Gillette Pakistan Limited (PSX: GLPL) was incorporated in Pakistan as a public limited company in 1986. GLPL is a subsidiary of The Series Acquisition B.V. Netherlands, which is a wholly owned subsidiary of the P&G Company, USA. The company is engaged in the manufacturing and selling of blades and razors.
Pattern of Shareholding
As of June 30, 2024, GLPL has a total of 31.872 million shares outstanding which are held by 1003 shareholders. The Series Acquisition B.V. has the majority stake of 91.72 percent in the company followed by joint stock companies holding 4.4 percent shares. Individuals account for 3.87 percent of the outstanding shares of GLPL. The remaining shares are held by other categories of shareholders.
Financial Performance (2019-24)
GLPL’s topline rode an upward trajectory until 2023 followed by a drop in 2024. Conversely, its bottom line rose until 2020 and then drastically fell in 2021 and 2022 whereby in the latter year, the company registered net loss. In 2023, GLPL registered a net profit. In 2024, net profit ticked down. GLPL’s margins mounted until 2020 followed by a steep plunge in 2021. In 2022, gross margin ticked up while operating and net margins plummeted. In 2023, GLPL’s margins significantly improved. In 2024, gross margin drastically fell down while operating and net margins mounted (see the graph of profitability ratios). The detailed performance review of all the years under consideration is given below.
In 2019, GLPL’s topline inched up by 7.33 percent year-on-year. 2019 was a challenging year for the company amid a 23 percent depreciation in the value of the Pak Rupee, heavy duties on imports, elevated freight charges, and high inflation. The company was able to pass on some of the impact of cost hikes to its consumers. This is evident from a 9.54 percent year-on-year increase in gross profit and an uptick in GP margin from 32.55 percent in 2018 to 33.22 percent in 2019. Distribution expenses slid by 2.29 percent year-on-year in 2019 as the company rationalized trade discounts and squeezed its advertising and promotion expenses in 2019. Conversely, administrative expenses hiked by a massive 57.17 percent year-on-year in 2019 primarily due to an increase in legal and professional charges. This included the salaries of tax consultants and legal advisors due to legal and tax-related queries raised during the year. Other income posted a tremendous 939.31 percent rise in 2019 due to higher interest income on term deposits and savings deposits. Although the Pak Rupee depreciated during the year which warranted a bigger exchange loss, however, revaluation adjustment in the intercompany payables resulted in a lesser exchange loss in 2019. This coupled with fewer stocks written off during the year resulted in 61 percent fewer other expenses incurred during the year. As a consequence, operating profit magnified by 112 percent in 2019 with OP margin climbing up from 6.86 percent in 2018 to 13.56 percent in 2019. Finance costs dropped by 15 percent year-on-year in 2019 despite a discount rate hike during the year. This was because the company had no outstanding short-term borrowings on its books as of June 2019 as against the short-term borrowings of Rs.144.774 million in 2018. This coupled with lower tax under FTR on commercial imports translated into a 3703.63 percent bigger net profit registered by the company in 2019. GLPL’s net profit stood at Rs.164.39 million in 2019 with EPS of Rs.8.56 versus EPS of Rs.0.23 in 2018. NP margin also climbed up from 0.24 percent in 2018 to 8.38 percent in 2019.
In 2020, GLPL’s topline posted a marginal 0.44 percent year-on-year growth on account of COVID-19-related restrictions on the movement of goods across borders, global lockdowns of businesses as well as lesser demand owing to high inflation and crestfallen purchasing power. Cost of sales ticked up by 0.19 percent in 2020, resulting in 0.94 percent year-on-year growth in gross profit in absolute terms. GP margin slightly improved to clock in at 33.38 percent in 2020. Distribution expenses declined by 12.63 percent year-on-year in 2020 on account of the lesser advertising and promotion budget in 2020 and also because of operational efficiency achieved in the supply chain. Administrative expenses rose by 2.94 percent year-on-year in 2020 on account of higher legal and professional charges incurred during the year. Other income magnified by 98.29 percent year-on-year in 2020 due to higher interest income. Lesser volatility in the exchange rate during the year and revaluation adjustment in the intercompany payable resulted in 36.68 percent fewer other expenses incurred in 2020. Consequently, operating profit widened by 34.34 percent year-on-year in 2020 with OP margin reaching 18.13 percent. Finance costs were further nosedived by 25 percent year-on-year in 2020. Net profit expanded by 35.12 percent year-on-year in 2020 to clock in at Rs.222.12 million with EPS of Rs.11.57 and NP margin of 11.27 percent.
In 2021, GLPL posted 9.71 percent year-on-year growth in its topline despite higher inflation, freight charges, import costs, and commodity prices. However, it couldn’t trickle down to produce a bigger bottom line as the company sustained a 31.36 percent hike in cost of sales due to higher import costs, freight charges, and elevated commodity prices. This squeezed GLPL’s gross profit by 33.5 percent year-on-year in 2021. GP margin drastically fell to 20.24 percent in 2021. In line with the trend witnessed in the previous years, distribution expenses continued to slide down in 2021. This was on account of negotiating supplier prices to make them more competitive. Conversely, administrative expenses hiked by 26 percent year-on-year in 2021 on account of higher payroll expenses as well as higher legal and professional charges for the issuance of right shares. Escalated costs of sales and administrative expenses drove operating profit down by 56.25 percent year-on-year in 2021 with a thinner OP margin of 7.23 percent. Finance costs contracted by 51.95 percent year-on-year in 2021 due to monetary easing. GLPL’s net profit lessened by 82.72 percent year-on-year in 2021 to clock in at Rs.38.38 million with EPS of Rs.1.64 and NP margin of 1.77 percent.
