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P&G: Commodity costs weigh on bottomline - Views on News from Equitymaster
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P&G: Commodity costs weigh on bottomline
Apr 26, 2011

Procter & Gamble Hygiene and Health Care Ltd. has announced its third quarter results for 2010-2011 (3QFY11) (June ending company). The company has reported a 14.3% YoY growth in sales and a 10.8% YoY fall in net profits. Here is our analysis of the results.

Performance summary
  • Top line grew by 14.3% YoY during the quarter. This performance comes on the back of 21% YoY volume growth. However, increase in excise duty played spoilsport resulting in fall in realization.
  • Operating (EBITDA) margins for the company fell by 1.6% to stand at 19.7%. This fall in operating margins was due to sharp increase in cost of goods sold partially offset by fall in staff costs, advertisement and other expenditure (all as a percentage of sales).
  • Net profit for the quarter fell by 10.8% YoY on the back of lower operating income, fall in other income and rise in depreciation costs. Net profits would have been lower but for a fall in effective tax rate.
  • Net profits for 9mFY11 fell 32.1% YoY while net profit margin fell by 8.8%. This performance came on the back of fall in operating income due to change in product mix and higher commodity costs. Fall in other income by 9.6% YoY also put pressure on the bottom line. The bottom line would have been lower but for lower effective tax rates. Effective tax rates fell from 23.9% in 9mFY10 to 21.8% in 9mFY11.

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