Jyothy Laboratories: Lower interest costs boost Q1 profit after tax

Five of six power brands report robust volume growth, margins decline 90 bps y-o-y to 13.5%

Despite the slowdown, Jyothy Laboratories' consolidated sales grew by 16 per cent (Rs 385 crore) during the June quarter, driven by both value and volumes. From this financial year, Jyothy Laboratories has started reporting their financials in a consolidated format, as several brands (scrubbing brands like Exo) come under its subsidiary, Jyothy Consumer Products Marketing.

The highlight of the quarter was the sharp rise in net profit, which grew 72 per cent year-on-year (y-o-y) to Rs 42 crore. The sharp rise in profit has been driven by the lower interest costs, which fell to Rs 2.29 crore from Rs 16.6 crore in the comparable quarter last year. After adjusting this one-time event, Jyothy's post-tax profit is still up by 30 per cent. The promoters have infused funds into the company and retired expensive debt, which has helped lower interest costs.  

On the operational front, the company's soaps and detergents business grew 18 per cent to Rs 3,045 crore, while the home care segment grew 15 per cent to Rs 67.3 crore during the quarter. The company has relaunched several brands like Ujala, Exo and Henko Matic in recent months, which has helped grow the topline. Like many other FMCG players, Jyothy also reported a volume growth of eight per cent during the quarter, while the remaining eight per cent growth in sales has been driven by price rises. The company witnessed raw material costs increase by the same amount and has passed it on to consumers during the quarter. The company's operating margin declined 90 basis points y-o-y to 13.5 per cent, primarily to do with the shift in the product mix.

The company says that five out of its six power brands have reported robust growth, which is a promising development. During the quarter, fabric care has grown by 19 per cent y-o-y, fabric whitener (Ujala) has grown by 12 per cent. The seven per cent volume growth in fabric whitener and five per cent value growth suggests the brand's potential for further growth. The dish wash category has grown by 24 per cent, and is a segment analysts believe the company should focus on as it's a growing category.

Analysts claim that while the performance during the quarter is commendable, they are distinctly uncomfortable with the categories in which the company is present. The company is not present in any niche category and the ones it is present in are dominated by multinationals, which may restrict Jyothy’s growth.