Monday, August 27, 2012, Delhi, Page No.16(MARKETS & FINANCE-mint money)
P&G improves sales growth andprofitability in India
India saw the highest growth among the BRICcountries for Procter and Gamble
Mark to Market | Ravi Ananthanarayanan
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 andacquisitions on growth. India saw the highest growth among the BRIC (Brazil, Russia, India and China) countriesfor 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
sells Vicks and Whisper products in India, and its sales rose by 27.8% to Rs. 313 crore. Its materialconsumption cost rose by a lower figureof 15%, and advertising and promotioncosts rose by only 2.5%, but royalty andother expenses rose substantially. Royalty as a percentage of sales rose by 19 basispoints sequentially, while other expensesrose by 57% year-on-year (y-o-y). Onebasis point is one-hundredth of apercentage point.Still, lower material cost growth enabledP&G to easily cover the increase inexpenses, and operating profit grew by 75.8% y-o-y to Rs. 44 crore. Net profitdeclined chiefly because of higherdepreciation, lower other income and a
Naveen Kumar Saini/Mint
Tax write-back in the year-ago quarter. The company has not given a category-wise growth number in itsstatement, making it difficult to evaluate how these businesses have done. But the reported sales growth, and the3.8 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 shavingproducts 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 poorerperformance 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 materialcosts or aggressive marketing plans that may affect margins.