BENGALURU: Consumer goods company Procter & Gamble Hygiene and Health Care Limited (P&G Healthcare) reduced its ad and sales promotion spends (ASP, marketing spends) by 20 per cent in the quarter ended 31 March, 2015 (MQ-2015, current quarter) to Rs 66.50 crore (12 per cent of net Total Income from Operations or TIO) from Rs 81.6 crore (16.6 per cent of TIO) in the year ago quarter (MQ-2014) and reduced by 24.3 per cent as compared to the Rs 87.85 crore (13.6 per cent of TIO) in the immediate trailing quarter DQ-2014.

Notes: (1) The company’s financial year ends on June 30, hence results for the quarter ended 30 June, 2014 are JQ-2014, for the quarter ended 30 September, 2013 are SQ-2014; for the quarter ended 31 December, 2013 are DQ-2014 and for the quarter ended 31 March, 2014 are MQ-2014. Similar nomenclature is applicable for other years.

(2) 100,00,000 = 100 Lakhs = 10 million = 1 crore.

Over the 13 quarter period starting MQ-2012 until the current quarter (MQ-2015), P&G Healthcare’s ASP spends both in terms of absolute rupees and as percentage of TIO were the lowest at Rs 37.99 crore and 7.8 per cent of TIO respectively in JQ-2014.

Though in terms of absolute rupees, P&G Health’s ASP shows an upward linear trend, in terms of percentage of TIO, the linear trend is downwards. The company’s highest ASP in absolute rupees was in SQ-2014 at Rs 104.88 crore (18.2 per cent of TIO), while the highest in terms of percentage of TIO was in DQ-2012 at 20.1 per cent of TIO (Rs 94.58 crore). Although in terms of absolute rupees, P&G Healthcare’s ASP shows an upward linear trend, in terms of percentage of TIO, the linear trend is downwards.

Please refer to Fig-1 below. The company spent far less on ASP than the numbers indicated by thelinear trend lines in the figure. The slope of the black broken trend line intercepts MQ-2015 at 13.18 per cent of TIO, as compared to the 12 per cent actually spent by the company in the quarter. In absolute rupees also, actual ASP spend in the MQ-2015 at Rs 66.50 crore was far lower than the Rs 82.38 crore indicated by the slope of the broken maroon line.

P&G Healthcare’s ASP is made up of two components – advertisement (ad) and trade incentives (incentive) spends. From FY-2008 (year ended 30 June, 2008) until FY-2013, the company’s ASP is split has shifted towards increasing incentive spends – the company’s incentive spend has moved from about 20 per cent of ASP to 44 per cent in FY-2013, with a slight dip to 42.1 per cent in FY-2014.

Ad spends proportionately moved downwards from 80 per cent in FY-2008 to 56 per cent in FY-2013, moving upwards slightly to 57.9 per cent of ASP in FY-2014. This does not mean that the company has been spending lower amount of money towards ad spends, it’s just that with higher budgets, the skew is more towards spending more on trade incentives. The upper small chart’s trend seems to indicate that at the end of P&G Healthcare current accounting year, ASP could be split almost equally between ad spends and incentive spends.

The company’s TIO in MQ-2015 at Rs 555.23 crore was also far lower than the slope of the dotted blue trend line, which indicates a TIO of Rs 611.56 crore. P&G Healthcare’s TIO in MQ-2015 was 10.9 per cent more than the Rs 500.67 crore in MQ-2014, but was 13.9 per cent lower than the Rs 644.51 crore in the previous quarter (DQ-2014). P&G Healthcare’s TIO shows a linear increasing trend across the 13 quarter period under consideration.

The company’s PAT in MQ-2015 at Rs 86.89 crore (15.6 per cent of TIO) was 7.6 per cent more than the Rs 80.76 crore (16.1 per cent of TIO) in the corresponding quarter of last year, but was 4.2 per cent lower than the Rs 90.66 crore (14.1 per cent of TIO) in DQ-2014. Please refer to Fig-2 below.

During the 13 quarter period under consideration in this report, the company’s highest PAT in absolute rupees has been during the immediate trailing quarter (DQ-2014) at Rs 90.66 crore, while in terms of percentage of TIO, the highest was in JQ-2014 at 18.5 per cent (Rs 89.92 crore). While PAT shows an upward linear trend in terms of absolute rupees and percentage of TIO during the past 13 quarters, over the past seven years starting FY-2008 until FY-2014, PAT in terms of percentage of TIO shows a declining linear trend.