Reckitt losing sheen? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Reckitt losing sheen?

Nov 5, 2001

Reckitt Benckiser India Limited (Reckitt) continues to be plauged by the slowdown and the increasing competition in household cleaning segment. The company has clocked a 6% decline topline and 26% decline in profits (excluding extraordinary VRS expenses) during 3QFY02. In the previous quarter (2QFY02), Reckitt had reported a 3% decline in topline and a huge 42% decline in profits (excluding VRS expenses).

(Rs m)3QFY013QFY02Change9m FY01 9m FY02Change
Net Sales1,4851,399-5.8%4,2754,257-0.4%
Other Income425565.8%6151-16.7%
Operating Profit (EBDIT)11388-22.5%3513602.6%
Operating Profit Margin (%)7.6%6.3%8.2%8.4%
Interest 105742.9%
Profit before Tax8479-5.7%3053081.0%
Extraordinary expenses (VRS)-19-10-19-31
Profit after Tax/(Loss)6048-19.4%209143-31.6%
Net profit margin (%)4.0%3.5%4.9%3.3%
No. of Shares (eoy) (m)32.932.932.932.9
Diluted Earnings per share*
Current P/e ratio31.732.2

Reckitt's 3QFY02 bottomline would have shrunk by over half as compared to the previous year, had it not been for a significant growth in its other income. Reckitt was hit hard on the expenditure front. The company's advertising expenditure during the quarter surged by 82%. This was due to the fact that Disprin and Dettol, its two main products, are now no longer in the Reckitt Piramal joint venture. Reckitt now markets these products on its own. In the current quarter advertising to sales ratio stood at 23%. The company's tax expenditure too surged as a result of new guidelines of AS-22.

Cost break-up
(Rs m)3QFY013QFY02Change
Raw material824551-33.2%
Total expenditure1,3721,311-4.4%

However, on the brighter side, the VRS has already started showing effect. The company's staff costs declined by over 10% during the quarter. Its raw material costs too declined significantly.

On a nine month consolidated basis, Reckitt's topline has declined marginally. However, its net profit has declined by nearly 24% (excluding VRS expenses). Its operating margins have shown a slight improvement during 9m FY02.

Reckitt is planning to launch mass market products from its parent's stable. The products are likely to be in the home care category, a business which Reckitt acquired internationally after its merger with Benckiser. The company expects the new products to contribute 20-22% of its total business in the current year. It also intends to penetrate rural markets aggressively by increasing distribution network. These strategies are further expected to help in improving its performance in the future.

At Rs 186 Reckitt trades at a relatively high P/E of 26 x annualised nine month FY02 earnings (excluding VRS expenses). This is probably because the markets anticipate that the company's topline and bottomline would improve once Reckitt has stabilised its merger with Benckiser and starts launching Benckiser products in a big way. However, competition has become the company's bane. The company has to deal with it otherwise the leadership it enjoys both in house cleaners as well as pest repellants may wane.

Equitymaster requests your view! Post a comment on "Reckitt losing sheen?". Click here!


More Views on News

Adani Wilmar IPO to Hit the Market Soon. Should you Apply? (Views On News)

Nov 29, 2021

The parent company of the brand Fortune is set to raise Rs 45 bn from the market.

What Happens if ITC Hives off ITC Infotech? (Views On News)

Nov 20, 2021

The cigarette to hotel conglomerate is reportedly mulling the demerger of its software business at a valuation of around Rs 250 bn.

What Sparked an 8% Rally in ITC Shares Today? (Views On News)

Sep 16, 2021

ITC did not participate in the rally after the second wave and continued to underperform its peers. Is this about to change?

HUL's Marketcap Tops Rs 6 Tn. Key Factors Driving the Stock (Views On News)

Aug 21, 2021

HUL became the fifth Indian company to achieve the milestone of a Rs 6-tn market capitalisation.

Godrej Consumer Products Shares Decline Post June Quarter Results (Views On News)

Aug 5, 2021

Adi Godrej, the Chairman of the Godrej Group, has decided to step down from the board of directors of the company.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Mar 7, 2019 10:55 AM


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