KARACHI, April 9: The company has been in operation in Pakistan for well over half a century. But up until the year 2000, the Reckitt Benckiser was the Reckitt & Colman of Pakistan Limited. In the last four years, this fast-moving consumer goods company (FMCG) appears to have made considerable progress so that the loss of staggering sum of Rs213 million that it had suffered in 1999 (the first deficit ever encountered by the company) seem all but a distant nightmare.
For the latest year ended December 31, 2002, the company posted pretax profit of Rs272.2 million which represented improvement over the earlier year’s pretax profit at Rs144.1 million. After tax profit rose to Rs166.2 million from Rs79.1 million the previous year. The Board has recommended cash dividend at 25 per cent, which would be approved at the shareholders’ annual meeting on April 29.
The company has consistently disbursed dividends, but it had to omit payouts for two years, in order to tide over the 1999 losses and consolidate the balance sheet. Dividend was resumed in 2001 with a cash payout at 25 per cent; the same as been proposed for 2002.
Like most multi-national blue chips, the Reckitt stock is illiquid. The controlling 58.11 per cent shares are vested in the holding company: the Reckitt Benckiser plc, UK, and its nominees. An important information contained in the annual report 2002 is in regard to a ‘royalty agreement’ which the company had entered into on November 26, 2002, with the Reckitt and Colman (overseas) Limited, UK, for the use of trademarks. “As per the terms of this agreement, royalty shall be payable at 1.5 per cent of the net proceeds of the sales made on or after January 1, 2003 onwards of the goods manufactured/repackaged in Pakistan,” the company said.
Another major stockholder in the Reckitt Benckiser is the National Bank of Pakistan, which owns 10 per cent of the company. With no right or bonus issues, the company’s paid-up capital has remained unchanged at Rs320.6 million for the last many years. The price of its 10-rupee share had touched historic high at Rs240 in 1994. The current quotation is Rs47.50; break-up value of the share works out to Rs18.75. On the 2002 earning per share (EPS) of Rs5.18, the share is now trading on a price-to-earnings ratio of 9.2x.
Sales touched the new record at Rs2,502 million for the year under review, which enabled the company to post the highest ever pretax profit of Rs272.2 million. Comparable figures for 2001 were Rs2,163 million and Rs144.1 million.
In his report for the year 2002, chief executive Sabir Sami observed that in continuation of the company’s strategy, further restructuring of certain business activities was carried out during the year. That was achieved through outsourcing some functions and by refining some other processes. “While the cost of restructuring has been expenses, the savings therefrom will provide a continuing beneficial impact on operating costs in the future,” the company chief said. Land and buildings of the household products unit at A-44 SITE, Karachi, which had been shut down last year, were disposed of.
In the household product segment, the company reported growth of 25.7 per cent with product sales at Rs1.3 billion, up from Rs1.1 billion the previous year. Gross margin improved 10 per cent in this segment.
Sales in the pharmaceutical segment were said to have been impacted twice during the year under review, first due to the suspension of dispatches when sales tax was imposed by the government in March and later on in August when that sales tax was withdrawn. Sales in the segment increased by 6 per cent but operating profit dropped by Rs7.8 million, the latter ascribed to sales mix and to one-time restructuring costs which were incurred during the course of the year under review.
The company complained of competition from the smuggled goods, under-invoiced imports and counterfeit products, which continued to affect performance of some of the key brands. But the directors expressed determination to use all pricing, marketing and selling measures in order to combat competition from those sectors.
