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GlaxoSmithKline plc’s first quarter net income surged, a stellar performance that means the leading player in the Fast Moving Consumer Goods (FMCG) industry and health care space has overcome a foreign currency crunch.
High patronage for the firm’s products also helped spur sales as it continues to intensify on its focus and market penetration strategies.
The firms Profit after Tax (PAT) surged by 3026 percent, despite revenue increasing slightly by 9.5 percent.
PAT surged from N8.26 million in the first quarter of 2017, to N258.3 million in Q1 2018, surpassing analyst and market expectations.
“The firm’s outstanding performance is riding on the back of improved foreign exchange liquidity that has enveloped the industry as a whole,” Ayo Akinwumi Head of Research FSDH Merchant bank said.
“Also, there have been a general rebound in economic activities compared to what we at the thick of the recession which also spread into 2017”.
“Consumers pocket are also gradually gaining momentum which will show in their spending pattern, Companies like GSK will definitely benefit in terms of increase in sales for its products,” Akinwumi added on phone.
Glaxosmith had a disappointing performance in full year 2017 on the back of a lengthy recession that hammered the Nigerian economy in 2016 and spanned into 2017, where the sector was fraught with shortage of naira liquidity as an increase in government borrowing at that time spurred banks to invest in the safety of sovereign debt rather than lending to businesses or consumers.
While revenue increased from N14.4 billion in 2016 to N16.0 billion in 2017, gross profit fell sharply from N8.9 billion in 2016 to N4.4 billion in 2017.
The company’s cost of sales jumped massively from N5.4 billion in 2016 to N11.6 billion in 2017. Overhead costs also dropped sharply from N930million in 2016 to N154 million in 2017, materials consumed jumped from N4.4 billion in 2016 to N11.3 billion in 2017.
This led to the company’s operating segments of consumer healthcare and pharmaceuticals making losses of N701 million and N15.5 million respectively in 2017.
Profit before tax increased from N185 million in 2016 to N1.1 billion in 2017. Profit after tax, however, fell sharply from N2.3 billion in 2016 to N486 million in 2017.
Despite the sharp fall in profit, the company resolved to pay a special dividend of N7.10 from its retained earnings and N0.40 dividend from the retained portion of the pioneer earning balance.
The total cash value of the special dividend is a whopping N8.4 billion and will be paid from the portion of its retained earnings that was earned from the sale of its drinks business to Suntory in 2016.
The firm’s share price headed north after it announced the payment of special dividend to shareholders.
GlaxoSmithKline shares has risen 11.06 per cent this year outperforming the NSE All share index at 7.85 percent.
It was priced at N24:00 as at the close of trading in Lagos on Friday, with its market capitalisation standing at N28.701 billion.
MICHEAL ANI
