Analyst Concall
Volume, value growth to improve in Jan-Mar - Godrej Consumer
This story was originally published at 19:53 IST on 24 January 2025
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--Godrej Consumer: Oct-Dec was a tough quarter for company
--CONTEXT: Comments by Godrej Consumer mgmt in post-earnings analyst call
--Godrej Consumer: Expect volume, value growth to improve in March quarter
--Godrej Consumer: Expect to report positive organic revenue growth Jan-Mar
--Godrej Consumer: Expect to see margin growth in Apr-Sept of FY26
--Godrej Consumer: Expect margins in soaps to normalise in next few qtrs
--Godrej Consumer: Seeing softness in premium categories across segments
--Godrej Consumer: We have been aggressive in price hikes
--Godrej Consumer: Expect margins in soaps to normalise in next few qtrs
--Godrej Consumer: See urban demand slowdown; bulk of co's portfolio urban
--Godrej Consumer: Another round of pricing needed for soaps
--Godrej Consumer: There is scope for 1 or 2 rounds of pricing in soaps
--Godrej Consumer: Pricing growth in Jan-Mar seen higher than Oct-Dec
--Godrej Consumer: Not sure if palm oil price correction is temporary
--Godrej Consumer: Market share gain flat for personal wash in Oct-Dec
--Godrej Consumer: Not worried about business in Indonesia
--Godrej Consumer: Expect laundry liquid segment to grow fast
--Godrej Consumer: See FY26 India margins at lower end of guidance
By Steffy Maria Paul and Anjana Therese Antony
MUMBAI – Despite the 'tough' December quarter, the management of Godrej Consumer Products Ltd. sounded optimistic about its growth in the coming quarters. Though a surge in palm oil prices to the tune of 40% and a poor season in the household insecticide category impacted the company's standalone business during Oct-Dec, the fast-moving consumer goods company expects its volumes and value to improve in the March quarter. A positive organic revenue growth is anticipated for the ongoing quarter and may see improvement in margins in the first half of the next financial year, the management said in a post-earnings analyst call Friday.
The Mumbai-based company, which has already been aggressive in taking price hikes in the soap category, feels that there is scope for a couple more rounds of pricing action in the category. Additionally, the company expects the pricing growth to be higher in the current quarter as compared to the previous three months. Godrej Consumer expects the margins in the soap business to normalise in the next few quarters.
Although palm oil prices are correcting, it has not reflected in the prices of palm fatty acid distillate, a by-product used for making soaps, the management said. While the price of palm oil has dropped 20% from its peak, that of the by-product has fallen only 7-8%. However, the company said it is not sure whether the price correction in palm oil is temporary or not.
Echoing the commentary of other fast-moving consumer goods companies, Godrej Consumer said that the demand in the rural areas outpaced their urban counterparts in the quarter. The company said its premium categories across segments saw softness and downtrading during the quarter while its rural van distribution programme did well. The slowdown in urban consumption is a cause for concern for the company, whose product portfolio is biased towards the urban consumers, it said.
Godrej Consumer reported a consolidated net profit of INR 4.98 billion for the December quarter on revenues of INR 37.68 billion. While the company's net profit fell 14% on year, its revenue rose 3% during the quarter. The company's standalone earnings before interest, tax, depreciation, and amortisation margin for the quarter was 22.6%. The management said it expects the margins for the India operations to remain near the lower end of their guidance. The standalone business has historically had normative EBITDA margins in the range of 24-27%, the company had said in its quarterly update.
The company said it is not particularly worried about its Indonesia business, volumes of which grew 6% and sales grew 9% in rupee terms during the quarter. In the personal wash category, the company said its volumes fell by mid-high single digit and its market share gains were flat during the quarter. Conversely, it expects its laundry liquids segment, which hosts brands such as Fab, Ezee, and Genteel, to continue to grow fast.
Godrej Consumer said it will not cut down on its advertisement spending and will continue to invest in increasing its reach through campaigns such as rural van distribution as it believes the environment it experienced during the quarter in its standalone business to be transitionary and not structural. The company spent INR 3.64 billion on advertisement and publicity during the quarter.
On Friday, shares of the company closed at INR 1,130.35 on the National Stock Exchange, down 1.3%. The company detailed its December quarter earnings after market hours Friday. End
Edited by Deepshikha Bhardwaj
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