Jan 31, 2007|
P&G: Mixed quarter!
Procter and Gamble Health and Hygiene (PGHH) have announced its second quarter and half year results (June-ending company). The company’s topline has grown by 7.7% YoY due to divestment of its detergent manufacturing facility to the parent’s unlisted subsidiary, Procter and Gamble Home Products (PGHP) in 1QFY06. It must be noted that the results of the quarter under review cannot be compared to that of the corresponding quarter of the previous year due to the above-mentioned reason. The bottomline has declined by 25.7% YoY due to lower other income and higher tax outgo.
|Operating Profit (EBDITA)
|Operating Profit margin (%)
|Profit before Tax
|Profit after Tax/(Loss)
|Net profit margin (%)
|No. of Shares (m)
|Diluted Earnings per share (Rs)*
|P/E Ratio (x)*
|*(trailing 12 months)
P&G is a 65% subsidiary of the FMCG major, P&G USA. In India, the company is a focused two-product company, dominating both the segments it is present in, backed by strong brands, namely ‘Vicks’ in the anti-cold segment and ‘Whisper’ in the feminine care segment. The parent has two other 100% subsidiaries in India, which have a dominant shampoo (Pantene, Rejoice) and detergent (Ariel, Tide) portfolio. P&G undertakes contract manufacturing for its parent’s detergent portfolio in India.
| What is the company’s business?|
In July ‘05, the listed entity, PGHH, sold its detergent manufacturing unit at Mandideep in Madhya Pradesh, to the parent’s unlisted subsidiary in India, Procter and Gamble Home Products (PGHP). PGHH carried out contract manufacturing of detergents for PGHP and earned a margin for the same. It must be noted that 1QFY06 was the last quarter in which PGHH carried out contract manufacturing for its parent’s wholly owned subsidiaries, as the detergents plant was transferred to the unlisted entity effective October 1, 2005.
Topline performance: On a YoY basis the sales of PGHH for 2QFY07 have grown by 7.7%. Though the company had divested its detergent manufacturing division in 1QFY06, revenues of Rs 85 m were adjusted in 2QFY06 and hence the performance is not strictly comparable. Excluding this effect the net sales of the core business grew by 14% YoY.
The Feminine Hygiene business continued with its strong sales registering a 21% YoY for the quarter. The contribution of the division has gone up from 38% in 2QFY06 to 43% in 2QFY07. The sales of the Health Care business also grew by a healthy 9% YoY at Rs 907 m. The strong performance of the company is on the back of focused marketing initiatives and deeper distribution. In the six-month period ended December 2006, PGHH recorded a topline growth of 17% YoY excluding the manufacturing business sales.
| What has driven performance in 2QFY07?
|As a % of net sales
|Total Cost of goods
Higher margins: The operating margins increased by 410 basis points for the quarter. This was mainly due to the divestment of the contract manufacturing division, which yielded very low margins, as compared to the company’s core portfolio. The higher margins are a result of lower raw material prices, which fell significantly as a percentage of sales (21.8% in 2QFY07 as compared to 28.5% in 2QFY06). The advertising expenses increased to 10.8% of its sales due to large marketing initiatives taken by the company to promote its products. This indicates the company’s strategy to largely focus on building its brands to face the competition.
Lower profits: The company’s profits fell by 26% YoY for 2QFY07 despite strong margin expansion. This was mainly due to lower other income and higher tax outgo. Also in 2QFY06, there was an extraordinary item to the tune of Rs 73 m. Excluding this profits have declined by 9% YoY.
At the current price of Rs 900, the stock trades at a price-to-earnings multiple of 22.9 times its trailing 12-month earnings. The company’s core divisions are witnessing strong performance. The poor per capita consumption of the hygiene products among the female population further provides good opportunity for its growth. The company is increasing the capacity of its existing feminine hygiene plant in Goa and building new health care plants in Baddi, Himachal Pradesh to target the large female population. However, since the company just has a two-product portfolio, it is a risky proposition due to increased competition in this segment.
More Views on News
Dec 9, 2016
Procter & Gamble Hygiene and Health Care has announced the first quarter results of the financial year ended June 2017 (1QFY17). The company's sales rose by 12.5%YoY while net profit rose by 50.1% YoY during the quarter.
Oct 5, 2016
Procter & Gamble Hygiene and Health Care reported a 0.1% YoY growth in sales and a 2.2% YoY increase in net profits during the quarter ended June 2016.
Aug 9, 2017
While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.
May 6, 2016
Procter & Gamble Hygiene and Health Care reported an 11% YoY increase in revenues, while profits rose by 12% YoY during the quarter.
Feb 9, 2016
Procter & Gamble Hygiene and Health Care reported an 11% YoY increase in revenues, while profits rose by 62% YoY during the quarter.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407