Glaxo reports Lucozade sales pressure

Drug maker GlaxoSmithKline today said sales of its Lucozade drink slumped 12% as it announced lower quarterly profits amid slumping US performance.

The pharmaceuticals giant said its sports and energy drinks suffered as UK consumers shied away from impulse buys.

Glaxo also said it was hit by the impact of competition from new generic drugs as it said underlying pre-tax profits had fallen more than 30% for the three months to March 31.

The group saw profits fall to £1.66bn (€1.85bn), once the cost of a major restructuring programme was stripped out, from £1.87bn (€2.08bn) in the same period the previous year.

Glaxo saw a mixed global performance, with a 22% slump in US sales compared to strong sales in other regions.

The firm said the performance of its over the counter portfolio – which includes pain-killer Panadol and new anti-obesity product Alli – was “impressive given the current economic downturn”, but added that it had seen a lower demand for nutritional products in the UK.

It said its consumer healthcare division saw sales rise 4% in the quarter, to £1.1bn (€1.23bn).

It said growth from Horlicks – up 20% to £75m (€83.7m) – helped to offset the decline for Lucozade, which reduced to £80m (€89.3m).

Smoking cessation products also saw growth of 12%.

Glaxo said US sales had dropped to £2.3bn (€2.56bn) as patents lapsed, allowing competition from generic drugs.

Chief executive officer Andrew Witty said: “In this first half of the year, our performance will be heavily impacted by the year-on-year comparative effect of generic entries in the US.

“However, in the second half of 2009, this impact is projected to reduce and we expect to see increased sales contributions from new products.”

He said the group was experiencing “some of our toughest performance challenges” and added it was “aggressively re-engineering” its US business.

Glaxo’s figures benefited from the weaker pound as it sells most of its products abroad. When the effects of sterling had been removed, pre-tax profits were shown to have fallen 31%.

Major restructuring costs skimmed £265m (€295.7m) from profits in the quarter.

The firm said the programme was on track to increase annual cost reductions from £700m (€781m) to £1.7bn (€1.9bn) by 2011.

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