P & G First-Half Profits Decline
Higher operating expenditure has pushed down Procter & Gamble India's 1996 first half net profit by six per cent. The company registered Rs 14.25 crore this year against Rs 15.17 crore in 1995.
Sales have gone up by 20 per cent while EPS fell to Rs 9.87 from Rs 10.51. P&G has not declared any dividend, while last year there was an interim dividend of 25 per cent. Operating margins have fallen from 19 per cent to 15.63 per cent, indicating higher expenditure.
In a statement, the company said higher interest rates, pre-operative expenses of P&G's new plant at Goa and higher advertising expenditure have depressed profits. "Given the investments made in the first half of new products and tight credit situation which reduced trade inventories, we are quite happy with the results," said Bharat V Patel, chairman and managing director of P&G India.
The 1996 results show a decline in both growth and profitability. In the first half of 1995, sales growth was much higher and profits grew more than 80 per cent. For the full year of 1995-96, the company's sales grew 37 per cent and profits 87 per cent.
In the first half of 1996-97, sales grew 20 per cent to Rs 205.6 crore from Rs 171.55 crore. Expenditure growth was much higher from Rs 140.55 crore to Rs 175.83 crore. The company attributes this to pre-operative expenses on the new plant at Goa, inaugurated in January this year.
Interest costs have risen from Rs 2.75 crore to Rs 3.68 crore and depreciation went up from Rs 3.28 crore to Rs 5.86 crore. Taxes fell from Rs 12.93 crore, but still remain high at Rs 8.35 crore. Gross profit has fallen to Rs 28.46 crore from Rs 31.38 crore.
Net profit has therefore fallen marginally from Rs 15.17 crore to Rs 14.25 crore.
Equity has remained unchanged at Rs 14.43 crore. P&G hopes to do better for the full year as they expect to benefit from the tax relief in setting up a plant in Goa.
P&G declared its results after a late evening board meeting in Mumbai on February 20. The 65 per cent subsidiary of P&G, USA makes healthcare products like Vicks and Whisper sanitary napkins. It is the market leader in both categories.
Last year, it launched three new products, Vicks Sinex, Vicks Vitamin-C and Vicks Super balm.
Company sources said higher ad and marketing expenditure on the new launches and the plant are responsible for the profit fall.