LONDON (dpa-AFX) - British drug maker GlaxoSmithKline plc (GSK, GSK.L) on Wednesday reported a 13 percent increase in profit for the second quarter despite lower sales. However, core earnings declined from last year, reflecting pricing pressures in Europe and cheaper generic products in the U.S.
Looking ahead to fiscal 2012, GlaxoSmithKline forecasts sales to be in line with 2011 on a constant currency basis. The company also forecasts core operating margin for the year to be broadly in line with the prior year's 32.1 percent.
Earlier, the company had projected underlying sales for the year to translate to reported sales growth at constant exchange rates, and core operating margin to begin to improve gradually.
Sir Andrew Witty, chief executive officer of GlaxoSmithKline said, 'Our performance this quarter reflects the challenging macro-economic environment in which we are operating and the continued transition of our product portfolio.'
The company's pharmaceuticals and vaccines turnover for the quarter decreased 3 percent to 5.21 billion pound, primarily reflecting continued pressures in mature markets that offset growth in emerging markets and Japan.
Pharmaceuticals and vaccines sales rose 9 percent in Emerging Markets/Asia Pacific or EMAP, and 6 percent in Japan. However, sales declined 8 percent in Europe, reflecting a 7 percent adverse pricing effect and 1 percent decline in volume. The company's sales in Europe have been negatively impacted by government austerity measures.
Sales also declined 6 percent in the U.S., reflecting pressure that was exacerbated by genericisation and discontinuation of certain products. Consumer Healthcare turnover for the quarter was flat with the year-ago period at 1.26 billion pounds.
Excluding the non-core OTC brands that were divested in the first half of 2012 and alli, consumer healthcare turnover rose 7 percent. This reflected continued strong contributions from Oral care, Nutrition and Wellness, partly offset by a decline in Skin health.
GlaxoSmithKline's second-quarter profit attributable to shareholders increased to 1.25 billion pounds or 25.1 pence from the restated 1.11 billion pounds or 21.6 pence in the year-ago quarter.
However, core earnings per share for the quarter declined to 26.4 pence from 27.9 pence in the same quarter last year.
The decline in core earnings reflects the strength of the Sterling against the Euro and other international currencies, offset by its weakness against the U.S. dollar and the Japanese yen.
Turnover for the quarter declined 3.9 percent to 6.46 billion pounds from 6.72 billion pounds in the year-ago quarter.
GlaxoSmithKline noted that 12 assets out of the 15 for which Phase III data expected by the end of 2012 reported some or all of their data, with 10 positive and 2 negative.
The company expects new manufacturing process improvements to generate annual cost savings of about 500 million pounds by the end of 2015.
The company's board declared a second interim dividend of 17 pence per share, making 34 pence for the half year. The ex-dividend date will be August 8, with a record date of August 10 and a payment date of October 4, 2012.
In Wednesday's regular session, GSK is trading at $44.06, down $0.74 or 1.65 percent on a volume of 598,775 shares.
Copyright RTT News/dpa-AFX
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