Procter & Gamble Hygiene & Health Care, which sells sanitary napkins and cold and cough OTC (over the counter) products under popular brands like Whisper and Vicks, posted disappointing results for the June quarter. An excise duty levy on sanitary napkins in the 2010-11 Union Budget and increasing competition are among the key reasons for its muted top line growth, which slipped to just nine per cent year-on-year for the quarter from 15-20 per cent in the previous three quarters of the financial year.
The slow growth in top line is despite the 170 per cent rise in marketing costs, an indication of rising competition, especially in its sanitary napkin business. At the net level, profits were, thus, down 80 per cent during the quarter. The lackluster quarter resulted in the company reporting flat profits of Rs 179 crore for the year ended June 2010, even as sales were up 17 per cent over the previous year.
Positively, the long-term demand for hygiene products in India has been healthy, driven by the low penetration of 25 per cent in urban India and 10 per cent in rural areas, along with improving income levels and rising personal hygiene standards. In fact, the company occupies around half of the Rs 900-crore sanitary napkins market. It has reported robust growth in the last three-four years led by popular brands like Whisper Ultra (premium-end) and Whisper Choice (mid-tier), as well as technology support from its US-parent. Hopefully, it should do better in future.
| MARGIN WOES | |||
| In Rs cr | Q4 FY10 | Q4 FY09 | FY10 |
| Net Sales | 197.9 | 181.1 | 902.9 |
| EBITDA | 20.8 | 71.3 | 258.7 |
| Net profit | 10.1 | 47.8 | 179.8 |
| EPS (Rs) | - | - | 55.4 |
| Year ending is June Source: Capitaline | |||
Its other solid brand, Vicks, is a seasonal product present in a relatively mature market. The stock, which has risen 126 per cent in the last one year, trades at 28 times its estimated 2010-11 earnings, which is not cheap.
Expect the stock to remain under pressure in the near term.