GSK's earnings nosedive on pharma unit closure

GSK Bangladesh incurred a huge loss in the third quarter because of the closure of its pharmaceuticals unit in the country.

The shutting down of the pharmaceutical operations involves a significant amount of costs in terms of severance payment to employees, impairment of non-current assets and inventory write-off, said the drug-maker in a posting on the website of the Dhaka Stock Exchange (DSE).

These expenses affected the financial result of the entity leading to a significant deviation between earnings per share (EPS) and net asset value (NAV), it said.

“We have witnessed the loss in this quarter due to the cost of the closure of the pharmaceutical unit,” said Nakibur Rahman, managing director of GSK Bangladesh.

Continued losses in recent years forced GlaxoSmithKline to close the medicine manufacturing unit in July after more than six decades of operation.

The British drug-maker posted a negative EPS of Tk 48.64 in the July-September quarter against Tk 20.50 in the same period the previous year.

Overall, the EPS was Tk 33.50 in negative in January-September, down from Tk 39.78 in the same nine-month period last year. The NAV per share stood at Tk 129.85 on September 30, much lower than Tk 204.43 recorded on the same day a year ago.

Rahman said GSK completed the compensation deal with all the employees of the unit. As a result, it had to bear a huge cost in the third quarter.

The unit had employed more than 800 permanent and nearly 200 temporary employees before its closure.

“The expenditure will not continue in the next quarter. Moreover, a good amount will be added to the earnings in future from the unit's assets. But at first we have to decontaminate the unit,” said Rahman.

GSK Bangladesh, however, would continue with its profitable consumer health care business that produces items like Horlicks, Sensodyne and Glaxose-D.

The stocks of GSK Bangladesh fell 0.17 percent to Tk 1,068 on the DSE yesterday.

The DSEX, the benchmark index of the bourse, dropped 19.48 points, or 0.37 percent, to close the day at 5,238.98. Turnover rose 1.8 percent to Tk 539.32 crore.

Khulna Power was the top traded stock with 34.11 lakh shares worth Tk 36.08 crore changing hands, followed by United Power Generation, BBS Cables, Intraco Refueling and Nurani Dyeing.

Hakkani Pulp & Paper Mills was the day's best performer with a gain of 21.27 percent on the back of the disclosure by the company.

Regent Textile was the biggest loser, shedding 11.64 percent.

Losers outnumbered gainers by 159 to 142, while 34 securities remained unchanged.

The Chittagong Stock Exchange also witnessed fall as its key index declined 47.86 points, finishing the day at 9,747.19. The port city bourse traded 88.01 lakh shares and mutual fund units worth Tk 31.18 crore.