GlaxoSmithkline Consumer Healthcare Ltd. (SBCH) has posted a 38% dip in its 1QFY04 net profits. Though we do not have the company's detailed release on the results, as per the declared numbers, the company's gross sales has dipped by over 4% during the March quarter. The company has however, clarified that it has not lost market share in the malted beverage segment. With this, SBCH's poor showing continues.
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2002 was one of the worst years for the company wherein it reported a 9% dip in topline and nearly 35% dip in profits. Going by the March quarter results, 2003 has also started on a weak note. Though the topline dip is marginal and is a sign that the fall in revenues is getting arrested, it remains an area of concern. Operating margins for the company have dipped to 19.2%, almost a 5% fall in operating margins. This was mainly on account of higher advertising spending (10.5% of sales in 1QFY04 as compared to 9.0% last year).
A 14% hike in advertising revenues indicates the pressure on the company to maintain its growth. In 2002, the management had clarified that a lot of the de-growth in topline came as a consequence of an inventory correction. However, the pressure on topline continues. Being a single product focused company, this sort of degrowth in topline is very worrying, much like what has happened to Colgate. The stock has consequently, been hammered in the last one year.
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At Rs 230, the stock trades at 14x annualised 1QFY04 earnings with market cap. to sales at 1.4x. Though the company's past growth track record is enthusing, we believe that it is moving towards a Colgate type fate unless it de-risks its product portfolio.
GSK Consumer Healthcare declared results for the quarter ended September 2016. The revenues dropped by 1.3% during the quarter as compared to a year ago; while the profits declined by 16.6% YoY during the quarter.
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