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Business News/ Money / GCPL’s foreign buys to drive earnings
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GCPL’s foreign buys to drive earnings

GCPL’s foreign buys to drive earnings

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The March quarter consolidated results of Godrej Consumer Products Ltd (GCPL) were boosted by its overseas operations, the addition of Godrej Sara Lee Ltd’s

Soaps contributed about two-thirds of stand-alone sales in fiscal 2010. A slowdown in the consumer market and the need to protect share appears to have affected value growth. Market leader Hindustan Unilever Ltd has taken an aggressive stance to regain volume growth and market share in the soaps segment, with a combination of re-launches, price cuts and volume discounts. While the market may have slowed, GCPL has retained its market share, a positive sign.

GCPL’s consolidated performance is another story altogether, with sales rising by 48% to Rs509 crore and its net profit rising by 56% to Rs92 crore over the year-ago period. A key contributor is GSLL, in which GCPL acquired a 49% stake in June 2009. Excluding GCPL’s share of this joint venture, sales growth would have been 6% and net profit growth 17%. GCPL’s international business did well during fiscal 2010, with sales rising by 21% while net profit nearly doubled. The key reason for lower growth is its stand-alone business, which contributes 55% of consolidated sales.

At the consolidated level, in the March quarter, the operating margin improvement was much lower at around 75 basis points. Advertising costs in general are growing ahead of sales growth, reflecting competitive activity across the board. While vegetable oil prices are lower year-on-year, sequentially, prices are rising. An increase in crude oil prices too is a cause for some concern. The bump from the GSLL acquisition will cease after the June quarter. That’s where its recent international acquisitions will come in, keeping up the sales growth momentum. In the near term, the acquisition of the remaining 51% stake in GSLL and a recovery in domestic consumer markets will be key triggers.

marktomarket@livemint.com

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Published: 26 Apr 2010, 10:06 PM IST
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