New Delhi: New Delhi. Strong performance of its soaps and hair colour brands as well as steady growth in international business has helped personal and homecare products manufacturer Godrej Consumer Products Ltd (GCPL) achieve an impressive 168 % jump in net profit for the second quarter ended September 30, 2009. Its net profit for the period stood at Rs 93 crore. The company registered a 65% increase in net sales which stood at Rs 576 crore during the quarter compared to the corresponding period in the last financial year.
The numbers have surprised the analysts. A Mint poll of six brokerages earlier this month had estimated a 15 to 21.6% increase in revenue and a 52% to 85.7 % jump in net profit during the quarter. However, most of the estimates did not include the contribution of Sara Lee Ltd with its mosquito repellent brands such as GoodKnight, JET, HIT and AmbiPur (car and room freshner) to GCPL’s earnings. “We had expected Sara Lee numbers to be consolidated in the annual report and not included in this quarter,” said Anand Shah, an analyst at Mumbai-based brokerage firm Angel Broking Ltd. Godrej Sara Lee Ltd, 49% share of which is held by the company with effect from June 1, 2009, registered sales of Rs 139.7 crore.
“The performance is way beyond expectations. All the businesses are doing well for the company in India. The topline has been impacted by traction from overseas subsidiaries,” said Shah. The company’s overseas units include Godrej Netherlands BV, Rapidol Pty L td and Kinky Group Ltd (South Africa) and Godrej Global Middle east FZE.
On a standalone basis the company sales increased 27% at Rs.329.7, while net profit rose by 112% at Rs. 68.5 crore.
In September, GCPL’s toilet soaps such as Cinthol, Godrej Fairglow and Godrej No. 1. together captured 10.9% share of the total soap market. The company’s share in the toilet soap category was 9.6 in March this year. The share Hindustan Unilever Ltd, the market leader in the category has been constantly declining.
“The growth has been led by good performance of the soaps brand which are continously seeing increase in market share. The company has kept prices under control and offered right product mix to consumers,” Vanmala Nagwekar, a research analyst, with financial services firm India Infoline Ltd said. The company resisted from price hikes and launched brands like Cinthol in smaller packs. HK Press, vice-chairman, GCPL said that the company had not increased prices since January this year. Forward contract of vegetable oil on commodity exchanges helped keep the prices under control. “Commodity prices were benign during the quarter so we passed on the benefit to our consumers,” Press said.
In the hair colour segment, GCPL’s market share rose to 34.7% in September as compared to 33.7% in March. During the quarter, the company spent 9 % of its total sales on advertising and promotions. Its expenditure on advertising and promotion increased by 109% to Rs 50.9 crore from Rs. 24.4 crore. “We would continue to invest behind our brands to drive growth that will help us strengthen our competitive position,” Adi Godrej, chairman, GCPL, said.
“It has been an excellent growth across the board - sales growth, profit growth and market share growth. Our rural penetration has increased and now contributes to 38% of our overall sales. International businesses have shown good growth. Also the cost cutting measures on account of all the consumer goods businesses sharing infrastructure like distribution, logistics, insurance and telephone has helped the profitability of the company improve,” Adi Godrej told Mint.