Godrej Consumer: See strong growth across categories in Q1

Nachiket Kelkar
moneycontrol.com

Godrej Consumer Products says there are no signs of a slowdown and is expecting strong growth in the April-June quarter. "We continue to have very good demand for our products. In the domestic market, in the three core categories, we grew well ahead of the category growth...We see very good signs of strong growth in the first quarter also...The momentum is very strong and there are no signs of a slowdown," Adi Godrej, Chairman, said on Tuesday. The company's first quarter consolidated net profit zoomed 73 percent year-on-year to Rs 334 crore, helped by one-time exceptional gain of Rs 129 crore from sale of its Indonesian arm's foods business, which was a non-core asset. Excluding the gain, it profit was at Rs 205 crore. Consolidated total income increased nearly 30 percent to Rs 1,719 crore. Analysts on average were expecting Godrej Consumer to report a net profit of Rs 207 crore, on revenue of Rs 1,696 crore. Also Read: Dabur Q4 net rises 17% to Rs 200cr, in-line with forecast Godrej Consumer, however, disappointed on the EBITDA (earnings before interest, taxes, depreciation and amortization) front. Its EBITDA of Rs 275 crore last quarter (up from Rs 250 crore a year ago), came in below analysts expectation of Rs 309 crore. Operating profit margin also slipped to 16 percent, compared with the street expectation of 18.2 percent. Godrej said the margins were impacted due to higher advertising and marketing spends. "We have been investing a lot on advertising, especially because we are launching a lot of new products. So after advertising, the margins were slightly lower," he said. In the domestic market, companies including Godrej Consumer have started some promotional offers in soaps, on the back of benign cost of raw materials like palm oil (key raw material in soaps) and these promotions are likely to continue in an environment of easing input costs. Growth in company's international markets remains strong and it will continue to seek opportunities to expand its operations, Godrej added. Among its rivals, Hindustan Unilever, the largest FMCG company in India, had on Monday, reported better-than-expected fourth quarter results. HUL's Anglo-Dutch parent Unilever announced earlier on Tuesday that it seeks to raise its stake in the Indian arm by acquiring 48.70 crore shares or 22.52 percent of total voting share capital from public shareholders at Rs 600 a share. Unilever directly and through arms currently holds 52.47 percent stake in HUL. Godrej said this is another sign that long-term growth potential in India's FMCG sector remains strong. "We have always mentioned we are bullish on the FMCG sector in India. We don't think its slowing down. And this offer by Unilever, clearly  indicates that they also feel that the FMCG sector in India has a tremendous future. I think its a very smart move on the part of Unilever," Godrej said.
 
Godrej Consumer shares closed down 3.7 percent at Rs 825.70 on NSE. Nachiket Kelkar
nachiket.kelkar@network18online.com