Dr Reddy's Laboratories beat street expectations on both topline and bottomline but operating performance was below estimates. Consolidated net profit of the drug maker fell 7 percent year-on-year to Rs 574.5 crore, impacted by weak operational performance and higher R&D expenses.
Dr Reddy's Laboratories beat street expectations on both topline and bottomline but operating performance was below estimates. Consolidated net profit of the drug maker fell 7 percent year-on-year to Rs 574.5 crore, impacted by weak operational performance and higher R&D expenses. Consolidated revenue grew 8.7 percent to Rs 3,843 crore during October-December quarter from Rs 3,533.8 crore in the year-ago period, driven by PSAI and global generics businesses. Discussing the numbers, Abhijit Mukherjee, COO of Dr Reddy’s Laboratories, said the company has done well in Russia, posting a volume growth of 30 percent in local currency terms, and the whole impact of currency devaluation has not fully played out. He however feels the Russain market looks challenging currently.
Q Can you start by taking us through Russia because the decline was just about curtailed to a nine percent decline on a year-on-year (YoY) basis. Can you just tell us what the on ground situation was and what is your expectation going forward? Do you think that the currency devaluation that we have seen is more or less factored in terms of your on ground operations?
A: It is a very tough time in Russia although we have done very well. The volume growth has been very good in terms of local currency. We have grown by about 30 percent in Russia which has mitigated to a large extent the devaluation of the currency. Having said that the whole thing has not fully played out because there are some hedges which will run out by the end of the year and probably next year we will get little larger hit but the market overall we are doing quite well in terms of units as I said and which plays out in terms of mitigating part of the negatives because of the currency fall out.
Q So would that mean that Russia will continue to decline going into next quarter and maybe it could show a steeper decline than what you posted this quarter. Is that how we should read it?
A: In constant currency term it is very difficult to arrest the downfall. The Ruble which used to be in the range of Rs 33-34 per dollar is somewhere in the 60s and it is a massive change. Of course to a certain extent we are naturally hedged because it is a branded market but that doesn’t take away the whole impact. The thing which we will be looking forward to is robust growth in our business and some case to case price corrections in non-essential items which we will have to take. So, with that we will try and manage but certainly this is going to be a little challenging period overall but we are encouraged with our own performance in the market compared to a lot of other competitors.
Q 82 percent growth is what you have reported on a YoY basis. Is Venezuela contributing a lot more and what have been the other growth drivers in this market?
A: Yes, Venezuela has done extremely well. There are risks in this market but any risk is accompanied with opportunities as in life and we are doing the best of the opportunities at the moment in Venezuela because the brands are well accepted. There are a lot of companies who are nervous in terms of the country, the way it is panning out. We think that since medication is for the patients and we will continue to sort of deliver, we are backward integrated and hence our supply chain is well placed and we stay committed to the country. January 22 Nicolás Maduro Moros mentioned that food and pharma would probably fall in one category of currency exchanges; in Venezuela there are three different rates of currency. So, this would remain in one specific and the fact that food and pharma is clubbed in one group we take that as a positive. We stay committed to the country. Having said that, there are risks and there are challenges.
Dr Reddy's Laboratories beat street expectations on both topline and bottomline but operating performance was below estimates. Consolidated net profit of the drug maker fell 7 percent year-on-year to Rs 574.5 crore, impacted by weak operational performance and higher R&D expenses. Consolidated revenue grew 8.7 percent to Rs 3,843 crore during October-December quarter from Rs 3,533.8 crore in the year-ago period, driven by PSAI and global generics businesses. Discussing the numbers, Abhijit Mukherjee, COO of Dr Reddy’s Laboratories, said the company has done well in Russia, posting a volume growth of 30 percent in local currency terms, and the whole impact of currency devaluation has not fully played out. He however feels the Russain market looks challenging currently.
Q Can you start by taking us through Russia because the decline was just about curtailed to a nine percent decline on a year-on-year (YoY) basis. Can you just tell us what the on ground situation was and what is your expectation going forward? Do you think that the currency devaluation that we have seen is more or less factored in terms of your on ground operations?
A: It is a very tough time in Russia although we have done very well. The volume growth has been very good in terms of local currency. We have grown by about 30 percent in Russia which has mitigated to a large extent the devaluation of the currency. Having said that the whole thing has not fully played out because there are some hedges which will run out by the end of the year and probably next year we will get little larger hit but the market overall we are doing quite well in terms of units as I said and which plays out in terms of mitigating part of the negatives because of the currency fall out.
Q So would that mean that Russia will continue to decline going into next quarter and maybe it could show a steeper decline than what you posted this quarter. Is that how we should read it?
A: In constant currency term it is very difficult to arrest the downfall. The Ruble which used to be in the range of Rs 33-34 per dollar is somewhere in the 60s and it is a massive change. Of course to a certain extent we are naturally hedged because it is a branded market but that doesn’t take away the whole impact. The thing which we will be looking forward to is robust growth in our business and some case to case price corrections in non-essential items which we will have to take. So, with that we will try and manage but certainly this is going to be a little challenging period overall but we are encouraged with our own performance in the market compared to a lot of other competitors.
Q 82 percent growth is what you have reported on a YoY basis. Is Venezuela contributing a lot more and what have been the other growth drivers in this market?
A: Yes, Venezuela has done extremely well. There are risks in this market but any risk is accompanied with opportunities as in life and we are doing the best of the opportunities at the moment in Venezuela because the brands are well accepted. There are a lot of companies who are nervous in terms of the country, the way it is panning out. We think that since medication is for the patients and we will continue to sort of deliver, we are backward integrated and hence our supply chain is well placed and we stay committed to the country. January 22 Nicolás Maduro Moros mentioned that food and pharma would probably fall in one category of currency exchanges; in Venezuela there are three different rates of currency. So, this would remain in one specific and the fact that food and pharma is clubbed in one group we take that as a positive. We stay committed to the country. Having said that, there are risks and there are challenges.
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