The pharmaceutical company reported an 80% drop in its net profits in the April – June quarter at Rs 126.3 crore on the back of price erosion and a dip in USA sales.
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The company’s net profit plunged to 1.54 billion rupees ($22 million) in the quarter ending June 30 from 6.47 billion rupees in the same period previous year, it said July 26th, citing competitive pressures in the USA and lost business in Venezuela as that country grapples with a shortage of foreign currency. Besides, there were zero sales in Venezuela with nil despatches despite having good orders.
As of 11.25 a.m., Dr Reddy’s Labs shares traded 9.4 per cent lower at Rs 3,007, underperforming the Nifty, which was up 0.1 per cent.
The company also faced challenges, including price erosion, and delayed launches as a result of the warning letter which significantly impacted its earnings. However, we continue to make actions that focus on remediation, strengthening our quality systems and executing on our strong product pipeline. Sales in the North American market, which account for more than half of Dr Reddy’s total generic sales, was hit by fierce competition and pricing pressure, analysts said. According to Kotak Institutional Equities, Dr Reddy’s 1QFY17 numbers were very poor with U.S. declining by $54 million quarter-on-quarter and all other divisions missing our estimates. The current market cap of the company is Rs. 56720.37 crore.
The company’s top priority for the year is to fix quality-control problems at three of its factories, which account for about 12 percent of its sales, after USA regulators issued a warning letter highlighting quality compliance problems there in November.
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