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Glaxo's China sales crash

Published: 23:28 23 Oct 2013 AEDT

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The fall-out from the bribery investigation in China has hit drugs giant Glaxo’s (LON:GSK) sales in the Middle Kingdom.

In its third quarter update Glaxo revealed that sales in China were down 61% year-on-year, as operations have been disrupted by the ongoing investigation into its business. That decline is twice as large as Citigroup had estimated in a recent broker note.

“At this stage, it is still too early for us to quantify the longer-term impact of the investigation on our performance in China,” Glaxo said.

The collapse of sales in China, where the company’s reputation has been hit by allegations of bribery perpetrated by senior Glaxo staff, led to turnover, up 1% year-on-year at £6,510mln, coming in below market expectations of £6,610mln.

The China crisis aside, third quarter core earnings per share (EPS) at 28.9p were ahead of market expectations of around 26.8p, and were up 16% on a year earlier.

The company said it is sticking with its full-year guidance of EPS growth of around 3-4% on a constant exchange rates basis.

The stock is a favourite of income investors and they will likely have been cheered by the proposal of a third quarter dividend of 19p, up 6% on a year earlier. The third quarter divi is a penny higher than the divis paid in the first two quarters of the fiscal year.

The shares were down 1.3% in lunch-time trading to 1,580.5p.

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