GlaxoSmithKline (GSK) Nigeria (GLAXOSM.LG) says it will cease operations in after reviewing the alternatives for transitioning to a third-party distribution strategy for its medications and consumer healthcare goods.
GSK Records Sales Drop
Giving figures driving its decision, GSK Nigeria said its half-year sales had declined to 7.75 billion Naira ($9.82 million) from 14.8 billion Naira in the same period last year.
According to the company, this decline is due to rising competition from local competitors and imports from India and China.
Its British parent firm, GSK (GSK.L), which has operated in Nigeria since 1971, said in 2018 that it would reduce its activities in Africa and instead market medications in 29 Sub-Saharan African nations through a distributor-led strategy.
GSK Nigeria said it was working with advisers to agree on future steps and plans to submit a scheme of arrangement to Nigeria’s Securities and Exchange Commission, which if granted will result in a cash return to shareholders other than its parent company.
Closing Of Operations
It also noted that the Haleon Group (HLN.L) informed it of plans to terminate a distribution agreement and employ a third-party distributor in Nigeria, which is dealing with a high cost of living, rising business costs, and a declining consumer base.
“For the foregoing reasons and having evaluated various other options in collaboration with GSK UK, the Board of GlaxoSmithKline Consumer Nigeria Plc has concluded that there is no alternative but to cease operations.” a statement by the company read.
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GlaxoSmithKline Nigeria shares closed at 8.10 Naira, down from a high of 42.24 Naira in 2014, with British drugmaker GSK owning 46.4% and Nigerian stockholders owning the remaining 53.6%.
In Africa’s largest economy, inflation has been in double digits since 2016 and it is expected to grow further after new President Bola Tinubu removed a popular but costly petrol subsidy and depreciated the Naira.
However, President Tinubu hopes the reforms will kick-start growth and attract foreign investors which will help boost inflows into a country that has suffered chronic dollar shortages.
Sadly, the situation is making it difficult for companies like GlaxoSmithKline (GSK) to import raw materials.