Horlicks bounces back in 2021, Unilever Consumer’s profit flat

Infograph: TBS

Horlicks, the most popular health food drink (HFD) brand in the region, recovered its Bangladesh sales in 2021 thanks to the restoration of the supply chains and an increase in the number of new consumers mostly for its small packs.

The increased sales did help Unilever Consumer Care's operational profit to increase by one-third. But, a drastic drop in financial income and an increase in effective tax did not allow the company to post annual growth in the bottom line.

The company that turned into Unilever Consumer Care in the mid-2020, from GlaxoSmithKline (GSK) Bangladesh Ltd, following the acquisition of majority shares by Unilever group from the GSK headquarters, suffered a sales drop in 2020 to Tk347 crore from Tk404 crore in 2019.

Unilever Consumer Care Ltd Chairman Masud Khan told The Business Standard that Horlicks sales suffered a drop mostly due to a supply chain disruption during the repeated waves of the pandemic. Now the company has no difficulty in importing the raw material – dry mix – from India.

In 2021, sales rebounded to around Tk410 crore, even without the revenues from Sensodyne toothpaste and digestive over the counter product Eno. Since Unilever did not take over the products, the listed company has not been selling the two since 1 July 2020.

HFD revenue strongly bounced back as an increasing number of Bangladeshi families opted for the nutrition product, said Khan, especially for the smaller packs of Horlicks, while sluggish sales of larger jars are reflecting the average consumers' caution about their wallet amid soaring inflation.

To forward a warm hand to the families, the company kept product prices almost flat, compared to the pre-pandemic level, according to Khan.

The 19% surge in revenue helped the company register a 32.5% annual growth in operational profit in 2021 as operational costs did not grow at the same pace.

But, the declined interest rates reduced the company's financial income by around Tk15 crore in the year.

A nearly Tk2 crore increase in effective tax also hurt net profit in 2021, said Khan.

The company had written off some of its assets in 2020 that reduced tax expenses, which was not there in 2021, he explained.

Unilever Consumer Care's net profit after tax in 2021 was Tk52.7 crore, which was Tk53 crore in 2020.

Khan said if the profit contribution of Sensodyne and Eno in the first six months of 2020 were discarded, the company in 2021 would have registered net profit growth.

The earnings per share (EPS) from continuing operations rose by Tk2.55, the company said in its regulatory filing.

Its ultimate annual EPS inched down to Tk43.8 from Tk43.94, and the company recommended Tk44 in cash dividends per share for 2021.

At the end of December, the company's net asset value per share stood at Tk122.9.

Khan mentioned two factors – one is hurting the company's profitability and the other is helping improve it.

The government in the last fiscal year increased the customs duty on its dry mix imports to 25% from 15%, which Khan believes is inappropriate on a mass-market food product raw material.

On the other hand, the company under GSK control was dependent on a third party company Mutual Food Products Ltd for toll manufacturing and distribution.

The operational model changed a bit after Unilever took over and it is giving a higher margin to Unilever as the contractual factory is packaging HFD products for some fees now and the distribution is being done through Unilever dealers, instead of that by Mutual Food.

GSK Bangladesh shut its six decades-old pharmaceuticals plant in Chattogram in 2018 as it was losing money amid the stiff competition from local players.

Later, the global GSK sold its HFD business to Unilever Group.

As HFD was the major business of GSK in Bangladesh, they instead left the company's control to Unilever by taking away Sensodyne and Eno which are being sold by a GSK subsidiary in Bangladesh.

Unilever Consumer Care is selling different types of HFD products under the brands Horlicks, Maltova and Boost, and its glucose product Glaxose D.

Following the earnings disappointment, Unilever Consumer shares dropped 6.2% to Tk2,939 on Tuesday on the Dhaka Stock Exchange.