GlaxoSmithKline Pharmaceuticals

GlaxoSmithKline Pharmaceuticals recorded sluggish 4% growth in net sales to Rs 607.56 crore for the quarter ended September 2011, on relatively high base in the corresponding pervious period. Moreover, the rise in the costs across the business especially the higher consumption cost, other expenses coupled with the rise in staff cost due to ramp up in the field force resulted in sharp 690 basis fall in operating profit margins to 29.8%. This led to 15% fall in operating profit to Rs 183.04 crore.

However, the 45% growth in interest income to Rs 37.06 crore restricted the fall in PBDT to 9% to Rs 220.10 crore. Further, the decline in effective tax rate restricted the fall in net profit to 8% to Rs 145.99 crore.

Commenting on the performance, Dr. Hasit B. Joshipura, Managing Director, GSK Pharmaceuticals said, Vaccine & Specialty franchises continue to register strong double digit growth which includes Dermatology, Oncology, Cardiovascular & Metabolic. The Mass Market businesses and Anti-Invectives were impacted by a relatively lower growth of the market and a high base effect. The ramp up in field force during the course of the year has impacted costs.

Quarterly Performance:

Net sales witnessed sluggish 4% growth to Rs 607.56 crore for the quarter ended September 2011, and the core pharmaceuticals business grew by 7% for the same period. In addition, Operating profit margins fell by 690 basis points to 29.8% on account of increase in consumption cost by 670 basis points and other expenses by 200 basis points as percentage to sales and net of stock adjustments. In addition, staff cost higher by 40 basis points due to the ramp up in the field force. As a result operating profit was lower by 15% to Rs 183.04 crore.

However, the robust 45% growth in interest income to Rs 37.06 crore has restricted the fall in PBDT to Rs 220.10 crore. Even after the 20% increase in depreciation to Rs 4.90 crore, PBT fell by 9% to Rs 215.20 crore. Moreover, the decline in effective tax rate by 120 basis points to 32.2% marginally restricted the fall in net profit to 8% to Rs 145.99 crore. After accounting EO loss Rs 0.13 crore during the quarter net profit fell by same 8% to Rs 145.86 crore.

Nine-months Performance:

Net sales higher by 9% to Rs 1772 crore for the nine months ended September 2011. However, OPM fell by 400 basis points to 33.4% on the back of higher costs across the business. This has resulted marginal 2% decline in operating profit to Rs 600.19 crore. Other income remained flat at Rs 18 crore. Moreover, with 51% robust growth in interest income to Rs 99.97 crore there was 3% growth in PBDT to Rs 718.16 crore. Further, even after depreciation higher by 20% to Rs 14.26 crore PBT grew by 3% to Rs 703.90 crore. Further, thanks to the fall in effective tax rate by 180 basis points to 31.2% there was 5% growth in net profit to Rs 483.98 crore. However, after accounting 190.12 crore as EO loss primarily on the back of provisions made under the of special leave petition of the Central Government in supreme court as litigation running over Betapmethasone bulk drugs and formulations there was 34% fall in net profit to Rs 293.86 crore.

Other Information:

• The scrip was up by 0.98% to Rs 2109.55 at BSE, India on 4^th November 2011, and further TTM EPS is at Rs 71 and P/E workout to be 29.8 times.

Financial Results: GlaxoSmithKline Pharmaceuticals