Impacted by an increase in soap prices and unseasonal rainfall slowing down sales of the home insecticides (HI) segment, Godrej Consumer Products expects a “flattish” underlying volume growth and a mid-single-digit sales growth in the domestic market in the December quarter.
Both segments jointly contribute to two-thirds of GCPL’s standalone revenue — mainly income from operations from the domestic market.
However, the rest of the portfolio is demonstrating good performance and is expected to deliver double-digit underlying volume growth, Godrej Consumer Products Ltd (GCPL) said in an update on business conditions and quarterly performance to the exchanges.
“The demand conditions in India have been subdued for the past few months which is evident in the FMCG market growth,” it said.
A surge in palm oil and derivatives prices to the extent of a year-on-year increase of 20-30 per cent has impacted the soaps category, representing one-third of GCPL’s standalone business revenue.
“To partly offset the cost increases we have taken price increases, reduced grammage of key packs and reduced various trade schemes,” said the Godrej Industries Group FMCG arm.
Such pricing actions typically have minimal impact on category consumption but do result in reduced inventory across wholesale and household pantries, it said.
It anticipates normalisation happening on the volume growth side following price stabilisation after the next few months only as per the historical patterns.
Moreover, delayed winters in the north and cyclones in south India have slowed down sales in the HI segment, which also contributes one-third to GCPL’s standalone business.
“This has impacted HI category growths in the current quarter,” it said.
Under the HI category, GCPL operates in the home hygiene segment with mosquito repellent brands such as Good Knight and HIT.
“However, given the significant contribution of soaps and HI to the overall business mix, the standalone business is expected to report around flattish underlying volume growth and around mid-single digit sales growth in this quarter,” it said.
According to GCPL, these are “exceptional situations in standalone business” that the management believes are transitionary and not structural.
“Hence the management remains focused on navigating these near-term challenges while maintaining strategic investments for long-term growth as these negative trends are likely to persist for a few months,” it added.
GCPL’s international businesses continue to do well on their relevant strategic objectives, it added.
Indonesia, which is the second largest market for GCPL after India, it expects to deliver a “continued superior performance with mid-single digit volume growth and high single-digit sales growth”.
While its GAUM (Godrej Africa, USA, and Middle East) organic business is expected to see volume decline due to a reduction in trade stocks and portfolio simplification, as per its earlier guidance.
“The effects of these actions would be largely completed in Q3 FY25. However, we continue to do well on our profitability journey, and this is likely to be the fourth consecutive quarter of healthy EBITDA margins for GAUM,” it said.
Through these updates, GCPL provided an overall summary of the demand conditions & trends and operating performance during the ongoing quarter.
“This will be followed by a detailed performance update, post the approval of the Q3 FY25 financial results by the Board of Directors,” it added.
In FY24, GCPL had a consolidated revenue of ₹14,096 crore in which 59% was from the Indian market and the rest 41%was generated from international operations.
Published – December 07, 2024 09:19 pm IST