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GlaxoSmithKline healthcare Q2-2014 marketing spend down 24 per cent q-o-q

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BENGALURU: Nutritional products and OTC drug major GlaxoSmithKline Consumer Healthcare Limited (GCHL) spent 23.9 per cent less towards advertising and sales promotion (ASP) in the quarter ended 30 June 2014 (Q2-2014) at Rs 141.40 crore (14.6 per cent of Total income from operations or TIO) versus Rs 185.75 crore (16.6 per cent of TIO) in Q1-2014 and just 2.8 per cent more than the Rs 137.56 crore (15.5 per cent of TIO) in Q2-2013.

The company’s nutritional product brands include Horlicks, Boost, Foodles , while its OTC drugs brands include Crocin, Eno and Iodex.

Notes: (1) GCHL’s follows the calendar year and its fiscal ends on 31 December, hence quarter ended31 March is Q1, quarter ended 30 June is Q2, quarter ended 30 September is Q3 and quarter ended 31 December is Q4.

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

GCHL’s TIO in Q2-2014 at Rs 965.97 crore was 13.7 per cent less than the Rs 1119.82 crore in Q1-2014 and 8.5 per cent more y-o-y than the Rs 890.30 crore in Q2-2013. The company’s TIO shows an upward trend over a nine month period commencing Q2-2012 and ending with the current fiscal Q2-2014.

In terms of actual rupees spent, the company’s ASP shows a slightly upward simple linear trend, while in terms of percentage of TIO, ASP seems to have flattened out. The simple average ASP across the nine quarters under consideration is Rs 148.42 crore, which means that the current quarter’s ASP is 7.9 per cent below par when compared to the average of the nine quarters under consideration in this report. Please refer to Fig 1 below.

GCHL’s PAT in terms of absolute rupee value shows an upward simple linear trend, while in terms of percentage of TIO, the linear trend is flat, tapering downwards slightly, a fact that could easily change with a slightly higher than average PAT  in percentage of TIO terms in the next few quarters. The company’s simple average PAT across the nine quarters under consideration is 13.4 per cent of TIO.

GCHL reported PAT of Rs 130.12 crore (13.5 per cent of TIO) in Q2-2104, 24.2 per cent lower than the Rs 171.71 crore(15.3 per cent of TIO) in Q1-2014 and 8.5 per cent more than the Rs 119.96 crore (13.5 per cent of TIO)  reported in the year ago quarter Q2-2013.

GCHL’s analyst presentation says that its domestic sales have grown 10 per cent despite an extremely challenging environment. It has witnessed a 24 per cent drop in export sales due to certain one-offs and slowdown in Bangladesh. Overall, domestic growth can be attributed to a 3 per cent growth in volume and 7 per cent due to increase in pricing.

Strong innovation led re-launches of sub-brands - Mother’s Horlicks, Horlicks Lite and Chocolate Horlicks were re-launched during the quarter. GCHL says that it ran new impactful campaigns on Mother’s Horlicks and Chocolate Horlicks, and has added focus on digital marketing during the current quarter.

Click here to read the financial report

Click here to read the unaudited financial report

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