Food & Personal Care Products: GILLETTE PAKISTAN LIMITED - Year Ended 31-12-03
After steady growth in sales and earning per share from 1999 to 2002, Gillette had a hiccough in 2003.
However, the earning per share, though down from Rs 5.09 of 2002, still remained fairly good at Rs 3.95. "Parallel imports" and cheaper products are cited as the reason for the deterioration in profitability.
Gillette hopes to meet the dual challenge through introduction of new products and expansion of the distribution network. The Directors expect the 2004 outlook to be "reasonably optimistic."
Quite content, apparently, with only indenting and marketing in Pakistan, products manufactured elsewhere.
Gillette, the maker (elsewhere) and seller (in Pakistan) of blades and
razors, personal care products, alkaline batteries, household appliances and oral care products, has had a hiccough after continuously increasing sales and earnings from 1999 to 2003 for which period statistics have been provided in its Annual Report to the shareholders.
Sales rose steadily from Rs 428 mln in 1998 to Rs 669 mln in 2002, falling to Rs 627 in the year under review. Likewise, net earning per share rose steadily from Rs 3.14 per share in 1998 to Rs 5.09 in 2002 before falling to Rs 3.95 in 2003.
The fall in EPS from 2002 would have been less steep had not that year benefited from a "one time gain on sale of idle factory land and building."
One notes that Gillette's activities in Pakistan do not include manufacturing except for the lowly tooth brush and even that is outsourced.
Any mention of a future move in the direction of local manufacture is conspicuous by its absence.
In fact, there is no attempt to build up a sizeable equity. This year Rs 4.00 is given away as dividend against an earning of Rs 3.95 by digging into the kitty. In 2002, the shareholder was rewarded Rs 5.00 against an earning of no more than Rs 5.09 per share.
The major beneficiary of the largesse is the holding company - The Gillette Company, USA - which holds an overwhelming 77% equity.
In the absence of any hint from the report concerning the Company's intentions with regard to indigenous manufacturing, we are reduced to guessing.
One reason why the Company does not appear to have any plans in that direction could be that the quantum of consumption of its products in the country does not justify a foray into local manufacturing.
Another reason well could be the very frequent exhortations by the USA Government to its citizens to take care while moving about in the country and to take all due precautions for their own safety.
A very recent headline reads: "US refuses to stop negative advisories" concerning travel of its citizens to its non-Nato ally.
Be that as it may, we turn to more mundane matters. Despite some loss in sales due to reasons mentioned, the gross margin actually improved to a very robust 41.5% (up from 39.3% in 2002).
Net margin fell from 14.6% in 2002 (helped by a one-time gain, already mentioned) to 12.1% in 2003.
Among the Company's products, the Gillette Mach III shaving "system" is stated to be doing well in the premium market while sales of the disposable category are affected by cheaper products in the market.
Sale of personal care products (not identified in the Report) grew 10% despite "increased inflow of illegal imports." Oral-B (we are not informed what that is) was launched and met favourable response we are informed.
The Braun range (of what, alas we do not know) is also said to be doing well. The Company plans to launch new products and to expand its distribution network to meet the challenges of 2004 and is "reasonably optimistic" about the outcome.
The number of shareholders is given as 579 in which CDS withholding of 21.54% equity is one. We do not know how many shareholders that masks.
The share is rather illiquid with only 50,600 shares changing hands during the quarter January-March 04, the price per share ranging between Rs 61.25 to Rs 65.00.
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Performance Statistics (Million Rupees)
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Year Ending 31 December 2003 2002
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Liabilities
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Paid-up Capital: 192 192
Reserves & Surplus: 46 47
Equity: 238 239
Current Liabilities: 143 179
Non-current Liabilities: 1 1
Balance Sheet footing: 383 420
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Assets
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Current Assets: 359 388
Non-current Assets: 23 32
Total: 383 420
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Sales, Earnings, Payout
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Net Sales: 627 669
Gross Profit: 260 263
Admin. & Selling Expenses: 143 147
Financial Charges: 0 0
Other Income: 6 18
Profit Before Tax: 123 134
Current Tax: 26 31
Prior Tax: 21 3
Total Tax: 47 2
Profit After Tax: 76 98
Dividend: 4.00 5.00
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Ratios
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Earning Per Share (Rs): 3.95 5.09
Payout Ratio (%): 101.3 98.2
Price on 14-4-04 (Rs): 64.00 -
P/E Ratio: 18.3 -
Book Value of Share (Rs): 12.4 12.4
Price/Book Value Ratio: 5.2 -
Gross Margin (%): 41.5 39.3
Net Margin (%): 12.1 14.6
Debt/Equity Ratio: 0:100 0:100
Current Ratio: 2.51 2.17
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COMPANY INFORMATION: Chairman: Sanaullah Qureshi. Chief Executive: Mohammad Azhar Aqil. Directors: Samir N. Haddad, Siavash Motemavelian, Peter Mee, Rashid Abdulla, Salim Adaya. Company Secretary: Saeed Akram; Registered Office: 2nd Floor, Imperial Court Building, Dr Ziauddin Ahmed Road, Karachi. Phone: 9221-568-8930. Registrars: Gangjees Investment & Finance Consultants, Karachi.
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