• FEBRUARY 2, 2001

P&G Hygiene: Margins advantage

P&G Hygiene & Healthcare Limited has declared a 28% jump in its bottomline in its second quarter ended December 31, 2001. However, P&G could not escape the slow down in its turnover growth. The company's turnover growth was a minor 1% during the quarter.

(Rs m) 2QFY00 2QFY01 Change 1HFY00 1HFY01 Change
Sales Turnover 1,341 1,359 1.3% 2,534 2,560 1.0%
Other Income 10 12 15.0% 12 26 116.9%
Total expenditure 1,024 980 -4.2% 1,972 1,900 -3.6%
Operating Profit (EBDIT) 318 379 19.2% 562 660 17.4%
Operating Profit Margin (%) 23.7% 27.9%   22.2% 25.8%  
Interest 17 0 - 29 1 -95.1%
Depreciation 56 70 24.5% 114 143 25.6%
Profit before Tax 254 320 26.0% 431 541 25.4%
Tax 47 56 18.2% 75 91 21.6%
Profit after Tax/(Loss) 207 264 27.7% 356 450 26.2%
Net profit margin (%) 15.4% 19.4%   14.1% 17.6%  
No. of Shares (eoy) (m) 21.6 21.6   21.6 21.6  
Earnings per share*       32.9 41.6  
Current P/e ratio         16.2  

However, the company managed to put in a good performance by improving its operations. It improved its operating margins by 420 basis points by controlling expenditure. P&G also pruned its debt burden. As a result, its interest costs were zero during the quarter. The company's net margins too, improved by 400 basis points.

The company's consolidated first half performance was almost identical to the second quarter performance, indicating a consistency in P&G performance.

To lend focus to its business, P&G consciously decided to be present only in two products viz. Anti-cold (Vicks) and feminine care (Whisper). Its strategy has revolved around premium positioning of both its product categories. In a sense, the company has been focussing on margins (value) rather than volumes. But competition from products such as Dcold and Smyle has impacted the sales of Vicks cough drops.

The stock trades at a P/e multiple of 16.2 times its annualised half yearly FY01 earnings. For P&G we had projected a net profit of Rs 763 m in FY01. The company's performance in the first half indicates that it is likely to exceed those projections.

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 (Research Analyst) bearing Registration No. INH000000537 (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, Canada or the European Union countries, 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 (Research Analyst)
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