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Q1-2016: Emami spends Rs 142.06 crore towards marketing

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BENGALURU: Emami Limited spent 38.1 per cent more towards Advertisement and Sales Promotion (ASP, marketing) in Q1-2016 (quarter ended 30 June, 2015) at Rs 142.06 crore (24.1 per cent of Total Income from Operations or TIO) as compared to the Rs 102.84 crore (21.3 per cent of TIO) in the corresponding quarter of the previous year. Emami?s Q1-2016 ASP was 72.3 per cent more than the Rs 82.47 crore (14.9 per cent of TIO) in the immediate trailing quarter (Q4-2015).

Note: 100,00,000 = 100 lakh = 10 million = 1 crore

Among the brands in Emami?s portfolio are Zandu, Zandu Balm, Himani Navratna, BoroPlus, Fair and Handsome, Emami Vasocare, Emami Mentho Plus, Himani Fast Relief, Zandu Sona ChandiChyawnprash Plus, Zandu Kesari Jivan,etc. 

Emami director Mohan Goenka said, ?The first quarter of 2015 has been challenging with subdued economic environment and unfavourable weather, which is expected to continue. Notwithstanding such hurdles, Emami has ensured a good performance to deliver a profitable growth during the quarter. Strong performance by all our power brands in key categories coupled with growth in International business has helped us to register a 22.4 per cent top line growth.?

Please refer to Fig A below for ASP during the 17 quarter period starting Q1-2012 until the current quarter. ASP in Q1-2016 has been the highest by the company in terms of absolute rupees and in terms percentage of TIO at Rs 142.06 crore and 24.1 per cent. Historically, as is evident from the figure below, Emami?s ASP has been the highest in Q3 of a financial year (the festival season in India) and the next highest in Q1, with the company spends the lowest towards marketing in Q4.

During the 17 quarter period under consideration in this report, Emami has spent the lowest towards ASP in terms of absolute rupees and percentage of TIO in Q4-2012 at RS 36.60 crore and 9.2 per cent of TIO. The broken blue and maroon trend lines indicate that the company?s ASP shows a linear increasing trend in terms of absolute rupees and percentage of TIO.

Also historically, Q3 of a financial year has been the best quarter for Emami in terms of TIO and PAT, which peaked in Q3. The next best quarter has been the fourth quarter of a financial year before sales and profits dip to the lowest in a year in Q1 (the summer and the beginning of the educational holiday season in India) followed by a rise in Q2. Please refer to Fig B below.

In Q1-2016, Emami reported TIO of Rs 589.87 crore, which was 22.4 per cent more than the Rs 481.73 crore in Q1-2015 and was 6.5 per cent more than the Rs 553.66 crore in Q4-2015..

During the 17 quarter period under consideration, Emami TIO was highest in Q3-2015 at Rs 692.26 crore and lowest in Q1-2012 at Rs 299.91 crore. The broken brown trend line shows that the company?s TIO is increasing linearly.

PAT in Q1-2016 at Rs 87.75 crore (14.9 per cent of TIO) was 23.9 per cent more than the Rs 70.80 crore (14.7 per cent of TIO) in Q1-2015 but was 36.6 per cent lower than the Rs 138.33 crore (25 percent of TIO) in Q4-2015.

Company Speak

Domestic business in the first quarter grew steadily to achieve a healthy topline growth of 23.4 per cent. Despite prevailing macro-economic challenges and not very favourable weather, both the consumer care and the health care segments have performed considerably well.

New brands such as Fair and Handsome Instant Fairness Facewash, Emami 7 Oils in One, Zandu Balm Ultra Power and ?HE? Deodorant continue to contribute to the growth during the first quarter.

The quarter also witnessed the launch of a brand extension - Zandu Gel Balm Junior, the first ever gel based balm for kids in the country. The company also scaled up its spend on both advertisement and brand building during the quarter. Despite the high increase in ad spends, the company?s EBIDTA during the quarter rose by 32.9 per cent, bettering industry average.

Aggressive marketing campaigns, both ATL and BTL delivered rich dividends in terms of growth of most of Emami?s Power Brands. Navratna Oil, Navratna Cool Talcum Powder, Zandu Balm, MenthoPlus Balm, Fair & Handsome and Zandu HCD Range grew in healthy double digits and enhanced their respective market shares.

With increased emphasis, improved visibility and focused execution, the Modern Trade business and Direct Rural business continued to grow at a steady pace.

Emami director Harsha V Agarwal said, ?Prudent approach, efficient cost management and robust business model have helped us to meet the challenging environment to remain competitive and profitable. For the long term, we will continue to focus on cost efficiencies and invest in R&D and brands to further grow our market share. As part of our aggressive growth strategy, we acquired the Kesh King business during the first quarter FY-2016 and forayed into the Ayurvedic Hair & Scalp care segment. The Kesh King business is being integrated with Emami?s existing business and it has already started contributing to the growth. We plan to make Kesh King a pan-India brand soon.?

Emami acquired hair and scalp care business under the ?Kesh King? and allied brands for Rs 1684 crores. The company raised around Rs 950 crore debt to partially fund the acquisition. The balance was funded by internal accrual.

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