GlaxoSmithKline Pharmaceuticals AR 2013 - page 7

3
Directors’ Report
The Directors have pleasure in submitting their Report for the year ended 31st December 2013
1. Results & Dividend for the year ended 31st December 2013
Year ended
31st December
2013
Year ended
31st December
2012
Rs. in lakhs Rs. in lakhs
Sale of Products (Net of Excise Duty) .. .. .. 2520,17.24 2599,93.10
Other Operating Revenue .. .. .. .. 25,97.50 26,50.37
Revenue from Operations .. .. .. .. 2546,14.74 2626,43.47
Profit before Exceptional Items and Tax .. .. .. 703,16.57 994,77.65
Exceptional Items .. .. .. .. .. 26,15.46 (148,21.70)
Profit before Tax .. .. .. .. .. 729,32.03 846,55.95
Tax expense .. .. .. .. .. .. 227,43.79 269,30.06
Net Profit for the year .. .. .. .. .. 501,88.24 577,25.89
Add: Opening Surplus brought forward from the previous year 1142,94.60 1110,59.15
Less: Appropriations:
Proposed Dividend (including tax on distributed Profits) 494,70.75 487,17.85
Transfer to General Reserve.. .. .. .. 50,18.82 57,72.59
Closing Surplus carried forward .. .. .. .. 1099,93.27 1142,94.60
2. Dividend
The Directors recommend a Dividend of Rs. 50 per Equity Share for the year (previous year:
Rs. 50 per Equity Share). If approved by the Shareholders at the Annual General Meeting, the
Dividend will absorb Rs. 424 crores. The Dividend Distribution Tax borne by the Company will
amount to Rs. 71 crores.
3. Management Discussion and Analysis
(a) Finance and Accounts
Sale of Products (net of Excise Duty) declined by 3.1% as compared with the previous
year, with sales of the Pharmaceutical business being lower than last year by 4.3%. The
introduction of the revamped Drugs (Prices Control) Order extending coverage to the National
List of Essential Medicines impacted sales in the second half of the year. The Pharmaceuticals
business was also affected by significant supply constraints through the year. In addition,
during the second half of the year, a segment of the trade did not buy the Company’s
products and the Company believes that, having regard to its internal plans, it would have
lost a sales opportunity on this account in the region of Rs.180 crores. The maximum impact
of the above developments was felt in the Mass Markets and Mass Speciality businesses,
each of which declined by 12% compared to last year. Sales in the Speciality segments which
include dermatologicals and oncology grew by 9%, and Vaccines sales recorded a growth of
12% compared to the previous year.
The above factors, coupled with material cost escalations and the adverse exchange rate
movement, had its inevitable impact on Gross Margin which declined by 9.3% compared
to last year. Incremental investments were required on the manufacturing side in manpower
and other spends and in costs associated with outsourcing finished products from third
parties. Field force recruitment was restricted to segments that required resourcing for growth.
Significant investments were made for the consumer brands lodex and Ostocalcium which are
managed by GSK’s Consumer Healthcare business in India. Profit after Exceptional items and
Tax amounted to 20% of Net Sales (previous year: 22%) and declined by 13.1% as compared
to the previous year.