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December quarter: P&G Healthcare marketing spends down 10 per cent, PAT up 18.4 per cent

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BENGALURU: Consumer goods company Procter & Gamble Hygiene and Health Care Limited (P&G Healthcare) reduced its ad and sales promotion spends (ASP, marketing spends) by 10 per cent in the quarter ended 30 December, 2014 (DQ-2014, current quarter) to Rs 87.85 crore (13.5 per cent of net Total Income from Operations or TIO) from Rs 97.56 crore (17.1 per cent of TIO) in the year ago quarter (DQ-2013) and reduced by 16.2 per cent as compared to the Rs 104.88 crore (18.2 per cent of TIO) in the immediate trailing quarter SQ-2014.

Notes: (1) The company?s financial year ends on June 30, hence results for the quarter ended June 30, 2014 are JQ-2014, for the quarter ended September 30, 2013 are SQ-2014; for the quarter ended December 31, 2013 are DQ-2014 and for the quarter ended March 31, 2014 are MQ-2014. Similar nomenclature is applicable for other years.

(2) 100,00,000 = 100 Lakhs = 10 million = 1 crore.

Across 12 quarters starting MQ-2012 until the current quarter (DQ-20140, P&G Healthcare?s ASP spends both in terms of absolute rupees and as percentage of TIO were the lowest at Rs 37.99 crore and 7.8 per cent of TIO respectively in JQ-2014.

Though in terms of absolute rupees, P&G Health?s ASP shows an upward linear trend, in terms of percentage of TIO, the linear trend is downwards. The company?s highest ASP in absolute rupees was in the previous quarter at Rs 104.88 crore (18.2 per cent of TIO), while the highest in terms of percentage of TIO was in DQ-2012 at 20.1 per cent of TIO (Rs 94.58 crore). Although in terms of absolute rupees, P&G Healthcare?s ASP shows an upward linear trend, in terms of percentage of TIO, the linear trend is downwards.

P&G Healthcare?s ASP is made up of two components ? advertisement (ad) and trade incentives (incentive) spends. From FY-2008 (year ended June 30, 2008) until FY-2013, the company?s ASP is split has shifted towards increasing incentive spends ? the company?s incentive spend has moved from about 20 per cent of ASP to 44 per cent in FY-2013, with a slight dip to 42.1 per cent in FY-2014.

Ad spends proportionately moved downwards from 80 per cent in FY-2008 to 56 per cent in FY-2013, moving upwards slightly to 57.9 per cent of ASP in FY-2014. This does not mean that the company has been spending lower amount of money towards ad spends, it?s just that with higher budgets, the skew is more towards spending more on trade incentives. Please refer to Fig -1 below.

The company?s TIO in DQ-2014 at Rs 644.51 crore was 12.8 per cent more than the Rs 571.27 crore in DQ-2013 and 11.8 per cent more than the Rs 576.49 crore in SQ-2014. TIO shows an upward linear increase trend over the 12 quarters under consideration.

Profit After Tax (PAT)

P&G?s PAT in the current quarter at Rs 90.66 crore (14.1 per cent of TIO) was 18.4 per cent more than the Rs 76.57 crore (14.1 per cent of TIO) in the corresponding year ago quarter DQ-2013 and was a whopping 47.4 per cent more than the Rs 61.50 crore (10.7 per cent of TIO) in the preceding quarter SQ-2014.

During the 12 quarter period under consideration in this report, the company?s highest PAT in absolute rupees has been during the current quarter, while in terms of percentage of TIO, the highest was in JQ-2014 at 18.5 per cent (Rs 89.92 crore). While PAT shows an upward linear trend in terms of absolute rupees and percentage of TIO during the past 12 quarters, over the past seven years starting FY-2008 until FY-2014, PAT in terms of percentage of TIO shows a declining linear trend.

P&G Healthcare attributes the improvement in PAT to its continued focus on brand fundamentals and that both its feminine and healthcare businesses continued to deliver double digit growth in a competitive market environment behind superior products, strong innovation and strength  of product portfolio.

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