GlaxoSmithkline Consumer Healthcare (GSK Consumer healthcare) held a conference call to discuss the result for the quarter ended December 2008. Following are the key highlights of the call:
Highlights of the call
The company’s sales for the calendar year (CY) ended December 2008 has increased by 21% to Rs 1592.30 crore while net profit has increased by 16% to Rs 188.33 crore.
The company had export revenue of Rs 140 crore for CY08.
For the quarter ended December 2008, the net sales of the company has increased by 17% to Rs 343.56 crore while net profit has increased by 18% to Rs 32.58 crore.
The company’s auxiliary business income for the Q4 is Rs 7 crore compared to Rs 5.5 crore in the corresponding quarter of last year. For CY08, it has stood at Rs 37 crore.
The company has seen a value growth of 21% for CY08, which includes a 7% price hike and 15% of volume hike.
For the quarter, the company recorded a 17% overall growth with 4% price hikes and balance 13% volume hike.
The company has taken a 5.5% price hike in January 2009.
Horlicks has recorded a 13% growth and Boost a 14% growth for the CY08. Volume growth of Horlicks was 13% and Boost 12% for CY08.
Base Horlicks has grown by 16%, Junior Horlicks grown by 20% and Mother Horlicks by 30% for CY08.
Biscuits business has seen 24% growth in volume. The company has done a biscuit business fo Rs 60.2 crore against Rs 48.5 crore for CY08.
The company has 70% market share in malt business.
The company receives 75-80% revenue from Horlicks brand, 11-12% from Boost brand and rest from Maltova brand.
In January 2009, the company has launched one product ‘Activ Grow”; more will be launched in coming quarters. Activ Grow is nutritious product launched for infant population and will be sold through prescription only. The company will entered in new categories related to food. Last year 3 new products: Women Horlicks, Active Base and Boost White were launched.
Sugar and barley prices were ruling high in double digits growth, which has now come down to 6% but milk prices are still high. However, malt barley prices are still high due to capacity constraint, which will ease in next half of CY09. Raw material inflation of the company has come down from 13% to 6%, but the management says that future is still unclear over raw material prices. Fall in crude oil prices has benefited the company in reducing its packaging cost.
There has not been any significant drop in SMP prices, which has come down from Rs 150 kg to Rs 135 kg, and management expects the prices not to fall below Rs 130 kg. The gap between milk and SMP prices is expected to remain because milk prices depend on Co-operative and demand-supply.
The other income of the company has gone up because of exchange gain of Rs 5 crore from export market and from interest income.
The company will maintain its adspend ration of 12% for its base business while spending more on its new category business which will eventually raise adspend to 14%.
The company receives 7% from modern trade, which is growing at 50% to 60%.
The company has cash in hand of around Rs 450 crore.
The company will have Rs 60 crore normal capex for CY09. The company is going for capacity expansion for Rs 130 crore, which will be spend equally in CY09 and CY10.
The Board of Director has recommended a final dividend of Rs 5 per equity shares of Rs 10 each for the year ended December 2008 at its meeting held on January 27, 2009. As such, the total year dividend will be Rs 15 per equity shares.
Inflation and agro products are at higher level is posing challenges to the company.
The company expects to post a double digit growth for CY09 also.
The company has not yet experience any impact of downturn. The management said that March months will bring clear picture of the downturn on the industry.