Karachi: GlaxoSmithKline Pakistan (GLAXO) reported a 5% year-over-year decline in earnings per share for the second quarter of 2026, falling to Rs6.19. The earnings, which amounted to Rs1.9 billion, were below market expectations, driven primarily by a higher-than-anticipated effective tax rate.

According to JS Global, the effective tax rate for the quarter was reported at 45.94%, significantly higher than the anticipated 39%. This resulted in tax charges of Rs1.6 billion for the quarter, bringing the total for the first half of 2026 to Rs3.3 billion, with an effective tax rate of 42.25%.

Net sales for the second quarter reached Rs14.5 billion, a 2% decline year-over-year and a 15% drop from the previous quarter. This decrease is attributed to a broader slowdown in demand within the pharmaceutical sector. Despite the quarterly decline, sales for the first half of 2026 totaled Rs31.5 billion, up 4% from the same period last year.

The company reported an increase in gross margins to 38.22% for the second quarter, compared to 36.52% in the same period last year and 37.49% in the first quarter of 2026. The first-half gross margins of 37.83% marked the highest on record for this period.

Distribution costs decreased by 5% year-over-year to Rs1.4 billion but rose by 11% from the previous quarter. The first half of 2026 saw distribution costs rise by 6% compared to the previous year, totaling Rs2.7 billion.

Other income surged by 1% year-over-year and 192% quarter-over-quarter to Rs531 million, driven by higher returns on investments. The finance cost also saw a significant reduction, reaching Rs6 million for the second quarter, down 94% year-over-year and 74% from the previous quarter, due to a debt-free balance sheet.

The company declared a cash dividend of Rs7.0 per share for the second quarter of 2026, surpassing expectations. JS Global maintains a buy stance on GLAXO, with the stock trading at a projected price-to-earnings ratio of 10.1x for 2026 and 8.7x for 2027.