Highlights of the call
- The company’s sales for the quarter ended March 09 has increased by 31% to Rs 539.37 crore, supported by volume growth in Horlick by 21% and Boost by 8%. There was a overall volume growth of 20%. There was a price growth of around 7% for the quarter. A 3% excise reduction has also impacted on overall volume growth.
- All regions have recorded good growth with all brands registering a double-digit growth.
- The export business has grown by 45% for March quarter and expects to maintain this growth for rest of the year also. Export business is 6% of the total sales and will increase to 7%
- The net profit of the company grew by 48% to Rs 83.89 crore due to improved revenue and margin.
- The operating profit margin (OPM) of the company has increased by 230 basis points to 22% due to decrease in advertising and sales promotion (ASP) cost, other expenditure and raw material cost. However, the company said that it expects its margin to be around 18% for calendar year (CY) 2009 due to increase in ASP cost, as company will launch new products throughout year and increase spending for the new 3 products launched this year. Also, food inflation will also rise, expected to be around 10% to 11% during the year.
- The margin may go below 18%, a fall of 100 basis points, may be registered after CY09, due to new product launches and increase on spend on this products.
- ASP cost decreased during the quarter (12% of the adjusted sales) due to tightening of the spend and preserving money for Q2 and Q3 quarter. The ASP cost will go up to 13% to 14% of total sales by the year-end.
- The company earns margin of around 20% from export business.
- The company earns a margin of around 25% from third party sales and around 20% of manufacturing cost from inter-company sales.
- Other income of the company has inclined by 38% to Rs 25.64 crore, which comprise of auxiliary business Rs 11 crore, dividend Rs 9 crore and miscellaneous sales around Rs 2 crore.
- The company had 15% revenue from rural market.
- The company’s market share remains intact in health food drink (HFD) despite entry of two new players in this market last year, Dabur and Hindustan Unilever.
- Milk powder price for Q1 was Rs 133 kg and expected to remain around Rs 130 – 135 kg for the CY09. Malt and barley prices has seen a 10% to 12% rise during Q1 and may come down during the year. Wheat prices have gone up by 2% during Q1 and do not see much uplift during year. However, prices of wheat will depend upon MSP for the year. There may be rise of 5% on runaway inflation. Sugar prices have moved up by 40% while milk prices has gone up by 15% to 20% in Q1 and expects to rise future. Sugar prices expected to move up future in coming months.
- 50% of the product produced is from excise free zone.
- Excise has come down from 9% to 6.5% for Q1.
- The company has launched new product in April, which is ready to drink products named Horlick Chill Dood, which has market size of around Rs 250 crore.
- Going forward, the company will bring out global products and leverage Horlicks brand for its top line growth.
- The company has cash of around 517 crore at present.
- The company will have its normal capital expenditure of Rs 50 to 60 crore for CY09 along with a Rs 180 crore capacity expansion plans at its existing factories for existing products. This will begin from Q4 CY09 and will be there till half of CY10.
- The company doesn’t expect this kind of growth for the rest of the year. The company maintains its 8% to 9% of the volume growth expectation, which is a sustainable growth if the present situation remains