BackDemand up, but inflation worrying: P&G Hygiene
Procter & Gamble Hygiene and Health Care sees broad consumption rise despite challenges such as high commodity prices and erratic rains.
PremiumNew Delhi: Procter & Gamble Hygiene and Health Care Ltd on Friday pointed to a broad consumption rise in its business segments, even as steep commodity prices, erratic rains and the recent spike in inflation keep the maker of Whisper, Vicks and Old Spice on its toes.
“We’re seeing consumption trends to be broadly up, driving our optimism," said Gautam Kamath, the company’s vice-president of finance. “However, retail inflation for the months of July and August have averaged 7% and August rainfall has shown an 11% negative deviation from the norm, driving the caution part of it. On anecdotal evidence, September rainfall appears to have bounced back and may have a big say in how the rest of the year pans out," Kamath said at a virtual meet with analysts on Friday.
The company highlighted “visible signs of green shoots" in the rural economy, adding concerns remain around a patchy monsoon, though the broader trend is “very encouraging".
Commodity prices have remained high with little signs of easing, the management said. Among the top three commodities used by the company, prices of two remain much higher in the current fiscal compared to FY21, Kamath said, without identifying them. “This means bottom-line pressure will remain. Of course, this could differ based on the particular commodities that impact each industry and each category," he added.
American consumer goods multinational P&G operates its India FMCG business through three entities—P&G Hygiene Health Care (feminine hygiene and Vicks), Gillette India (grooming and oral care) and P&G Home products (detergents, baby care, hair care and air care); of these, the first two entities are publicly listed. India contributes approximately 2% of P&G’s global revenue, although it is among its top 10 markets, analysts at Jefferies said in a note on Friday.
Kamath said the global parent continues to see “huge growth potential" for its India subsidiaries. “India is among the top 10 markets for P&G globally. In fact, P&G’s global CEO has gone on record stating that he expects to get to deliver consistent double-digit growth and become one of the top contributors to the top line and bottom line for the company globally," he added.
Kamath said Procter & Gamble Hygiene and Health Care expects volume growth for the categories it operates in to be in mid-single digits over the next five to seven years. The company plans to drive double-digit revenue growth in these categories. This will be led by category growth and premiumization through customer education and new product launches.
“There are several categories where consumption is fairly undeveloped…We see an opportunity to grow these categories double-digit. To make this a reality, the role we see companies like P&G play is to continue to drive awareness and education, making our products available to consumers at varied price points and retail channels," he said.
For the fiscal ended 30 June 2023, Procter & Gamble Hygiene and Health Care reported sales of ₹3,917 crore, unchanged from a year ago, owing to a one-time other operating income and a pandemic-linked demand surge in the healthcare portfolio in the base period. The company reported profit of ₹678 crore, up 18% from a year ago, including one-time tax impacts, during the year.
Meanwhile, in a separate virtual analyst meeting for Gillette India held on Friday, the management said it will continue to drive both top line and bottom line as well as Ebitda margins. “The exact band is difficult to predict. But we aim to grow the bottom line ahead of the top line in the foreseeable future. This will enable us to fund innovation, raise the bar on superiority and absorb macro headwinds," Kamath said.Ebitda is short for earnings before interest, taxes, depreciation and amortization.
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