GlaxoSmithKline Consumer Healthcare ’s net profit for the July-September quarter surged 31% year-on-year to Rs 103.03 crore as strong sales coupled with price hikes taken during the quarter offset pressures from rising input costs.
The health food and drink maker’s net sales for the third quarter were up 18% year-on-year to Rs 720.07 crore.
GSK Consumer’s flagship brands Horlicks and Boost saw "robust double-digit" growth in the quarter, said Ramakrishnan Subramanian, director – finance.
For instance, Horlicks grew 18%, which included a volume growth of 10% and value growth of 8%.
GSK Consumer’s earnings were also boosted by other income during the quarter, which jumped 78% to Rs 23.11 crore. Tax expenses, however, rose 27% to Rs 49.93 crore in July-September, the company said on Friday.
Investors cheered the strong earnings growth of GlaxoSmithKline Consumer Healthcare and the shares ended up 5% at Rs 2,498.50 crore on NSE.
But while earnings growth and sales growth was strong, the company like many other FMCG companies saw pressure from rising input costs. GSK Consumer’s raw material costs rose 20% year-on-year to Rs 180.80 crore. Packaging costs over the three-month period were up 24% to Rs 64.99 crore, it said.
"Other than sugar, all other inputs moved up significantly," Subramanian said in a post earnings conference call. Milk for example is up 20%, barley prices are up 14-15%. He expects that milk prices at least will remain high due to a demand supply gap in the market.
Subramanian said GSK Consumer did increase product prices by 2.5-3% in July to offset some of the rise in input costs. It also launched Horlicks Gold at a 30% premium to the regular Horlicks during the quarter.
Continuing with its trend of expanding the Horlicks brand into the health foods category, the company is launching Horlicks Oats. This product will be first launched in south India, and then will be rolled out nationally in a phased manner, Subramanian said. Marico and Kellogs are among the other companies already marketing oats in India.
However, GSK Consumer seems to have hit a supply road block as far as its Horlicks Foodles noodles is concerned. He said that the company is in the process of sorting out supply related issues with Indo-Nissin Foods, which makes the noodles for GSK Consumer.
There is already a stiff competition in the health drinks segment as well as noodles and oats segment. That means advertising and promotion [A&P] spends will be high across companies. GSK Consumer’s A&P spends rose 11% to Rs 119.62 crore in the third quarter.
The company will continue A&P spends at 15-17% going ahead, Subramanian said.
Meanwhile GSK Consumer has pegged a capital expenditure of Rs 200 crore for 2012. The company has a January-December fiscal year. It has spent Rs 160 crore on capital expenditure this year.
Separately the company said its board approved re-appointment of Zubair Ahmed as its managing director from January 01, 2012 to May 31, 2013.
Source: www.moneycontrol.com
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