Active Stocks
Fri Sep 22 2023 15:58:38
  1. Tata Steel share price
  2. 126.7 -0.86%
  1. HDFC Bank share price
  2. 1,529.2 -1.57%
  1. State Bank Of India share price
  2. 598.1 1.67%
  1. Power Grid Corporation Of India share price
  2. 199.1 -1.34%
  1. Tata Motors share price
  2. 621.1 -0.93%
Business News/ Opinion / Online-views/  P&G improves sales growth and profitability in India

Procter and Gamble Co.’s (P&G) listed subsidiaries in India have done well in the June quarter to support the company’s 21% organic sales growth. Organic growth for P&G strips out the effect of foreign exchange and acquisitions on growth. India saw the highest growth among the BRIC (Brazil, Russia, India and China) countries for P&G, and much better than the 10% growth in its developing markets. It has two listed subsidiaries in India.

Procter and Gamble Hygiene and Health Care Ltd sells Vicks and Whisper products in India, and its sales rose by 27.8% to 313 crore. Its material consumption cost rose by a lower figure of 15%, and advertising and promotion costs rose by only 2.5%, but royalty and other expenses rose substantially. Royalty as a percentage of sales rose by 19 basis points sequentially, while other expenses rose by 57% year-on-year (y-o-y). One basis point is one-hundredth of a percentage point.

Still, lower material cost growth enabled P&G to easily cover the increase in expenses, and operating profit grew by 75.8% y-o-y to 44 crore. Net profit declined chiefly because of higher depreciation, lower other income, and a tax write-back in the year-ago quarter. The company has not given a category-wise growth number in its statement, making it difficult to evaluate how these businesses have done. But the reported sales growth, and the 3.8 percentage point growth in operating profit margins, indicates it appears to be doing quite well.

Gillette India Ltd’s performance was not as good, however, chiefly due to losses incurred in its oral care and battery business. The company’s overall sales rose by 15%, driven by a healthy 20.4% growth in its shaving products business, but pulled down by single-digit growth in batteries and oral care. Its grooming business performance is encouraging, as segment profit has increased by 55%, a sign that the company’s efforts to grow usage of twin-edge products and also upgrade users to higher-end products, are working.

The batteries and oral care business have seen the company carry out aggressive marketing and pricing plans, which may have affected reported sales growth and margins. Reported profits have risen by 5.5 times, primarily due to sales growing ahead of material costs, and higher advertising costs in the year-ago quarter.

Shareholders of both companies should be happy to see the healthy levels of sales growth that these companies are achieving. Profitability in both companies has improved, chiefly due to some relief on the material inflation front. P&G’s focus on developing markets, especially countries such as India, continues to be strong, and its poorer performance in developed markets will mean the emphasis on growth in developing markets will continue.

Its Indian listed subsidiaries should do well in 2012-13 (year ended June), too, barring adverse trends in material costs or aggressive marketing plans that may affect margins.

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 26 Aug 2012, 08:46 PM IST
Next Story
Recommended For You
Switch to the Mint app for fast and personalized news - Get App