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P&G: Feminine Hygiene boosts topline
Aug 20, 2010

Procter & Gamble Hygiene and Health Care Ltd. has announced its FY10 results. The company has reported a 16.8% YoY and 0.5% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline grew by 9.2% YoY during the quarter. This growth comes on the back of strong performance by the company’s healthcare and feminine hygiene segment.
  • Operating (EBITDA) margins for the company fell by 26% to stand at 9.9%. This fall in operating margins was due to sharp increase under all heads of operating costs (as a percentage of sales) during the quarter.
  • Net profit for the quarter fell by 79% on the back of lower operating income and lower other income, partially offset by lower effective tax rate.
  • Net profit for FY10 increased by 0.5% while net profit margins fell by 3.2%. This performance was a result of growth in operating profit partly offset by lower other income and higher effective tax rate.


Rs(m) 4QFY09 4QFY10 Change FY09 FY10 Change
Net sales 1,815 1,982 9.2% 7,742 9,045 16.8%
Expenditure 1,164 1,786 53.4% 5,655 6,744 19.3%
Operating profit (EBDITA) 651 197 -69.8% 2,087 2,300 10.2%
EBDITA margin (%) 35.9% 9.9%   27.0% 25.4% -5.7%
Other income 62 11 -82.4% 373 287 -23.2%
Interest - -   - 0  
Depreciation 41 100 146.3% 144 250 74.2%
Profit before tax 672 108 -84.0% 2,317 2,336 0.8%
Extraordinary inc/(exp) - -   - -  
Tax 194 7 -96.6% 528 539 2.0%
Profit after tax/(loss) 478 101 -78.9% 1,789 1,798 0.5%
Net profit margin (%) 26.3% 5.1%   23.1% 19.9%  
No. of shares (m) 32 32   32 32  
Diluted earnings per share (Rs)*         55.4  
Price to earnings ratio (x)*         38.8  
*trailing twelve months

What has driven performance in FY10?
  • Sales of Procter & Gamble Hygiene and Health Care (PGHH) grew by a strong 17% during the year. This came on the back of strong double digit volume growth in the company’s feminine hygiene segments. In value terms the feminine hygiene segment grew by 22% YoY led by Whisper Ultra and Whisper Choice. On the other hand, the health care business grew by 111% YoY led by strong growth of VICKS cough drops and VICKS vaporub.

  • Operating income for the year grew by 10% YoY. This was because of increase in raw material costs, higher staff costs and rise in advertisement expenditure (all as a percentage of sales). Costs of goods sold increased by 20.3% YoY while staff costs increased by 25.5% YoY. Advertisement expenditure was up by 30.7% YoY.

  • Net profit for the year was flat on YoY basis while net margins fell by 3.2% to stand at 19.9% in June 2010. This performance was due to fall in operating expense, lower other income and higher depreciation charge.
    Cost break-up
    As a % of net sales 4QFY09 4QFY10 FY09 FY10
    Total Cost of goods 28.5% 29.6% 30.0% 30.9%
    Staff Cost 1.1% 3.3% 4.5% 4.8%
    Advertising 10.6% 25.6% 16.0% 17.9%
    Other Expenditure 24.0% 31.6% 22.6% 21.0%

What we expect?
At a price of Rs. 2,250, the stock is trading at 30 times our estimated FY12 earnings. (RPro subscribers click here).The company is the market leader in both the segments it operates in. We believe that PGHH has good growth potential because of its presence in the feminine hygiene market which remains under penetrated. However, given that the valuations of the company are fairly priced we would advise investors to exercise caution.

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