Low Interest Cost, Increased Sales Prop Up Glaxo India
In spite of severe competition and a recessionary trend in the pharmaceuticals sector over the past few years, Glaxo India has registered an improved performance in the first half of the current year.
During the half ended June 30, 1998, sales turnover rose by nearly 10 per cent. Though prices of one of its main products have declined in recent months due to the Drug Price Control Order (DPCO), Glaxo still maintains a higher level sales realisation compared to last year.
The DPCO reduced the prices of Ranitidine, an anti-ulcer intermediate, to Rs 1,200 per tonne -- lower than the production cost of Rs 1,400 per tonne.
The company accounts for 40 per cent of the Ranitidine market share in the country.
By virtue of better sales performance and effective cost control, the company was able to record a significant increase in operating profit.
While it provided Rs 7.16 crore for voluntary retirement schemes (VRS) in the first half of the previous year, no funds were allotted for the purpose in the half under review.
Glaxo recorded an over 47 per cent jump in net profit to Rs 26.48 crore (Rs 17.98 crore) in the first half of the current year.
This increase can be attributed to lower interest cost and depreciation. Interest burden declined by more than 45 per cent, while depreciation dropped by 60 per cent.
During the year end December 31, 1997, sales turnover rose by 8 per cent compared with a 23 per cent dip in the previous year.
While profit after tax recorded an rise of over 12 per cent, net profit declined by about 14 per cent in 1997. The fall was due to the company's provision of Rs 14.47 crore for voluntary retirement scheme as against Rs 1.77 crore in the previous year.
By virtue of better PAT growth, Glaxo was able to increase its profitability ratios except for return to capital employed.
While its performance in the local market is nothing to write home about, Glaxo has recorded a significant improvement in showing abroad.
Export earnings originate largely from hard currency areas and the main buyers are from Germany, the United Kingdom, Japan, France, Australia and New Zealand. Export turnover (FOB) rose 81 per cent compared to a drop of 4.2 per cent in 1996. Glaxo was incorporated in 1924 as H J Foster & Co Ltd to distribute baby food in the country.
It started its pharmaceutical division with basic vaccines at Worli in Mumbai in 1956.
It set up the bulk drugs unit at Thane in 1961 and a formulations unit at Nashik in 1983.
In 1985, it set up another bulk drug unit at Ankleshwar. As part of a recast exercise, the company sold its foods division to H J Heinz in 1995.
At present Glaxo India is a subsidiary of Glaxo Wellcome plc, UK, which holds 51 per cent in the firm. After the global merger with Burroughs Wellcome, Glaxo's parent became the largest global pharmaceutical company.
Following the global merger of their parent companies, the local divisions of both Glaxo and Wellcome have also decided to merge into a single entity.