Food Processing Shares - Quick Overview

      GlaxoSmithKline Consumer Healthcare Ltd

GlaxoSmithkline Consumer Healthcare
At Rs 1,111, the GSK Consumer Healthcare stock may seem expensive at 20 times estimated 2009 earnings but it trades at a far more reasonable 17 times estimated 2010 earnings. The stock has gained more than 100 per cent since January this year, especially after the health beverages firm grew its net profit by 48 per cent in the March quarter.

It is a good play on a young population, rising disposable incomes and increasing spends on nutrition. Thanks to its strong brands, net sales were up a strong 25 per cent in the June 2009 quarter to Rs 376 crore. The 12 per cent growth in volumes was lower than the 20 per cent in the last five quarters but the company managed a price increase, which helped it negotiate a rise in the cost of some inputs.

Despite a 250 basis-point rise in advertising spends, the operating profit margin expanded 140 basis points to 14.5 per cent, pushing up the operating profit by 36.6 per cent.

If the net profit grew just 19.6 per cent, it had more to do with a higher tax rate and lower other income. With a share of over 50 per cent of the Rs 2,300 crore malted beverages category, GSK Consumer is leveraging the flagship brand, Horlicks, to launch variants and enter new product categories, including biscuits for children, health snacks, chilled milk and protein supplements. That’s one reason for the increased ad spends.

The company is also trying to position Horlicks at lower price points so as to attract new consumers; last year, it launched Women’s Horlicks and Boost bites. New products contribute a very small portion to the total revenues and it could be a while before they contribute to the profits.
source - BS

(updated - 11 Sept 2009)

Disclaimer: Information presented on this site is a guide only. It may not necessarily be correct and is not intended to be taken as financial advice nor has it been prepared with regard to the individual investment needs and objectives or financial situation of any particular person. Stock quotes are believed to be accurate and correctly dated, but does not warrant or guarantee their accuracy or date.
Our site takes no responsibility for any investment decisions based on recommendations provided on website.

GlaxoSmithkline Consumer Healthcare
The economy may be in a downturn but some brands are strong enough to be able to command the pricing power. That is clear from the March 2009 quarter numbers for health beverages firm Glaxo Smithkline Consumer Healthcare.

With a remarkable 31 per cent top line growth at Rs 539 crore, driven by a 20 per cent increase in volumes, Glaxo Consumer has kicked off CY09 on a strong note. The highest the top line has grown in the last five quarters is 26 per cent, while for CY08 the growth was 21 per cent.
This is also the fifth consecutive quarter in which volumes have risen by 20 per cent; while the flagship brand Horlicks saw volumes grow over 20 per cent, the rise for Boost was 8 per cent, while for biscuits on a smaller base, the increase was 27 per cent. With prices of inputs, including those of malt, milk powder and milk rising sharply, gross margins were under pressure, coming off by about 220 basis points.

The impact might have been worse had it not been for the fact that wheat prices didn’t rise too much.

(updated - 01 May 2009)

However, the company cut back on advertising and other spends to ensure that the operating profit margins expanded by 220 basis points to 22 per cent, the highest in several quarters - the opm for CY08 was 15.5 per cent. With both interest expenses and depreciation costs stable at the levels seen in earlier quarters, the profit rose a remarkable 48 per cent to Rs 84 crore, partly helped by higher other income.
For long Glaxo Consumer was considered aone product company. However, off late it has launched several new products. Leveraging its brand, Glaxo Consumer has ventured into three new categories last quarter - chilled milk, protein supplements and nutribars. Last year, it had launched Women’s Horlicks and Boost bites.
At the current price of Rs 827, the stock trades at 14 times estimated CY09 earnings and is a good play on a young population, rising disposable incomes and growing aspirations.
source - BS