Dr Reddy's prunes losses, offers 1:1 bonus

Dr Reddy's Laboratories (DRL) today announced a 1:1 bonus issue and 55 per cent drop in losses for the fourth quarter ended March 31, 2006.

The fourth quarter loss declined by 54.6 per cent to Rs 23.6 crore compared with Rs 52 crore during the corresponding quarter of the previous year.

Total income for the quarter grew 64 per cent to Rs 697.4 crore compared with Rs 425.2 crore in Q4 of 2004-05. For the whole year, net income increased 672 per cent to Rs 162.9 crore against Rs 21.1 crore in the previous year.

Revenues for the year at Rs 2,426.7 crore grew by 25 per cent in comparison with Rs 1,947.2 crore in the previous financial year.

The company registered a diluted EPS of Rs 21.24 compared with Rs 2.76 for the same period a year ago, registering an increase of 670 per cent. The board has recommended a final dividend of 100 per cent on a face value of Rs 5 per share

Announcing the audited financial results of the company here on Wednesday, managing director and chief operating officer Satish Reddy said the subdued performance during the fourth quarter was primarily owing to a significant decline in gross margin ratio to 42 per cent from 52 per cent during the first nine months of the year.

Reddy said the decline in gross margin ratio was owing to the combined effect of lower proportion of revenues from international branded formulations segment to total revenues, lower margins in the UK and the 11 per cent contribution from Mexico custom pharmaceuticals services (CPS) business, which earn gross margins much below the company's average gross margins.

The fourth quarter results included the financials of betpharm for 28 days and CPS business in Mexico for 90 days.

Referring to the initiatives taken by DRL last fiscal, the company's executive vice-chairman and chief executive officer, G V Prasad, said that the full benefit of these actions would be realised in the current fiscal.

The German generics company betapharm, which was acquired by DRL, had contributed $16 million for the company's revenues last year and was estimated to contribute $ 200 million in the current fiscal.

"Overall we have activated a lot of momentum in the growth of our business last year. We are hopeful of taking forward the momentum" Prasad said.

DRL's chief financial officer, V S Vasudevan, said that the company would be acquiring a small firm in Spain, which has certain products in the market. On the whole, DRL would be making new investments to the tune of $100 million in the next 12 to 15 months.