2022 was commendable in terms of revenue growth, yet unpleasant in terms of the bottom line. In 2022, GLPL’s topline grew by 13.44 percent year-on-year. This was on account of better volumes as well as upward price revisions. This is obvious from the 41.40 percent year-on-year rise in gross profit in 2022 with the GP margin jumping up to 25.22 percent. In 2022, distribution expenses multiplied by 16.39 percent year-on-year as the company focused on new market segments, and improved its advertising and promotion budget with a consumer-centric focus. Administrative expenses also surged by 30.33 percent year-on-year in 2022 on account of higher salaries and benefits due to higher inflation and an increase in the number of employees from 6 in 2021 to 9 in 2022. Higher operating expenses coupled with a massive decline in other income and a hike in other expenses resulted in a marginal growth of 0.54 percent in operating profit in 2022. OP margin also slipped to 6.41 percent in 2022. Finance costs escalated by 190.85 percent in 2022 due to a higher discount rate and also because GLPL obtained a short-term loan from P&G Pakistan (Private) Limited, an associated company of GLPL. This coupled with the imposition of super tax during the year resulted in a net loss of Rs.22.158 million and loss per share of Rs.0.70 in 2022.
2023 was a year of recovery for GLPL with 23.28 percent in its topline. Despite higher import costs, freight charges, and hikes in commodity prices coupled with Pak Rupee depreciation, GLPL was able to drive down its cost of sales by 21.28 percent year-on-year by undertaking cost optimization measures. One such measure was the capitalization of its production plant during the year. Consequently, gross profit rebounded by 156.93 percent year-on-year in 2023 with GP margin staggeringly rising up to 52.57 percent. Distribution expenses enhanced by 31.78 percent year-on-year in 2023 on account of higher advertising and promotion expenses. Administrative expenses plunged by 30.54 percent year-on-year in 2023. The tremendous rise in interest income in 2023 pushed other income up by 1284.88 percent. However, it was nullified by an 821.29 percent hike in other expenses during the year. Despite this, GLPL was able to attain a 169.93 percent year-on-year rise in its operating profit in 2023 with OP margin reaching 14.03 percent. Finance costs mounted by 1880.60 percent in 2023 due to the unprecedented level of discount rate and a massive rise in short-term borrowings from P&G Pakistan (Private) Limited. This significantly diluted net profit during the year which clocked in at Rs.113.90 million in 2023 with EPS of Rs.3.57 and NP margin of 3.77 percent.
In 2024, GLPL’s topline dropped by 50.34 percent. This was the consequence of poor macroeconomic conditions as well as import restrictions. Due to lower demand, the company produced only 58 MSU, down 33 percent year-on-year. This resulted in a capacity utilization of 17.63 percent in 2024 versus a capacity utilization of 26.44 percent recorded in the previous year. Cost of sales slid by 29.71 percent in 2024 resulting in 68.95 percent thinner gross profit recorded during the year. GP margin slid to 32.87 percent in 2024. Distribution expense plummeted by 46.77 percent in 2024 due to lower sales volume. Conversely, administrative expenses escalated by 66 percent in 2024 mainly on account of legal and outsourced professional services shares incurred during the year. Other income strengthened by 77.25 percent in 2024 primarily due to liabilities written back during the year which pertained to inventory held at the port. Other expenses nosedived by 94.36 percent in 2024 due to considerably lower exchange loss incurred during the year. GLPL recorded 12.47 percent lower operating profit in 2024, however, OP margin considerably improved to clock in at 24.73 percent – the highest level achieved by the company. Interest expense increased by 41.32 percent in 2024 due to a higher discount rate and increased liabilities from the associated company. Net profit tapered off by 10.46 percent in 2024 to clock in at Rs.101.98 million with EPS of Rs.3.2. NP margin jumped up to 6.79 percent in 2024.
Recent Performance [1QFY25]
In the first quarter of FY25, GLPL recorded a 4.59 percent uptick in its net sales which was the result of a better sales mix, increased distribution, and in-house store strategies adopted by the company. The company was able to curtail its cost of sales by 6.48 percent in 1QFY25. This resulted in 38.20 percent stronger gross profit recorded in 1QFY25 with GP margin climbing up from 24.77 percent in 1QFY42 to 32.73 percent in 1QFY25. The company was able to drive down its distribution and administrative expenses by 11.82 percent and 44.92 percent respectively during the period by attaining operational efficiency. Operating profit mounted by 84 percent in 1QFY25 with OP margin rising up from 12 percent in 1QFY24 to 21.13 percent in 1QFY25. Interest expense multiplied by 291.44 percent in 1QFY25. This was the only factor that drove GLPL’s net profit down by 62 percent during the period to clock in at Rs.3.84 million. This translated into EPS of Rs.0.12 in 1QFY25 versus EPS of Rs.0.32 recorded during the same period last year. NP margin also dropped from 2.23 percent in 1QFY24 to 0.81 percent in 1QFY25.
Future Outlook
With the dwindling purchasing power of consumers on account of inflation, the volume might not see any commendable recovery. However, better sales mix, operational efficiency, cost optimization as well as superior other income may continue to keep GLPL’s bottom line afloat in rough times.
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