Dr Reddy’s Laboratories Ltd on Tuesday reported a 1.1% year-on-year drop in September quarter consolidated net profit to Rs305.4 crore, which still exceeded market expectations.
Cost rationalization helped offset some of the impact of weak US business on the company. Revenue declined 1.6% to Rs3,559.8 crore in the quarter from Rs3,616.3 crore a year earlier.
A Bloomberg poll of 21 analysts had estimated the Hyderabad-based company’s consolidated net profit at Rs285.20 crore and sales at Rs3,714.50 crore.
On a sequential basis, Dr Reddy’s net profit jumped 4.6 times and revenue increased 6.8% in the September quarter.
“Healthy performances in India, emerging markets, Europe and PSAI (pharmaceuticals services and active ingredients) businesses, as well as continued focus on cost control have contributed to sequential growth in our topline as well as bottomline, with an Ebitda increase of 105% over the previous quarter,” G.V. Prasad, chief executive and co-chairman of Dr Reddy’s, said in a statement. Ebitda is short for earnings before interest, tax, depreciation and amortisation, an indicator of operating profitability.
“We will continue to focus on the launching of new products as well as on improving operational efficiencies and quality management systems across the company,” he added.
Total expenditure declined 2.5% year-on-year to Rs3,182.9 crore during the quarter, mainly on account of a 20% fall in spending on research and development (R&D) and a 6% drop in selling and general administrative costs.
In North America, the largest market for Dr Reddy’s, generic drug sales fell 11% on year to Rs1,431.8 crore due to price erosion in the US.
Meanwhile, sales in the domestic market rose 2% to Rs637 crore and in emerging markets 14% to Rs550.6 crore.
Dr Reddy’s Q2 earnings were better-than-expected mainly because of cost control measures but R&D spending may not remain at current levels and increase in the future as the company is working on proprietary products, biosimilars and complex generics, where investment is higher than in simple generics, said Amey Chalke, an analyst at HDFC Securities Ltd.
Chalke said timely US approval and launch of key products such as generic versions of Copaxone and Nuvaring, and clearance of manufacturing sites that are facing regulatory action from the US Food and Drug Administration (FDA) will be big positives for the company.
Shares of Dr Reddy’s ended down 0.1% at Rs2,431.40 on the Bombay Stock Exchange (BSE), while the benchmark Sensex index closed down 0.2% at 33,213.13 points.