P&G Hygiene’s June quarter results offer comfort

During this unprecedented health crisis, Procter & Gamble Hygiene and Health Care Ltd’s (P&G Hygiene’s) marginal 0.5% year-on-year decline in the June quarter revenue is encouraging. The company’s financial year ends in June.

Some products across the personal care category are considered discretionary during this pandemic. But P&G Hygiene has the feminine care brand, Whisper, in its portfolio, which contributes a good proportion of its sales, and is resilient.

The company’s margin performance impresses, too. Gross profit margins expanded by 430 basis points. One basis point is one-hundredth of a percentage point. Further, earnings before interest, tax, depreciation and amortization (Ebitda) increased sharply by 722 basis points to 17.4%. Yes, margins in the June 2019 quarter had contracted sharply. Even so, last quarter’s Ebitda margin is higher compared to the June 2018 quarter margin, which was at 16%.

Note that margins expanded despite the fact that employee costs increased by about 44% on a year-on-year basis. The main boost to Ebitda margins last quarter came from nearly 42% drop in advertising & sales promotion expenses. Plus, the flattish revenue performance helped operating leverage unlike other companies that saw a meaningful revenue decline as the pandemic lockdown impacted their sales.

P&G Hygiene’s Ebitda increased by a neat 70% over the same period last year to Rs. 110 crore.