Shares of Glaxosmithkline Consumer Nigeria plc remained flat at their lowest level in more than ten years after the close of trading on Tuesday, coming ahead of company’s planned shutdown of its Agbara production operations.
The stock was unchanged at N10.15 despite a sharp drop of 6.02 percent in the early hours of trade at the Lagos bourse after the healthcare company notified the investing public on the Agbara shutdown.
In a report released by GSK on the Nigerian Stock Exchange (NSE) on Tuesday, the company indicated its move to restructure the supply chain operation effective the third quarter of 2021. This would involve working with local contract manufacturers for the supply of its products, according to GSK.
“The board of directors has approved a restructuring of GSK’s current operating model to better serve the Nigeria patients and consumers,” the company said.
This move would therefore see GSK’s production operations in Agbara closed by Q3 2021 as reported upon a successful transition of locally manufactured products to third-party contract manufacturing.
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A deeper look into other possible reasons for shutting down of the firm’s Agbara operations revealed that in the last two years, the operation, with the responsible to produce goods for the consumer health care segment has posted losses in the last 2 years.
Analysis revealed that the consumer health care segment posted a loss of a whooping N112.49 million in 2018; however an improvement in loss position by 83 percent compared to N701.960 million in 2017.
Operating expenses increased by 22 percent on year-on-year basis to N3.13 billion as against N2.56 billion recorded a year earlier, this saw the segment recording a loss of N37.6 million in operating profit. During the period, growth in operating expenses outpaced that of revenue as segment’s top line grew 12.5 percent.
In the last 4 years, the consumer health care segment contributed on an average 32 percent to total revenue of GSK, while pharmaceutical segment contributed about 68 percent on the average to total revenue.
However, GSK’s revenue average annual growth in the last 4 years of both segments have revealed the pharmaceutical segment of the GSK has performed poorly at -17 percent compared to 3 percent growth in the consumer healthcare segment.
The pharmaceutical segment recorded a whooping N1.89 billion loss in 2016. Being a segment for imported GSK goods, the loss could have been due to economic recession witnessed in Nigeria in 2016 which saw the naira depreciate significantly in value against the U.S dollars on negative shock in the crude oil market.
However, loss position of the segment improved significantly as the Nigeria economy bounced back from recession in 2017, although the segment still recorded a loss of N15.5 million during the period.
The report further stated, “it will be business as usual at the Agbara factory as GSK continues to ensure supply continuity for all its locally manufactured brands.”
“These proposed changes do not impact GSK’s broader commitments to global health in Nigeria and across Africa,” it concluded.
