Home / Markets / Mark To Market /  Ad spends hit P&G Hygiene’s June quarter Ebitda margin

Procter & Gamble Hygiene and Health Care Ltd’s shares closed 3.5% higher on Thursday on the National Stock Exchange, despite its earnings before interest, tax, depreciation and amortization (Ebitda) margin taking a beating in the June quarter.

The company announced its quarterly and year-ended 30 June results on Wednesday after market hours.

Last quarter, its Ebitda margin had contracted as much as 786 basis points (bps) year-on-year (y-o-y) to 9.5%. One basis point one-hundredth of a percentage point. This is at a time when gross margin expanded by 515bps.

A sharp fall
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A sharp fall

A steep rise in advertising and sales promotion expenses is the main culprit for the weak Ebitda performance. Note that ad spends as a percentage of revenue jumped to nearly 25%. For perspective: the measure stood at 14.6% in FY21 (ending June) and 10.9% in FY20.

However, the outlook is better. “Operating leverage, led by healthy sales growth and the relative normalization of ad spends, is likely to lead to healthy margin improvement going forward," Motilal Oswal Financial Services Ltd analysts said in a report on 25 August.

For the June quarter, revenue performance was encouraging with 24% year-on-year growth. Furthermore, for the year ended June, revenue growth stood at 19% y-o-y.

According to the company, during the fiscal year, both feminine care and healthcare businesses saw double-digit growth and grew ahead of their categories.

P&G Hygiene’s portfolio includes the feminine care brand Whisper, which accounts for a good proportion of its sales and is typically rather resilient.

Meanwhile, the company also declared its final dividend of 80 per share for the year, taking the total dividend to 315 per share. This includes 85 per share of interim dividend and a special dividend of 150 per share.

So far this calendar year, the P&G Hygiene stock has appreciated by around 22%, which may well limit significant upsides in the near term.

“With only about 20% penetration in feminine hygiene products (about 67% of P&G Hygiene’s FY20 sales), coupled with a dominant market leadership and considerable moats, the growth opportunity remains immense," said Motilal Oswal.

Based on the broker’s estimates, the stock trades at about 46 times estimated earnings for FY23


Pallavi Pengonda

Pallavi Pengonda is a financial journalist producing cutting edge commentary and analysis on companies, economy and market trends. Over her journalism career spanning more than 14 years, she has covered topics across sectors such as oil & gas, consumer, aviation and new age tech companies. She heads the Mark to Market team and joined Mint in June 2010. She lives in Bengaluru. She is an art enthusiast and likes to paint in her leisure time.
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