GST to hit GSK Consumer’s global growth
UK healthcare company GlaxoSmithKline Consumer’s growth globally could ease in 2018 due to the impact of India’s Goods & Services Tax, the pruning of its product offerings and competitive pressure.
“In 2018, we continue to expect low single-digit growth from consumer after factoring in the impact of tail brand divestments, the impact of GST in India, and the TDS generic (competitive pressures in the US), which in aggregate are expected to reduce growth by about 1.5% points on a reported basis,” GSK global chief financial officer Simon Dingemans said on an earnings call over the weekend.
He added that the company remains confident in the long-term profile of the consumer business. GSK products sold in India include Boost, Horlicks, Crocin and Iodex. India rolled out its biggest tax reform — a unified tax regime under GST — on July 1. Its introduction initially disrupted supplies and companies reported a slowdown in sales as distributors and wholesalers cleared stocks during the transition period. Some wholesalers took time to upgrade systems to become GST-compliant.
India is GSK ConsumerBSE 0.12 %’s second-largest market globally, after the US. The UK company reported a 3% sales increase to over Rs 30 billion for 2017, with a 5% profit growth across its pharmaceuticals, consumer and vaccine businesses, which it attributed to group’s operating margin accretion, improved earnings and cash flows.
“Consumer delivered low single-digit growth despite headwinds. Q4 saw better consumption than we’d expected in some of our key markets. The international region also benefited from comparison to a weak fourth quarter last year, which was impacted by demonetisation in India,” Dingemans said. Demonetisation, or the note ban in November 2016, led to crippling of cash flow across channels.
GSK CEO Emma Walmsley said that for its consumer healthcare business, the company’s sales momentum improved throughout the year with strong performances in wellness and oral health “offsetting the impact of a weak US season and competitive pressures in allergy, as well as divestments and the implementation of GST in India.”
The Economic Times, New Delhi, 12th February 2018