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GSK Consumer: Slowdown in demand impacts sales - Views on News from Equitymaster
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GSK Consumer: Slowdown in demand impacts sales
Oct 5, 2016

We present here with the June 2016 quarterly result analysis of GSK Consumer.

Performance summary
  • Standalone net sales declined by 1.4% YoY during the quarter ended June 2016 (1QFY17).
  • Operating profit margins improved from 19.1% in 1QFY16 to 19.2% in 1QFY17.
  • The bottom-line rose by 2.9% YoY; net profit margin expanded from 14.5% in 1QFY16 to 15.2% in 1QFY17.

    Standalone financial performance snapshot
    (Rs m) 1QFY16 1QFY17 Change
    Sales 10,740 10,594 -1.4%
    Expenditure 8,691 8,559 -1.5%
    Operating profit (EBITDA) 2,048 2,035 -0.6%
    Operating profit margin (%) 19.1% 19.2%
    Other income 549 592 7.8%
    Depreciation 192 147 -23.7%
    Finance cost 7 6.4 -5.9%
    Profit before tax 2,398 2,474 3.2%
    Tax 838 868 3.6%
    Effective tax rate 34.9% 35.1%
    Profit after tax 1,561 1,606 2.9%
    Net profit margin (%) 14.5% 15.2%
    No. of shares (m) 42.1
    Diluted earnings per share (Rs)* 38.2
    P/E ratio (x)* 37.6

    * On a trailing 12-months basis

  • GSK Consumer Healthcare (GSK) recently took a price hike in its key products. This was in the midst of a weak demand environment. The strategy didn't go well for the company and has adversely impacted the volume growth. Horlicks sales grew only 2% YoY, and Boost sales decline was much steeper. Smaller segments Foods and Exports also declined sharply. Market share of Horlicks/Horlicks extensions grew 60 bps YoY each, while that of Boost declined 20 bps YoY.
  • On the operating front, operating margins were more or less flat. The company had good savings on the raw material and other expenses front. But this was offset by the increase in the excise duty and higher advertising. Further, Net profit for the quarter increased by 2.9% YoY.
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