stock had already closed Monday’s trading session lower by 1.9% before the quarterly results were announced. The real effect of the earnings on the stock price would only be visible on Tuesday.

Meanwhile, Dr Reddy’s Laboratories also informed stock exchanges that Erez Israeli has been promoted as the company’s new chief executive officer (CEO) with effect from 1 August. GV Prasad will continue as co-chairman and managing director and Israeli will continue to report to him.