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Business News/ Market / Mark-to-market/  Godrej Consumer Products: The home market regains some shine
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Godrej Consumer Products: The home market regains some shine

A broad revival in demand is what consumer companies and their investors are awaiting rather than pockets of recovery as visible now

Godrej Consumer Products sales rose 7% in India (flat in the preceding quarter) and by 6% globally, on a constant currency organic growth basis.Premium
Godrej Consumer Products sales rose 7% in India (flat in the preceding quarter) and by 6% globally, on a constant currency organic growth basis.

Godrej Consumer Products Ltd’s September quarter results saw good growth in its India business but the global business did not do as well.

The company’s sales rose 7% in India (flat in the preceding quarter) and by 6% globally, on a constant currency organic growth basis.

Consolidated sales growth was 7%, better than the 3% growth achieved in the June quarter.

The domestic business benefited from a strong 18% year-on-year (y-o-y) sales growth in the household insecticides (HI) segment. The measure had declined in the June quarter.

According to the company, the recently launched Good Knight personal repellents range is receiving an encouraging response.

On the other hand, soaps proved to be rather disappointing with sales declining 10% and a volume decline of mid-single digit. Soap volume decline can be attributed to the withdrawal of promotions. Hair colours sales were flat on the back of a high base.

In its international business, its main market Indonesia’s performance came as a big disappointment as constant currency sales declined 2%.

The metric had increased 3% during the June quarter, which itself was relatively low.

A macroeconomic slowdown and adverse weather affected the HI business in Indonesia. The company maintains constant currency sales growth (ex-HI) was 13%, which may offer some comfort. Constant currency sales from Europe declined 2% due to weak demand post-Brexit. Africa and Latin America sales were strong.

Overall, Godrej Consumer’s operating profit increased 13.7% at a time when net sales increased at a slower 11.4%. That is despite the fact that advertisement and publicity expenses and other expenses increased by about 20%. The growth in profits was helped by a decline in raw material costs and employee costs as a percentage of revenue. Operating margins increased 40 basis points to 19.7%. The measure is higher sequentially as well. One basis point is one-hundredth of a percentage point.

The stock marginally declined on Monday and currently one share trades at 38 times estimated earnings for this fiscal year.

A broad revival in demand is what consumer companies and their investors are awaiting rather than pockets of recovery as visible now. A recovery in its international business could help growth recover to higher levels.

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ABOUT THE AUTHOR
Pallavi Pengonda
Pallavi is a deputy editor at Mint and heads the Mark to Market team. This column covers wide-ranging topics related to the stock markets, offering an in-depth analysis of financial reports of companies. She writes and edits across verticals, covering the breadth of the Indian stock market. Pallavi has done her master of management studies, specializing in finance.
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Published: 08 Nov 2016, 08:54 AM IST
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