The personal care company under the Cadila Healthcare umbrella, Zydus Wellness has posted a 9% rise in net sales during the second quarter of financial year, and a 38% rise in net profit to Rs 23.62 crore.
Analysts feel that the low sales growth can be attributed to lower advertisement spend by the company as well as stiff competition in the segments the company operates in.
"The company is facing stiff competition in the face-wash segment where it sells the EverYuth brand of products. Also, in the sugar substitute segment where Zydus Wellness' SugarFree brand has almost 90% market share, the company has seen single digit growth in sales", said Ruchita Maheswari, analyst with Nirmal Bang.
She added that the company had spent around Rs 31.4 crore on advertisements during the first quarter of the fiscal, which was around 33% of their sales. "The higher ad-spend in the first quarter had boosted the sales of the EverYuth segment. However, during the second quarter the ad-spend has come down to Rs 15 crore, which is at the same level compared to the corresponding period last fiscal. This, however, has impacted sales of certain segments", she explained.
Zydus Wellness traditionally spends the most on advertising during the first quarter, and brings it down in the following quarters.
Maheswari further added that "In the Nutralite segment, the company's sales is divided into a 70:30 ratio in favour of institutional sales while the share of retail sales in lesser. Margins are higher in retail sales. Also, the company has not focussed on promoting its adult healthdrink brand Actilife. It is a niche segment product, and advertising would boost the segment growth."
Zydus Wellness posted 38.12% rise in consolidated net profit to Rs 23.62 crore for the quarter ended September 30, 2012. The company had posted a net profit of Rs 17.10 crore for the quarter ended September 30, 2011, Zydus Wellness said in a filing to the Bombay Stock Exchange. Consolidated net sales of the company rose to Rs 91.41 crore for the quarter under consideration from Rs 83.89 crore for the corresponding period previous fiscal.