PRESS RELEASE: Fitch Affirms GlaxoSmithKline at 'A+'; Outlook Stable

5th Jul 2010 16:34

Fitch Ratings-London-05 July 2010: Fitch Ratings has affirmed UK-based pharmaceuticals company GlaxoSmithKline PLC's (GSK) Long-term Issuer Default (IDR) and senior unsecured ratings at 'A+' and its Short-term IDR at 'F1'. GlaxoSmithKline's commercial paper programme is also affirmed at 'F1'. The Outlook for the Long-term IDR is Stable. "The group's debt protection measures are strong for the ratings, but are expected to deteriorate due to continued bolt-on acquisitions and shareholder-friendly measures in the next few years. However, there is significant rating headroom to accommodate this," says Britta Holt a Director in Fitch's Corporates team. Adjusted net debt/EBITDAR stood at 1x at FYE09 compared with 1.2x at FYE08, while the operating EBITDAR net fixed-charge cover was 12.5x (FYE08: 15.9x). For FY09, group sales grew 3% y-o-y at constant exchange rates (CER), and 16% on a reported basis. The CER sales growth was driven by the consumer healthcare business (16% of FY09 group sales of GBP28.4bn), which grew 7% y-o-y - more than three times the growth of the global market. Pharmaceuticals' CER sales growth of 2% was negatively affected by US generic competition, which caused US sales to fall 13% in FY09. This was offset by strong sales growth in emerging markets (up 20%), Asia-Pacific/Japan (16%) and Europe (9%). The group's EBITDAR margin declined in FY09 to 35.9% (FY08: 38.4%), driven by the impact of generic competition on higher-margin products. Diversification efforts away from the high cash flow-generative pharmaceuticals business in Europe and North America are likely to have a further negative impact on operating profitability. However, these factors are likely to be mitigated by the positive impact of restructuring, which delivered GBP1bn of annual savings in FY09 and should add a further GBP1.2bn by end-2012. GSK's ratings are supported by its position as a leading player in the global pharmaceutical industry, its strong product portfolio and pipeline, good diversification by product and geography and high profitability. The group's patent protection profile appears well manageable; only 16% of 2009 pharmaceutical sales face US patent expiry by end-2013, including Advair (combination patent) in 2010. Negative rating factors include the group's acquisition appetite and shareholder-friendly financial policy. To enhance financial flexibility, GSK has no plans for significant buybacks for 2010. Of its GBP12bn share buyback programme announced in FY07, GBP6.2bn has been purchased so far. Applicable criteria, 'Corporate Rating Methodology', dated 27 November 2009, are available on www.fitchratings.com. >> Fitch has made major improvements to its credit research on EMEA and AsiaPac corporates. To view these improvements, visit our 'Clear Thinking' web page at http://clearthinking.fitchratings.co.uk/Index.html CONTACTS: Britta Holt, London, Tel: +44 (0)20 7 862 4022; Michael Zbinovec, Chicago, +1 312 368 3164. Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: [email protected]. Additional information is available at www.fitchratings.com. Related Research: Corporate Rating Methodologyhttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=489018 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. (END) Dow Jones Newswires July 05, 2010 11:34 ET (15:34 GMT)