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Henkel: Slowdown catches up - Views on News from Equitymaster
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  • May 22, 2001

    Henkel: Slowdown catches up

    Henkel Spic India has declared a 75% drop in its 1QFY02 earnings, despite a marginal 2% turnover growth during the same period. An 8% jump in its expenditure is largely responsible for this. A Rs 4 m decline in its other income also contributed to the decline in profits.

    (Rs m) 1QFY01 1QFY02 Change
    Net Sales 750 766 2.1%
    Other Income 5 1 -90.0%
    Total expenditure 682 739 8.3%
    Operating Profit (EBDIT) 68 27 -60.1%
    Operating Profit Margin (%) 9.1% 3.5%  
    Interest 11 12 10.9%
    Depreciation 13 13 3.1%
    Profit before Tax & extraordinary income 8 2 -75.0%
    Tax 0 0  
    Profit after Tax/(Loss) 8 2 -75.0%
    Net profit margin (%) 1.1% 0.3%  
    No. of Shares (eoy) (m) 116.4 116.4  
    Earnings per share* 0.3 0.1  
    Current P/e ratio   430.6  

    Henkel Spic is a 54% subsidiary of German consumer products major, Henkel KgaA, engaged in the manufacture of eco-friendly zeolite-based phosphate free detergents, both surface cleaners and laundry based products. The company also has a presence in oral care and cosmetics segment. Tamilnadu Petroproducts is the other promoter. The company owns brands like Brisk, Henko, Limeshot, Pril, Mr. White, Margo, Neem toothpaste, Fa and Aramusk.

    The company had recently turned around in FY01. It finished FY01 with a Rs 30 m profit, as compared to a Rs 59 m loss in FY00. However, one of the main reasons for this improvement was a healthy 20% growth in net turnover during FY01. Added to that the company managed to reduce its overall interest burden by 71% during this period.

    The company's performance in 1QFY02 is an indication that the slowdown and consumer downgrading has hit Henkel too. Competitive pressure from Nirma has hit both HLL and Henkel.

    At the current price of Rs 30, the stock trades on a multiple of 431x its annualised 1QFY02 earnings. Given its current performance and a staid outlook for the FMCG sector in the medium term, the company's valuations are likely to be under pressure in the medium term.



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