Analyst Meet / AGM - Analyst Meet
Preserving cash to spend on Greenfield plant over the next few years
GlaxoSmithkline Consumer Healthcare (GSKCH) held a conference call to discuss the results for the quarter ended March 2014 (Q5 FY14).
Highlights of the call
The net sales for the March 2014 quarter have increased by 15% to Rs 1119.82 crore. Growth has been consistent with all regions and all categories. Health drink portfolio continues to be a market leader with 57.5% Value sales and 64.8% Volume share - (MAT March, 2014). Its closest competitor have market share of 14.5% Value Market Share and 16.5 % Volume Market Share - (MAT March, 14). Three innovative products were launched between Jan 2013 and March 2014. Horlicks Kesar Badam achieved high in-store visibility and high distribution. Women's Horlicks continued to deliver well through its communication around bone health. Lite Horlicks created high impact visibility across South and East markets. Food business grew on the back of strong performance across North and West regions. The OPM declined by 61 bps to 20.5%. The net profit grew by just 10% to Rs 171.71 crore due to one-offs in depreciation (change in policy) and tax rate (up from 32% to 34% and deferred tax adjustment).
There was overall good performance with HFD & Foods growing at 13% and 32% respectively.
Domestic sales grew by 15% aided by 7% volume growth and 8% price growth. Horlicks registered 7% volume growth & 7% price growth while Boost delivered 6% volume growth & 4% price growth.
Women's Horlicks grew by 40% and Chocolate Horlicks grew by 23% during the quarter.
The sachet business grew 15% in the quarter, which constituted 5.5% of total HFD sales.
Oats registered a double digit growth (on low base) and saw a gain in market-share. The company commands 17% market share in South. Biscuit business grew by 18%. Foodles registered 20% growth, albeit small base
In January, the company has take price hike of 3.5% in HFD segment.
HFD grew by 18% growth in North & West and 13% growth in South & East.
Auxiliary business income grew by 13% this quarter due to lower revenue from Crocin. The mgmt said that there was regulatory issues, where company was ordered to sell the drug at DPCO prices, which is nearly half of its original pricing (i.e. to sale a Crocin at Rs 0.99 instead of Rs 2).
The company's other distributed products continued to perform well. Eno registered good growth even though its category growth has come down. The market-share is up 260 bps. Iodex has gained 130 bps market-share even though category growth is lackluster. Sensodyne continues to do well; The company has gained 30 bps market share. The company has introduced a new product called Ostocalcium syrup, whose current sales was at Rs 65 - 70 crore and its category size is around Rs 250 crore. The mgmt expects going forward, auxiliary business income to grow by 20%.
The current distribution reach stands at 1.27 mn outlets which includes both direct & indirect and it plans to add 0.2 mn outlets in FY15. It has also launched several initiatives to improve its indirect coverage like - launched wholesale royalty program and introduced several retailer friendly packs for easier stocking.
The mgmt said that it is preserving cash as the company intends to spend Rs 700 - 900 crore on Greenfield plant over the next few years.
The company's current HFD capacity stands at 1.3 lakh tons.
The mgmt believes 6% - 9% volume growth and 7% - 8% price growth is sustainable in the next 1 - 2 years. The mgmt said that in case of weak monsoon, it expect its volume growth to be impacted due to high exposure to East, which is highly dependent on monsoons
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