Fourth quarter results of Dr Reddy's are below market expectations as the company struggled with higher costs, despite a healthy rise in revenues. For the full year 2005-06, the company has managed to substantially improve its performance, helped by lower R&D expenses and a substantial jump in other income.
For the quarter ended March 31, 2006, net losses increased 60.11 per cent to Rs14.01 crore from Rs8.75 crore for the previous year quarter. Total revenues increased 47.48 per cent to Rs524.98 crore from Rs355.96 crore for the previous year quarter.
Dr Reddy's managed a very marginal profit at the operating level against an operating loss of Rs17.15 crore for the previous year quarter. Input and manufacturing costs increased 81.59 per cent during the quarter even as R&D costs declined 10.66 per cent.
Selling expenses increased 31.1 per cent during the quarter and staff costs went up by 17.5 per cent. Other expenses increased by 14.31 per cent.
Interest costs for the quarter went up substantially to Rs9.19 crore from Rs1.77 crore. Depreciation charges went up by 18.49 per cent.
Other income for the quarter increased by 31.55 per cent over the previous year quarter.
For the full year 2005-06, standalone net profits jumped 222.52 per cent to Rs211.12 crore from Rs65.46 crore. Standalone revenues for the year increased 31.16 per cent to Rs2,136.57 crore from Rs1,629.04 crore for the previous year.
Operating profits increased 250.48 per cent during the year while operating margins as a percentage of net sales improved substantially to 13.19 per cent from 4.84 per cent for the previous year.
The improvement in operating margins was mostly due to a decline in R&D expenses by 28.76 per cent. Dr Reddy's had hived off its new drug research division as a JV with ICICI Ventures.
Input and manufacturing costs increased 37.91 per cent while selling expenses went up by 30.59 per cent during the year. Staff costs expanded at a lower 16.71 per cent while other expenses increased by 12.41 per cent.
Interest costs more than doubled during the year while depreciation charges increased by 20.41 per cent. The company managed to protect its bottom line through an 85.2 per cent rise in other income.
Consolidated net profits for the full year 2005-06 jumped 345.85 per cent to Rs146.73 crore from Rs32.91 crore for the previous year. Consolidated revenues for the year rose 27.2 per cent to Rs2.426.71 crore from Rs1,907.8 crore.
During the year Dr Reddy's acquired the whole of German pharma company Betapharm for a total consideration of Rs2,606.33 crore. The acquisition was funded through a long term bank loan of Rs2,160.2 crore. Betapharm would add around $200 million per annum to the company's top line.