GlaxoSmithKline net profits fall, but firm upbeat as sales grow

Shares of UK pharma giant GlaxoSmithKline (LSE: GSK) fell 3% to £14.14 yesterday, after the company reported first-quarter 2012 financial results, showing that group sales had grown 1% (+2% at constant exchange rates) to £6.64 billion ($10.70 billion), missing analysts’ estimates by 3%. At CER, the firm said at its biggest business sectors, pharmaceutical turnover grew 2% to £4.55 billion, and vaccines sales advanced 1% to £758 million.

Core operating profit came in at £2.07 billion, up 1% (+3% CER) resulting in core earnings per share of 27.3 pence, missing the average estimate of 29.0 pence from 11 analysts surveyed by Bloomberg. Operating profit reached £2.05 billion (+2% CER) with EPS at 26.7 pence, a rise of 11% (+10% CER), primarily reflecting impact of Quest disposal in first-quarter 2011. Profit after tax was £1.325 billion, down 13% from £1.525 billion a year earlier.
GSK also increased the first-quarter dividend by 6% to 17 pence and said it planned share repurchases for the current year of between £2 billion and £2.5 billion, including £450 million from the proceeds of the sale of all its planned non-core over-the-counter medicine brands except weight loss product Alli (orlistat; also sold on prescription by Roche as Xenical), which is still seeking a buyer.

“This quarter marked continued progress for the group as we returned to reported sales growth, delivered additional R&D pipeline output and maintained our focus on returns to shareholders through dividend growth and share repurchases,” commented chief executive Sir Andrew Witty. “Despite continued economic pressure and political instability in many markets and several demanding comparators with Q1 last year, total sales rose 2%. This performance reflects the resilience of our business and the investments we have made to increase the breadth and mix of the group,” he added.