Dr Reddy’s Q1 net profit plunges 80% to 126 cr

Revenue declines by 14% to `3,234 crore as US sales fall

Hyderabad: Hit by drop in revenues across all geographies save the Indian market, city-based Dr Reddy’s Laboratories posted a whopping 80 per cent fall in its consolidated net profit to Rs 126.3 crore in the first quarter ended on June 30, 2016, as compared to Rs 625.7 crore net profit in the same quarter a year.

The drug major attributed the drastic drop in profits to price erosion and fall in the US sales. The currency crisis in Venezuela also left a huge impact on the company’s bottom line. The consolidated revenues of the company for the quarter also declined by 14 per cent to Rs 3,234.5 crore against Rs 3,757.8 crore a year ago.

"Lack of new product launches and erosion of pricing of some of the key products in the US, the remediation cost for the USFDA warning letter, currency crisis in the Venezuelan market and crash of ruble against world currencies have impacted the quarter,” Abhijit Mukherjee, Chief Operating Officer, Dr Reddy’s Laboratories, told the media here after announcing the financial results.

He however maintained that all the headwinds had fully played out. “We are not able see anything beyond this. Hopefully we will be able to pick up here onwards," Mukherjee said. Global generic sales which account for over 80 per cent of the company’s revenues saw 14 per cent decline at Rs 2,663.8 crore against Rs 3,096.1 crore in the corresponding quarter a year earlier. In the North American market, the generic sales fell 16 per cent to Rs 1,552.3 crore from Rs 1,851.6 crore last fiscal.

The drug maker also reported decline generic sales in Europe and Emerging Markets while India remained the only bright spot for the company with 10 per cent upswing in sales at Rs 522.3 crore. "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 from USFDA, which significantly impacted our earnings," G V Prasad, Co-Chairman and CEO, Dr Reddy’s, said in a statement. Meanwhile, Mukherjee said the company had sent the last update to USFDA with regard to the warning letter it had received last year and is in the process of sending a request to the US drug regulator for re-inspection.

On market expansion, he said the company has plans to enter the Columbian market this year, while the Brazilian market will open up next year. Dr Reddy’s Laboratories Limited’s scrip ended the trade at Rs 3,322.85 on the BSE on Tuesday, down 4.37 per cent, over the previous close of Rs 3,474.85 per share.

Intra-day, it lost 5.17 per cent to Rs 3,295. At NSE, shares of the company fell 4.67 per cent to close at Rs 3,319.65. In terms of volume, 1.54 lakh shares of the company were traded on BSE and over 15 lakh shares changed hands at NSE during the day.