KARACHI, Nov 26: For Reckitt Benckiser — the fast moving consumer goods company (FMCG) that makes household and pharmaceutical products (mortein, veet, dettol, disprin, robin blue, air wick, cherry blossom, disprol and others) — the staggering loss of Rs213 million suffered in 1999 is now a distant memory. That was the first deficit ever encountered by the company.

Reckitt Benckiser (which until 2000 was Reckitt & Colman of Pakistan Limited) managed to return to profitability the following year, which was largely the result of restructuring and rightsizing manufacturing operations and the continuing cost saving initiatives relating to inputs of materials which started in 1999. That and the long awaited price increase allowed on most of the pharma products by the government in mid 2000 enabled the company to swing back to profit. The company also contracted out the manufacture of some of its Ethical pharma products. Those were previously made at the Reckitt’s factory at S.I.T.E in Karachi, which was shut down.

The recently released report for third-quarter 2002, shows consolidation along planned lines. Sales for the nine months (Jan-Sept 2002) stood at Rs1,817 million, demonstrating 12.5 per cent growth over sales valued at Rs1,615 million in the corresponding period of the previous year. The company posted 67 per cent increase in pretax profit to Rs165 million, from Rs99 million in the three quarters of the previous year. After tax profit rose 80 per cent to Rs97 million, from Rs54 million. The pretax profit to sales margin improved to 9 per cent, from 6.1 per cent.

A consistent payer of dividends, Reckitt was constrained to omit payouts for two years in succession. Dividend was nonetheless resumed in 2001 with a cash payout at 25 per cent.

Like most multi-national blue chips, the Reckitt stock is illiquid. The price of its 10-rupee share had touched historic high at Rs240 in 1994. The current quotation is Rs41.40; break-up value of the share works out to Rs19.06. On the current annualised earning per share (EPS) of Rs4.02, the share is now trading on a price-to-earnings ratio of 10.3x.

Paid-up capital of the company has remained unchanged at Rs320.6 million for a long time now.

Detailing segment-wise performance, the company was seen to have posted 21.9 per cent growth in sales of the Household segment, for the nine months of 2002 amounting to Rs958 million, from Rs786 million and an operating profit of Rs49 million in place of operating loss of Rs48 million suffered in the previous three-quarters. In their jointly signed report, chairman K.J Dinshaw and CEO Sabir Sami observed that a number of range extensions and new product launches in the toilet soap, talc, air fresheners and depilatory categories were made.

Pharmaceutical segment sales improved in the third-quarters, despite temporary suspension of despatches when sales tax was withdrawn in the last week of August 2002. Directors said that the withdrawal of tax was a welcome measure. However, the government hadn’t so far published notification dealing with the issue of refund of tax paid by manufacturers on goods lying with their distributors and in the trade on the cutoff date. “These factors and higher level of selling/administrative expenses has resulted in operating profit of Rs104.5 million as against Rs121 million generated in the nine months last year”, directors stated. The operating profit in the sector was seen to have declined inspite of increase in net sales to Rs858 million for the nine months under review, from Rs828 million in the similar three quarters of 2001.

Overall gross profit was up 20 per cent to Rs660 million for the three-quarters of 2002, from Rs550 million in the similar period of last year. Gross profit margin was a grand 36.3 per cent, up from 34.1 per cent.

The balance sheet footing of the company at close of nine-months under review stood at Rs1,338 million with Rs189 million in fixed assets.

Going forward, directors described trading conditions as ‘lacklustre’, but hoped to keep up the growth of sales and profitability through the introduction of new products, range extensions, cost-cutting initiatives and business simplification opportunities.