Destocking, in the run-up to the GST implementation, has severely dented dry cell battery-maker Eveready Industries India Ltd.’s first quarter profit. Net profit dropped 39.3% to Rs 13.6 crore. Operating income was 4% lower at 338.8 crore.
EIIL sells batteries, flashlights and lighting products, especially LED. It had recently entered the small appliances segment and is in the process of demerging its packet tea business.
Margin impact
The ‘GST-impact’ was most severely felt in the battery segment where destocking by trade channels translated to a 10% drop in volumes, EIIL said. It has a more than 50% share of the dry cell battery market contributing to a major share in its turnover. The GST impact led to a 2% drop in margins
In the flashlight segment, the impact was less adverse. This market has many organised players who have become apprehensive about the GST impact and in the long term, EIIL hopes to benefit from the GST roll out although its turnover from this business dropped by 10% in the first quarter, the company said in an information update.
Total turnover in the lighting segment remained flat, the company said, adding that the margins from this segment of the business turned positive. Turnover increased in the appliances sector, but the segment is yet to be profitable, with higher incidence of manpower and distribution costs. This has also impacted profits, it is learnt.
Eveready, however, held a positive outlook for the current quarter saying that a pick up in demand is indicated and once “all apprehensions relating to the new tax regime were put at rest at rest, demand is expected to return to normalcy by [the] end of this quarter.”
It expected the battery and flashlight segments to benefit the most as these segments bear the maximum impact of non-compliance with tax laws by the unorganised players in these segments.
EIIL said that the GST impact has mostly been revenue-neutral for the company. A normal monsoon also bodes well for EIIL.