SG&A ratio fell in 3 out of 4 MNCs...a COVID-19 Impact?

Average SG&A to sales ratio falls by 2% point in 34 Korean MNC subsidiaries

15 out of the 34 companies reduced SG&A expenses… 25 companies cut SG&A to sales ratio

Korean subsidiaries of multinational pharmaceutical companies have lowered their selling, general & administrative (SG&A) to sales ratio last year due to the prolonged COVID-19 crisis.

 

Analysts predict that the cost-cutting measure was made in response to the disruptions in face-to-face sales and marketing activities caused by the pandemic.

 

According to the Financial Supervisory Service (FSS) on the 19th, the SG&A expense of 34 major subsidiaries of multinational pharmaceutical companies in Korea last year amounted to 1.7 trillion won, a 0.8% increase from the previous year.

 

The result is based on audit reports of the 34 subsidiaries that submitted reports to FSS.

 

31 companies that close accounts in December - Sanofi-Aventis Korea, Novartis Korea, AstraZeneca Korea, GlaxoSmithKline Korea, Bayer Korea, Roche Korea, Zuellig Pharma Korea, Baxter Korea, Janssen Korea, Merck, Korea Otsuka Pharmaceutical, BMS Korea Pharmaceutical, Amgen Korea, Boehringer Ingelheim Korea, GSK Consumer Healthcare Korea, Lilly Korea, AbbVie Korea, Mundipharma Korea, Menarini Korea, Novo Nordisk, Fresenius Medical Care Korea, Galderma Korea, Sanofi Pasteur, Alcon Korea, Kyowa Kirin Korea, Lundbeck Korea, Ferring Korea, Teva-Handok, UCB Korea, Guerbet Korea, Leo Pharma - as well as Servier Korea (closes account in September), Pfizer Korea · Viatris Korea (closes account in November) were included for analysis.

 

Despite the increase in the total amount of SG&A expenses, The SG&A to sales ratio of the companies had declined 1.9% points from the previous year’s 23.6% to mark 21.7%.

 

At the same time, sales of the 34 companies have increased 9.6%.

 

The SG&A to sale ratio declined as the SG&A expense of the companies did not increase as much as their sales.

 

15 of the 34 companies reduced their SG&A expense compared to the previous year.

 

Alcon Korea's SG&A expense was 17.4 billion won last year, which was 71.3% lower than the previous year.

 

During the same period, the company's sales revenue increased 22.1% from 165 billion won to 201.4 billion won, decreasing the SG&A to sales ratio by as much as 28.0% points.

 

Guerbet Korea spent 8.7 billion won as SG&A expense last year.

 

Guerbet Korea’s SG&A to sales ratio last year was 21.8%.

 

Although its SG&A expense fell greatly, its sales also fell by 6.9%, resulting in a decrease in SG&A to sales ratio of only 2.4% points.

 

Merck Korea and Teva-Handok also cut costs by reducing their SG&A expense by over 15%.

 

19 companies, which accounts for over half of the surveyed companies, increased their SG&A expense.

 

SG&A expense of Lilly Korea, GSK Healthcare Korea, Leo Pharma, BMS Korea Pharmaceutical, Sanofi-Aventis Korea, Abbvie Korea, Roche Korea, Pfizer Korea, and Amgen Korea increased over 5% compared to the previous year.

 

Viatris Korea, which officially launched last November, reported its SG&A expense as 72.5 billion won.

 

The amount is an aggregate of its performance from December 2019 to November of last year.

 

However, as the SG&A expense written for the previous year - 39.9 billion won - was expense spent from May to November 2019, the change in SG&A to sales ratio (81.5%) cannot be considered significant.

 

25 of the 34 companies showed a reduced SG&A to sales ratio.

 

This means 3 out of 4 MNC companies lowered their SG&A to sales ratio.

 

Amgen Korea is known to have a relatively higher SG&A to sales ratio in the industry.

 

Until 2019, its SG&A to sales ratio was 59.9%, however, the ratio fell to 41.6% last year.

 

As its sales revenue increased by 51.6% but its SG&A expense only increased by 5.4%, the overall SG&A to sales ratio fell 18.2% points.

 

Merck Korea reduced SG&A expenses to 15.9% while increasing sales revenue by 20.9%.

 

As a result, its SG&A to sales ratio fell 8.0% points from 26.2% to 18.2%.

 

In companies like Galderma Korea and GSK Consumer Healthcare Korea, their SG&A to sales ratio decreased because their sales growth exceeded their SG&A expense.

 

Galderma Korea had increased its SG&A expense last year by 1.9% from the previous year to mark 26.2 billion won, however, as its sales revenue grew 16.6%, its SG&A to sales ratio fell 6.7% points.

 

For GSK Consumer Healthcare Korea, although its SG&A expense increased 13.4%, its sales revenue increased by 33.5%, resulting in a 6.2% point decrease in its SG&A to sales ratio.

 

The SG&A to sales ratio varies greatly from company to company.

 

Menarini Korea’s SG&A to sales ratio decreased by 1.5% point from the previous year, however, its ratio still exceeded half of its sales revenue.

 

On the other hand, Zuellig Pharma Korea and Alcon Korea’s SG&A to sales ratio fell short of 10%.