Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
GSK Consumer: Mal(t) nourished… - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Oct 23, 2003

    GSK Consumer: Mal(t) nourished…

    GlaxoSmithKline Consumer Healthcare Ltd. (erstwhile SmithKline Beecham Consumer Healthcare) continues to struggle with its performance. After reporting a strong 27% topline growth in the June quarter, the company seems to have lost the momentum. The company has reported nearly 2% decline in September quarter topline. What is worse, GSK Consumer has finished the quarter with a 32% dip in net profit.

    (Rs m) 3QFY03 3QFY04 Change 9mFY03 9mFY04 Change
    Net sales 2,319 2,281 -1.6% 5,735 6,074 5.9%
    Other Income 35 47 34.2% 115 149 29.5%
    Expenditure 1,844 1,986 7.7% 4,504 5,048 12.1%
    Operating Profit (EBDIT) 475 295 -38.0% 1,230 1,026 -16.6%
    Operating Profit Margin (%) 20.5% 12.9%   21.5% 16.9%  
    Interest (net) 21 (1) -106.5% 16 5 -67.7%
    Depreciation 93 87 -7.2% 161 269 67.0%
    Profit before Tax 395 257 -35.1% 1,168 900 -22.9%
    Tax 107 87 -18.2% 364 309 -15.0%
    Extraordinary items (48) (5) - (48) (22) -
    Profit after Tax/(Loss) 240 165 -31.5% 757 569 -24.8%
    Net profit margin (%) 10.4% 7.2%   13.2% 9.4%  
    No. of Shares (eoy) (m) 45.4 45.4   45.4 45.4  
    Diluted Earnings per share* 21.2 14.5   22.2 16.7  
    Current P/e ratio   23.0     19.9  

    Post the strong June quarter results, it was being felt that GSK Consumer's strategy of relaunching its flagship brand 'Horlicks' in new variants had worked. But the near stagnant growth in September quarter has cast doubts on the turnaround once again. The huge dip in operating margins (nearly 8%) is a worrying sign. Almost all cost heads of the company saw a rise. The company has had to up its advertising expenditure in a bid to push the new variants in the 'Horlicks' range. Consequently, as a percentage of revenues, ad expenses have gone up to 14.4% during the quarter (10.8% last year).

    Cost break-up
    As a % of sales 3QFY03 3QFY04 9mFY03 9mFY04
    Material/sales 38.2% 39.0% 34.7% 36.1%
    Staff/sales 9.4% 10.0% 10.8% 10.5%
    Adv/sales 10.8% 14.4% 10.5% 11.5%
    Other exp./sales 21.2% 23.7% 22.6% 25.1%

    The year 2002 was seen as one of the worst performances by GSK Consumer in the last 5-7 years. The company finished FY03 with a 10% dip in topline and nearly 35% dip in net profit levels. The year saw a big slowdown in the malted beverage market. The company attributed this dip to an inventory correction as well as delay in commissioning of its new plant in Sonepat, which effectively meant a delay in improvement of efficiencies.

    As said earlier, post the strength in the June quarter numbers it was being felt that the company's troubles are more or less over. However, a sluggish September quarter has dashed those hopes. The company's single product profile is anyway a big cause of concern, as it caps its future growth prospects. Moreover, malted beverages is not the core business for the pharma parent (GSK Pharma).

    Please note, for the comparision on a YoY basis, we have taken numbers that had been stated by the management last year. The company seems to have restated some numbers, as a result of which the topline dip during September quarter is coming to 0.6% (as opposed to 1.6% shown in the first table). Similarly, the nine month topline growth is coming to 4.9% YoY (as compared to 5.9% shown in the table). The bottomline growth numbers are however, correct. We haven't received the company's press release and consequently, are showing the comparision based on the numbers made available last year.

    GlaxoSmithKline Consumer's one product category focus and the parent's other 100% subsidiary were always a cause for concern. The blip in quarterly results is likely to further weaken the sentiment towards the stock. At Rs 333 the stock trades at a P/E of 20x annualised 9mFY04 earnings.



    Equitymaster requests your view! Post a comment on "GSK Consumer: Mal(t) nourished…". Click here!


    More Views on News

    GSK Consumer: On the Recovery Path (Quarterly Results Update - Detailed)

    Jun 20, 2017

    While GSK consumer reported muted revenue growth, volumes are seen to be recovering.

    GSK Consumer: Price Hike Hurts Volumes (Quarterly Results Update - Detailed)

    Nov 30, 2016

    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.

    GSK Consumer: Slowdown in demand impacts sales (Quarterly Results Update - Detailed)

    Oct 5, 2016

    GSK Consumer Healthcare has announced the first quarter results of the financial year 2016-2017 (1QFY17). The company's sales declined by 1.4% YoY while net profit rose by 2.9% YoY during the quarter.

    Apex frozen food Ltd. (IPO)

    Aug 21, 2017

    Should you subscribe to the IPO of Apex Frozen Foods Ltd?

    GSK Consumer: A Forgetful Year (Quarterly Results Update - Detailed)

    Jun 1, 2016

    GSK Consumer Healthcare announced its results for the quarter and year ended March 2016. During the quarter, sales and profit came in lower by 9% YoY and 8% YoY respectively.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 23, 2017 10:17 AM


    • Track your investment in GSK CONSUMER with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts