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Glaxo: Disappointing results

Feb 8, 2001

Glaxo has reported disappointing results for the year FY01 with the net profit falling 8.7% in the current year. A part of the reason is the trade boycotts of its products in some southern states, which reduced offtake by wholesalers and retailers. The company’s explanation for the boycott is that there was a change in the sales tax rates, which were passed on in the prices. The topline growth has been mainly a price led growth.

(Rs m) FY00 FY01 Change
Sales 8,855 9,346 5.5%
Other Income 309 316 2.2%
Expenditure 8,072 8,539 5.8%
Operating Profit (EBDIT) 783 808 3.1%
Operating Profit Margin (%) 8.8% 8.6%  
Interest 99 111  
Depreciation 162 164 1.2%
Profit before Tax 831 848 2.1%
Other Adjustments 219 235  
Tax 278 379 36.3%
Profit after Tax/(Loss) 772 705 -8.7%
Net profit margin (%) 8.7% 7.5%  
Earnings per share 12.91 11.78  

The results are also indicative of the tough domestic pharmaceutical environment and Glaxo has not been able to fulfill the promise (made after the first half results) that it would be able to outperform the industry.

The company is likely to announce the merger with SmithKline Pharma within the coming quarter. See Glaxo Smithkline merge. The stock is quoting at a price of Rs 434 which implies an earnings multiple of 34 times.

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