NH Bhansali, CEO, Finance, Strategy & Business Development and CFO, Emami Group said the company has continued to gain market share despite a relatively weak sentiment, and the third quarter performance was satisfactory in spite of delayed winter, erratic rainfall.
Bhansali is upbeat on the outlook for the fourth quarter and next fiscal on hopes of improving global sentiment, normal monsoons in India, and more new launches both in the healthcare and personal care segments, as well as investments in existing products. He is confident of maintaining margins in 17-19 percent range.
The company is focused on working for the long-term growth of brands, says Bhansali.
He is also hopeful of international business fairing well despite currency headwinds on back of power brands.
The Kolkata-based FMCG Company reported 26.98 percent decline in consolidated net profit at Rs 134.12 crore for the third quarter ended December 31, on account of amortization of Kesh King intangibles.
Below is the verbatim transcript of NH Bhansali’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.
Reema: We know that quarter (Q3) was not the best for fast-moving consumer goods (FMCG) quarters for various macro headwinds that we highlighted like weak winters etc and that impacted the company’s volume growth in the prior quarter (Q3). Now that it is behind us can you guide for some sort of volume growth in the coming quarter that we are in and even FY17 what is the outlook on volumes?
A: You rightly said there were lot of headwinds from weaker winters and erratic summer and rainfall also. For the quarter and for the nine months also the season had not been supporting to our business. However, despite this we have presented very good growth and relatively very satisfactory business results for us with a 14 percent growth for the quarter and 17.50 percent for nine months in terms of the turnover.
EBITDA growth also had been at 18 percent and 25.5 percent. So, this has happened mainly because of our consistent efforts in improving on all fronts right from, we came out with new launches; we kept on increasing our market shares, we kept on pushing our products and market them aggressively in this relatively weaker market sentiment also. So, all this has helped to improve our sales and also a profitable growth, so we are satisfied. Even globally if you look at our business has grown by more than 11 percent.
Reema: That is about the quarter gone, right. What is the outlook for the coming quarters if you could give us some colour on that?
A: We feel since the last year the monsoon had not been that good and in the coming quarter particular we are focusing more on the next year. We feel that next year would be relatively good. One can expect a normal monsoon and also some of the things to get settled globally. So, that should help business to grow from this because the baseline in the current year had been relatively low.
Nigel: Let us talk about your margins then, they are currently at around 31.5 percent roughly. Your advertisement spends to revenues, though they are reasonably high at around 18-19 percent approximately what is the guidance for the coming year that is FY17 as well as FY18?
A: We intend to come out with many new launches. We have recently launched Zandu Honey, you might have noticed which is completely pure and there is no added sugar to it. There would be many more new launches which would come in the healthcare sector and also in the personal care sector.
We would also be investing in the existing new launches kind of Fair & Handsome Face wash and many other products which have been launched during the last past quarter. So, we expect around this kind of investments to continue but that would not impact the overall EBITDA margin.
Nigel: So at around 19 percent it should continue, your advertisement spends to revenues?
A: It could be in the range of 17-19 percent somewhere.
Nigel: Also could you give us some details in terms of Kesh King what is the current run rate, when exactly will you clear this debt?
A: Kesh King, now it has started doing very well. In fact our market share despite the initial integration issues we have been able to increase the market share by over 200 basis points during this first nine months; not nine months even it is just six months.
Nigel: What is the current run rate?
A: It is inline with what has been expected. We expect market share as I said has increased and we expect a good growth to come in the next year as well.
Reema: Any numbers?
A: Would be difficult to put a very exact number. However, as I said we are working on the long-term growth for the brand. The number would be very promising better than what has been done now.
Reema: Is the best of the margin improvement behind us so do you think margins can improve from the current 31.5 percent?
A: Margins is the function of gross margin and also the kind of investments we make on the brand. So, while we expect this same kind of margins to continue but it also depends as I said that how aggressive it would be into the next quarters or next year depending upon new launches which we may come out with.
Nigel: How is your international business shaping up given that we are learning about a lot of global headwinds? What is the guidance on that front any headwinds currently?
A: There had been a challenge, we all know because of few of the focused market kind of Nepal and Russia. In the Russia still there are currency volatility and in other countries also. However, despite this we have been able to increase our market share in our major power brands kind of Navratna, BoroPlus and Fair & Handsome so we expect better growth to come in the next quarters as well from this.
(Copy edited by Vaishali Karulkar, interview transcribed by Vrushali Sawant)