FMCG sector continues to feel the heat of an economic slowdown. This is reflected in the slowing revenue growth of SmithKline Beecham Consumer Healthcare (SBCH). The company's turnover in the March quarter hardly saw any growth, compared to a 13.5% rise recorded in FY02. Although, it managed to improve operating margins, deferred taxes pressurized earnings.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares
Diluted Earnings per share*
The company's revenues, in fact, have shown a steady decline in the last 3 quarters. In October quarter turnover growth stood at 9%, in December quarter the growth slid to 8.2% YoY and now a negligible growth in topline. In the first half of FY02 the company had recorded a healthy 21% growth in topline. With increasing competition ('Bournvita' from Cadbury and 'Maltova' from Nestle) and sluggish demand, revenue growth has been impacted.
Infact, the gross sales (value terms) decreased by 3.2% during the quarter ended March 31, 2002. The company's management attributes it to adverse economic environment leading to continued demand recession.
However, SBCH's operating margins continue to rise on the back of its cost control initiatives. The consumption of raw material, as a proportion to sales, declined to 33.3% in 1QFY03 from 40.1% in the comparable previous period. The company also managed to reduce its advertising to sales ratio to 9.0% from 10.3% in 1QFY02. Overall operating efficiencies aided SBCH in improving operating profits by 20.5% during the quarter.
Expenses as a % of sales
Raw material consumption
The company would have declared higher net profits if it had not been for higher tax provisions due to deferred tax. A significant 51% dip in the company's other income was also responsible for the depressed earnings.
At the current market price of Rs 397, SBCH is trading at a P/E of 15x 1QFY02 annualised earnings. Although, its P/E multiple is lower compared to its FMCG peers, the company's market cap to sales ratio of 2.4x is more or less comparable to other food majors.
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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