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Destocking due to GST hits Emami’s revenue in June quarter

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FMCG major on Wednesday said significant destocking due to implementation of the Goods and Services Tax () and inventory correction along with the geopolitical condition in the international markets have impacted its revenue in April-June quarter.

Destocking due to GST hits Emami's revenue in June quarter
However, company's Director Harsha V. Agarwal said a good monsoon, increasing infrastructure, enhanced government spending and streamlining of GST are expected to help in generating good growth in medium to long-term basis

Its consolidated revenues at Rs 541 crore declined by 16 per cent in the quarter ended June 30, 2017 as compared to Rs 645.43 crore in the year-ago period.

The company’s net profit for the quarter was down by 98.16 per cent to Rs 1.04 crore as against Rs 56.65 crore in the year-ago period.

“The quarter witnessed significant destocking in the domestic market due to implementation of GST and also sizeable inventory correction in International markets,” it said in a statement.

“Domestic rural and wholesale markets which were recovering from demonetization were further impacted due to the implementation of GST. Further, geopolitical conditions in our International markets also impacted the business.”

It said the company would regain the ground as the market looks optimistic post GST and secondary sales in the international markets are also improving.

“Apprehensions of GST and resulting uncertainties at trade level, particularly in wholesale and rural sales channels led to substantial destocking in domestic market. Primary offtakes faced reduction in such a business environment,” company Director said.

However, company’s Director said a good monsoon, increasing infrastructure, enhanced government spending and streamlining of GST are expected to help in generating good growth in medium to long-term basis.

“We expect second half of the current fiscal to be better than the first half,” he said.

Responding to the shareholders’ query in the company’s Annual General Meeting on the possibility of acquisitions in the unorganised sector post GST, Agarwal said, “We are open for acquisitions for small or big opportunities. In unorganised areas it will depend on the brand value and their business model. If we see value in any unorganised player also, we are open.

“We have to see whether we can grow the brand. We are eyeing in personal care and healthcare segment. It can be as small as with a turnover of Rs 15-20 crore and can go upto Rs 300-500 crore. If there is a right price, if we see the potential for growth we may consider.”

“This year, our core focus will be on the healthcare and personal care products. There will be brand extensions as well as new launches,” he said

While addressing the shareholders at the AGM, company’s Executive Chairman R.S. Agarwal said, “Company has decided to go beyond its traditionally strong markets, and step into newer markets. It has registered products in Nigeria and Ghana with an intent to launch them during the current year. Your company also intends to launch more products in neighbouring Bangladesh.”

In June 2015, Emami Ltd acquired Kesh King for Rs 1,651 crore which was one of its largest deals in the FMCG space. The company also acquired the Zandu brand in the past which opened up the balms portfolio for the company.

Agarwal said Emami was also aiming to increase its presence in Bangladesh by widening the product portfolio as it expects that country s growth to be considerably higher than other foreign countries it operates in.

Bangladesh accounts for 30 per cent of Emami Ltd s consolidated international sales.

Emami chairman in his address to the shareholders said that the company has initiated the process to reduce dependence on wholesale channels and instead increase the emphasis on direct distribution.

“In FY 16-17, the company has increased its direct distribution by 1,00,000 to 7,30,000 outlets with a vision to ramp it up upto 8,00,000 in the current year,” he said.