Five-Fold Jump In Advertising Spend Hurts Symphony In January-March
Shares of Symphony Ltd. fell a day after the maker of air coolers reported a flat profit growth in the three months ended March as spending on advertising and sales promotion rose five-fold.
“We launched a fresh advertisement campaign for new products and hence the jump in spending,” Achal Bakeri, founder and chairman and managing director, Symphony told BloombergQuint. “Instead of deferring the expense over many quarters, we decided to take this one-time impact.”
Net profit in the fourth quarter was flat at Rs 46.7 crore, in line with analyst expectations, according to its stock exchange filing. Revenue grew 33 percent over the year-ago period to Rs 184 crore. Operating margin narrowed over 15 percentage points to 26.8 percent, while operating income fell 15 percent.
Bakeri said profitability was hurt because of the introductory pricing on the new product line. The demand was twice of what the company had expected, he said.
Touch and i-Pure have seen phenomenal demand on the ground. We would not have given a discount at all, had we know this would be the demand.Achal Bakeri, Founder & CMD, Symphony
Bakeri expects margins to improve in the quarter ending September.
The company intends to offload assets worth around Rs 15 crore in Mexico and would focus on cutting losses at its Chinese arm over the next couple of years.
Sales at the Chinese subsidiary started dipping and losses mounted under the control of the previous Swedish owner, which had acquired the company from another Chinese entity. Primary focus for Symphony is on product innovation, to build brand value and regain customer confidence in China, Bakeri said. The process is expected to be slow but the management is confident of turning it around successfully, he said.
Last November was the worst month for the company on account of demonetisation, but the note ban has since helped as Symphony operates in the organised segment, he said.
Summer months of March to May are the best months for the company. Towards the end of the season, dealers normally come back to replenish stock, but there is no evidence of it happening this year, he said.
Shares of Symphony fell as much as 5.71 percent compared to the benchmark S&P BSE Sensex Index that closed 0.25 percent higher at 30,659.